Engineering Firms Are Wasting 20% of Their Revenue – Here’s How to Fix It

Introduction: Why Most Engineering Businesses Are Losing Money Without Realising It

Most engineering and manufacturing businesses are leaking money - but they don’t even know where it’s going.

Many SME owners assume that if they’re busy and making sales, they must be profitable. But in reality, 20% or more of revenue is being lost due to:

• Unbilled extras & scope creep

• Inefficient quoting & pricing models

• Operational inefficiencies that eat into profit margins

• Cash flow mismanagement & late payments

📉 Sound familiar?

• Your business is turning over millions, but profits aren’t growing.

• You’re working harder than ever, yet cash flow is still tight.

• You take on big projects, only to realise they barely made any money.

This guide breaks down where engineering firms lose money - and how to plug those revenue leaks to increase profit without increasing sales.

1️⃣ The 5 Biggest Ways Engineering Firms Lose Money (and How to Stop It)

1. Underpricing & Unbilled Extras

• Many firms quote too low to win work - but never raise prices as costs increase.

• Scope creep leads to extra work that never gets billed properly.

Fix:
✅ Switch to value-based pricing - charge based on outcome, not just hours.
✅ Track all additional work & bill for extras - no more unbilled "favour" work.
✅ Regularly review pricing - adjust for inflation, material costs & profit margins.

2. Taking on the Wrong Projects

• Some jobs seem profitable but end up draining resources due to:
  ❌ Low margins
  ❌ Difficult clients
  ❌ Unrealistic timelines

Fix:
✅ Track profitability per project - drop clients & projects that don’t meet margin targets.
✅ Prequalify customers better - focus on repeat business & high-value contracts.
✅ Don’t chase every job - focus on specialised, high-margin work.

3. Poor Cash Flow & Late Payments

• Waiting 60-90+ days for payments kills cash flow and prevents growth.

• Suppliers demand upfront payments, but clients delay invoices.

Fix:
✅ Negotiate shorter payment terms - 30-day or staged payments instead of 90-day.
✅ Charge interest & penalties on late invoices to discourage delays.
✅ Use invoice factoring to improve cash flow while waiting for payments.

4. Hidden Operational Inefficiencies

• Wasted time & poor workflow leads to lost productivity.

• Equipment downtime & supply chain delays cause unplanned costs.

Fix:
✅ Implement lean principles - cut unnecessary steps & inefficiencies.
✅ Automate admin tasks & scheduling to free up time.
✅ Use AI-driven forecasting to prevent downtime & delays.

5. Employee Inefficiencies & Overheads

• Staff doing low-value tasks instead of focusing on skilled work.

• Too many manual processes eating into time.

Fix:
✅ Streamline operations with automation & AI tools.
✅ Ensure employees are working on high-value tasks, not admin work.
✅ Cross-train staff to improve productivity & flexibility.

2️⃣ The Fastest Ways to Increase Profit Without Increasing Sales

📌 Fixing these revenue leaks could instantly improve margins by 10-20% - without needing to increase turnover.

🔹 Shift from Cost-Plus to Value-Based Pricing

💡 Stop competing on price - charge based on the impact you deliver.

🔹 Cut Unnecessary Costs & Waste

💡 Track every expense & eliminate wasteful spending.

🔹 Improve Cash Flow Management

💡 Get paid faster & stop working for free.

🔹 Automate & Systemise

💡 Use AI & automation to optimise efficiency.

Key Takeaways: How to Stop Losing 20% of Your Revenue

✅ Track profitability per project - stop working on low-margin jobs.
✅ Charge for every extra task & eliminate scope creep.
✅ Fix your cash flow strategy - late payments kill businesses.
✅ Automate admin & inefficiencies - free up time for high-value work.

📌 Want to stop revenue leaks and increase profitability? Let’s talk about how to fix it. Schedule a Free Strategy Call