In the Trenches: Tracking Our Revenue Sources
I was talking to some friends a couple months ago, and they started asking me questions about Cranky Concierge. What types of customers made us the most money? And what services were our big sellers? I thought I had a decent handle on this since I've been running this business since the beginning, but when I went to pull the numbers, I couldn't. Our accounting system wasn't set up to give me that vital information. It was time to fix it.
The way I had set up the accounting system was around product type, but it was an additive system, and that wasn't good. If, for example, somebody needed flight monitoring it would be recorded that way. But if they also wanted us to help them book their flights, we recorded it as the same flight monitoring service but then just added another line for flight planning. The end result is that we had a bunch of revenue in flight monitoring, but some of that should have been attributed to people signing up for the flight planning service.
To fix this, we stopped doing the additive method and instead created single products for each service type in our accounting system. Finally I can accurately see whether people signed up for flight monitoring or for flight planning, and the revenue is attributed properly. It was an easy fix but one that simply hadn't occurred to me.
That didn't solve all the problems, however. Now I could see a lot more revenue flowing into flight planning, but I couldn't break it down by customer type. We have a large and growing percentage of our revenue coming from small business clients. We tailor pricing and services to work with each of our small business clients, but the way we accounted for it was screwy.
We'd just use the same published pricing product line in the system and then we'd change the price. That meant the only way we could find out where the revenue was coming from was to go through each of the clients and then add them together, hoping that it was right. That was crazy.
To address this, we created separate revenue items for each client and the service they use. This all rolls up into a small business line so I can now get the full breakdown with a simple search. Or, at least I'll be able to get the breakdown when we have some more history behind it.
The next time someone asks me that question, I'll be able to give a clear answer. And really, this is a question we should be asking ourselves anyway.