Having an in-depth understanding of a company's financial inflows and outflows is essential to its financial health, regardless of size. One of the most basic ideas to understand is "revenue." Revenue is the total amount of money made from an organization's core operations before any costs are subtracted, and it is frequently referred to as the lifeblood of the business. Long-term success and sustainability for Canadian businesses depend heavily on their ability to precisely calculate and strategically increase this number.

What is revenue?

Revenue is your small business’s gross income (and the two terms are interchangeable). Revenue includes all the money you take in from sales of your products or services minus customer discounts, client refunds, and returned merchandise costs. This number comes in handy for financial reporting, such as profit and loss statements, and you can track it in several ways, including reconciling your accounts and tracking your operating cash flow.

Types of revenue

Although "revenue" is frequently used in a broad sense, it can be classified in a number of ways, each of which provides a different viewpoint on the financial health of your company. For a complete financial picture, it is essential to understand these differences.

• Operating revenue: the main income derived from a business's main operations is known as operating revenue. For instance, software subscriptions or licensing fees provide operating revenue for software companies. It's the merchandise sales for a retail establishment. When people use the term "revenue" in a general business context, they usually mean this. It shows how well your primary operations are running.
• Non-operating revenue: this is revenue from sources other than a company's regular business operations. Typically comes in the form of gains from asset sales, rental income, or interest received on investments. It's important to analyze operating and non-operating revenue separately from operating revenue to truly understanding the overall financial picture of a business.
• Recurring revenue: income that persists in the future is called recurring revenue. Generally revenue from long-term leases, service agreements, ot subscriptions, and is very common in SaaS (Software as a Service) company. Investors and lenders place a high value on being able to predict revenue from this kinds of company.
• Project-based revenue: this is the type of money that comes in from distinct projects with predetermined start and finish dates. Typically found in sectors such as consulting, construction, or creative services.

Example of revenue

Consider the Canadian digital marketing firm "MapleLeaf Solutions." Client contracts for website development, social media management, and SEO generate $150,000 of their operating revenue in a given quarter. They would earn an extra $5,000 in non-operating revenue if they rented out any extra office space. Their recurring revenue would increase by $24,000 a year if they were to land a client for a one-year retainer for $2,000 a month in social media services. Lastly, project-based revenue is generated if they accept a $10,000 one-time project to redesign a client's website.

Revenue, Income, and Profit

Some of the most important financial terms to understand if you own a small business are revenue, income, and profit. While revenue represents everything you take in minus markdowns, refunds, and returns, income refers to the money your small business receives in exchange for goods and services with no subtractions. Keep in mind, this is different from net income, or profit, which refers to the amount of money you have left over after you subtract all your operating costs, including labour and marketing.

Profit and Loss Statements

Creating profit and loss statements requires you to know the difference between your revenue, income, and profit. These statements show you exactly how money comes into and leaves your small business on a day-to-day basis. Understanding this data helps you make good financial decisions for your company as it points to areas where you excel and need improvement.

Knowing how much revenue you take in compared to how much your goods or services cost can help you keep your small business in great financial shape. For extra peace of mind, plus easy revenue and expense tracking, 4.3 million customers use QuickBooks. Join them today to help your business thrive.

Strategies for increasing revenue and boost growth

Businesses can strategically optimize many areas of their operations, not just boost sales volume, in order to maximize revenue and achieve sustainable growth.

• Optimize Pricing Strategy: To have a big impact on your bottom line, regularly modify prices in response to competitor pricing, market demand, and perceived value. For example, a bakery in Toronto might use their distinctive artistic abilities to launch a premium tier for custom cakes.
• Customer Lifetime Value and Retention: Getting new clients can be costly. It is generally more economical to concentrate on keeping current clients and raising their lifetime value (LTV). Excellent customer service, loyalty plans, tailored offers, and promoting repeat business are ways to accomplish this (e.g., to promote repeat business, a nearby coffee shop may introduce a loyalty card program that offers a free coffee after every ten purchases).
• Cross-selling and upselling: Teach your sales team to spot chances to sell complementary goods or services (cross-selling) or more expensive versions of goods or services (upselling). Employees at a small clothing store could be trained to recommend accessories that go well with an outfit, and so on.
• Operational Efficiency: Improving your operational procedures can lower expenses and increase the amount of your gross income that goes to profit, even though it won't directly increase revenue. This covers effective resource allocation, streamlined processes, and efficient inventory management. 

Optimize accounting and increase revenue with QuickBooks Online

The intricacies of tracking multiple revenue streams, discounts, and returns can make it extremely difficult to comprehend and manage your company's revenue.

This is made easier with QuickBooks Online, which offers extensive tools for precisely tracking your gross income, classifying various revenue streams, and producing informative financial reports. It helps you quickly visualize your financial health and syncs with your sales data with ease.

Use QuickBooks Online to gain clarity on your business's true top line, make informed strategic decisions for growth, and ensure your financial records are always precise and organized.