Quite simply, 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.
Examples of Revenue
Say you sell 1,000 widgets for $100 each for a total of $100,000. If you offer $10,000 in customer discounts, give $1,000 in refunds, and have $9,000 in returned merchandise, your revenue, or gross profit, totals $80,000. As another example, imagine your consulting company takes in $60,000 for its services over a month-long period and gives clients discounts totaling $10,000. In this example, your revenue totals $50,000.
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.