Every novice entrepreneur is faced with the need to carefully understand financial terminology. Even if a very competent accountant works for him, he needs to understand the basics of production and income generation himself. In particular, it is important to know what revenue is, what is its difference from profit, how its level affects the work of the enterprise and how it is possible to plan it.
Concept and accounting methods
Very often, those who are just planning their own business or are at the very beginning of the business path have a misconception about what revenue is. Often it is confused with the net income of the enterprise, because of which miscalculations arise in the planning of activities. The result, as a rule, is bankruptcy. Meanwhile, understanding the difference is very simple. Revenue is the result of the sale of products, work performed or services rendered. It consists of cash receipts received as payment for goods (barter) and receivables. In addition, revenue is considered the financial result of investment activity in the sale of non-current assets or securities. However, it is mainly determined by the total income from the main activity.
To account for revenue, accountants apply two methods:
- Cash - when the payment received on the account in cash or in goods is accepted as revenue. This method is used by enterprises whose revenue does not exceed one million rubles per quarter according to the results of the last year of operation.
- Accrual method - when revenue is calculated immediately upon the shipment of goods to the buyer or on the provision of services, regardless of the actual receipt of payment. In this case, the risk of unpaid on-time debts is higher, therefore the company is allowed to create a reserve fund, reducing taxable profit.
Calculation and Planning
Revenue is the main source of financial revenues for the enterprise, the stability of turnover and work in general depends on its regularity. That is why it is extremely important to timely analyze the revenue from sales and plan its receipt.
The analysis is based on the difference between the volumes of released and sold products. In addition, it is important to consider the factors that influence revenue. The main reason for the low level of profitability of the enterprise may be the release of unclaimed or low-quality products. To monitor this situation, market research is needed. In an effort to increase revenue, an enterprise, based on the results of such an analysis, can improve product quality, reduce output (in case of overproduction), and change or expand its assortment.
In addition, revenue may be affected by:
- interruptions in work caused by various reasons;
- erroneous pricing policy;
- wrong marketing approach;
- breach of contractual terms by suppliers, carriers or buyers;
- inflation, changes in legislation.
Among these factors, there are those that can be affected by the entrepreneur himself, but there are those independent of him. However, regular revenue analysis may, for example, show the need to change the supplier of raw materials or the carrier. Indeed, the result of work depends on the quality of partnerships no less than on the characteristics of products or services provided.
When planning revenue, you should make three calculations. The first is a pessimistic forecast, suggesting the worst case scenario. The second is optimistic, taking into account the ideal combination of all circumstances. The third is a real calculation, which is a cross between the first two. It should be guided in the process of activity.
Nevertheless, the basis for planning is the revenue already received from the sale of products. The formula for its calculation is simple: = , where “” means sold products in units (or work performed, services rendered in quantitative terms), “” means the price for each unit, and “B", respectively, the revenue received. Only by performing the calculation and analysis, it is possible to build the growth prospects of the enterprise.
Distribution
Having understood what revenue is, you should deal with its further distribution. The initial source of funds of the enterprise is the authorized capital. In the process of further activities, all necessary payments are made directly from the cashier. Thus, the proceeds cover the necessary payments to the budget, tax and social benefits, utilities and raw materials, employees' salaries and other costs associated with the production and sale of products. Only that which remains after all necessary payments have been made is the net income or profit of the enterprise.
From the foregoing, it is clear that the goal of each entrepreneur is to increase total income. In order for this growth to be stable, it is important to clearly understand what revenue is and what factors influence its receipt. Proper analysis and planning to a large extent helps the company to successfully work and develop, and the owner - to earn well-deserved profit.