By the time a cost problem is visible in the P&L, it has usually been leaking for four to six quarters. These are the eight places we find it first.
1. Unapproved discounting
Price concessions granted at the point of sale, never consolidated. A 2% average discount on a 10% margin business removes a fifth of profit.
2. Duplicate vendor spend
The same category bought by three units at three prices, with no consolidated contract and no one comparing invoices.
3. Overtime as a planning tool
Overtime becomes structural because the schedule is set from sales promises rather than capacity. It is invisible in a salary line.
4. Freight and packaging
Both are usually negotiated once and never revisited, while order profiles change underneath them.
5. Returns and rework
Cost of poor quality is spread across production, logistics and credit notes, so no single owner ever sees the total.
6. Interest on trapped cash
Receivables and inventory funded by debt carry a real cost that sits in finance, far from the commercial decision that created it.
7. Software and subscriptions
Per-seat licences for tools no longer used, renewed automatically because nobody owns the renewal calendar.
8. Unbilled change requests
Scope grows with the customer but the invoice does not. Common in services and engineering contracts.
How to size it in two weeks
Pull twelve months of ledger data by vendor and category, map the top 80% of spend, then interview the three people who actually approve it. In our experience that produces 60–70% of the total opportunity — enough to decide whether a programme is worth running.
Our Profit Leakage Checklist covers all twenty-two checks we run.