Business Diagnostics: How to Find Profit Leaks and Fix Them

Many businesses experience “profit leaks” without realizing it—such as uncontrolled expenses, weak pricing strategies, inventory loss, duplicated work, or untracked service costs. A business diagnostic is an advisory approach that identifies the root causes of declining profitability and recommends corrective actions.

A typical diagnostic begins with financial trend analysis: gross margin movement, cost behavior, cash flow patterns, and expense structure. It then proceeds to operational review—checking workflow efficiency, approvals, procurement practices, and accountability. The objective is not to blame teams, but to build clarity and discipline.

Common profit leaks include: poor receivables collection policies, underpricing of services, uncontrolled overtime and staffing costs, inconsistent purchasing controls, and weak monitoring of project costs. When these are addressed through clear policies and management reporting, businesses often regain margin within months.

The output of a diagnostic should translate into a practical action plan: immediate quick wins, medium-term process improvements, and long-term system upgrades. When done properly, it strengthens profitability, reduces stress, and improves management confidence.

To maximize results, diagnostics should be done with objective, data-driven guidance. Consult a professional firm like DV Consulting. DV Consulting, led by Danhilson Vivo, CPA, REB, REA, provides advisory services to help businesses identify profit leaks, improve controls, and strengthen financial performance.