Sales Revenue – Definition, Calculations and Overview

By April 17, 2020 April 20th, 2020 Sales

The start of the growth process of any business starts with understanding your business type or industry and how you can generate sales, to lead to the generation of sales revenue.

For every business to succeed you must make profits. Profits are made only if the total revenue is greater than the total cost of producing and selling a commodity.

Revenue is crucial for your business and it is worth being understood perfectly and with all the aspects around it including the different types of revenue, keeping records and what you have to do with the revenue earned.

The most important and crucial thing for every business is to generate sales revenue not simply providing services or goods however the more goods you provide the more sales you make and the more revenue generated in return.

As a business owner, you must make sure that your sales don’t go down. Once sales go down it implies that the sales revenue will also go down and that is definitely not healthy for the survival of your business.

What is Sales Revenue?

Sales revenue refers to the amount of money realized by a business from the sale of goods or services. Alternatively, sales revenue refers to the amount of money that is brought into the business from the sales of products and/or services over a period of time.

Read: Monthly recurring Revenue – Everything You Need To Know.

 

Revenue is usually reported monthly, quarterly or annually. It indicates whether a company has profited or lost money over that time period. Keeping an eye on your sales revenue can help you manage and reduce costs and maximize profits. 

Sales look at the number of goods sold out of the business while revenue is the amount of money earned from the sold products.

Sales revenue entails and price of a commodity and the quantity.

Price is therefore defined as the monetary value of a commodity. The unit cost/price of a commodity is attained by dividing the total cost by the quantity produced. On the other hand, quantity refers to an amount or number of items or commodities.

Hoping that we have fully understood what sales revenue is, let us handle how to calculate the sales revenue.

Mathematically it’s expressed as;

Sales Revenue= Price x Quantity

To calculate the sales revenue, it is the number of products sold multiplied by the sales amount of that item. It is a process of three steps that include;

  • Determining the unit price
  • Calculating the total units sold.
  • Multiply the price by units.

For product-based companies (goods) the formula is; Sales Revenue = Units Sold x Sales Price

For service-based companies (services) the formula is; Revenue = Number of Customers x Average Price of Services.

Assuming MonkeyPesa sells computers, in March they sold out 100 computers at 1,000,000 Ug.shs, if we are to calculate the sales revenue, you simply get the units of the product sold out multiplied by the price per product. 100 x 1,000,000 = 100,000,000 ug.shs

Considering services; a number of customers x cost per service = sales revenue.

There are different types of sales revenue and these include; Net revenue and Gross revenue

Gross revenue refers to all income earned from a sale with expenses included. Expenses could be; production, shipping, storage, allowances, salaries and so many more.

Net revenue subtracts expenses from gross revenue. Net revenue basically refers to clean or net profits.

There are also other kinds of sales revenue and these include;

Recognized revenue, is recorded as soon as the business transaction is conducted. Once the sale has been completed, you record it there and then in your revenue records.

Deferred revenue refers to money earned in advance of earning. This money is earned from the payment of goods and services that are delivered in the future.

In conclusion, generating sales revenue for your company is simply a matter of knowing the number of unit products sold and multiplying it with the sale price of each product as explained above.

 

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