Ever wondered, how sales vs revenue can help you in achieving a profitable business? If yes, then this comparison of sales vs revenue is for you.
In the world of business, both sales and revenue are important metrics that measure how well a company is doing. Revenue measures the money made from selling products and services.
Sales measure the amount of product or service that was sold by a particular company.
Today, sales vs revenue are the two terms that are often used interchangeably in business writing, but they actually have different meanings.
Let’s find out what each means and when you should use each one.
Revenue is an important metric for any business, especially when trying to establish a level of success or growth.
A common misconception about revenue is that it shows how much money the company has made from its customers in one year; this is not what your company should be measuring.
The most accurate representation of a company's overall performance comes from looking at both revenue and sales levels over time (that's why we present this overview here).
When you measure success through bookings (sales) and don't focus on projected revenues, it makes sense that you'll have less than stellar results for longer durations.
An example of this is useful for any startup trying to solidify growth over the long term:
Let's assume a company has two (2) potential customers who purchase its product in month 1 and months 2, 3, & 4.
If sales are measured by only how much money was made from those two customers in each quarter without considering revenues paid to all clients throughout the year that account for most of these amounts, then the company will be operating at a loss with such financials after the first year.
On the flip side, if revenue and dollars made relative to total revenue for all clients for that quarter is used in this calculation then you can see what happens when every client comes into play.
Here we have projected numbers versus actual results from 2015 (ten months approximately) which might look something like these high-level (~2,800 visits per month figure).
Revenue equals sales revenue plus additional income sources generated by the company’s operations.
Revenues usually include:
1. Other revenues, such as advertising revenue, are not included.
2. Consolidation of companies in banking and finance often leads to financial products beginning to advertise directly on television or radio along with traditional print advertising. In addition, online portals that host commercial content may even begin incorporating commercials into their own brand of digital media (such as search results).
3. Ads during popular sporting events and shows may also help increase a company's advertising revenue figures during this time period .
4. Different companies may use different branding principles in this effort to draw attention from potential customers during these available time windows.
The term "revenue" is used commonly in the American and Canadian contexts, but can be confusing for international financial reporting purposes because of its broader meaning.
In Canada it is typically referred to as "Revenue'', whereas most English speaking countries refer more generally to their income before expenses (i.e., profit).
Revenues have also been referred to as "additional income sources'', but this term is now deprecated in favour of other terms, such as net operating earnings or op.
Revenues are collected starting with an invoice submitted by one company's representatives who lodge it electronically through the appropriate payment collection agency.
Contact revenue - where a visitor contacts your organisation directly for information regarding your products and services. This can be achieved either via telephone calls made to recruitment.
Sales are the number of money customers pay for a company’s goods or services.
This revenue issue may arise when companies do not disclose all sources of sales income in their filings, which can allow their clients to follow the reported figures and mischaracterize their earnings.
For some companies, it's common for them to include items such as discounts as part of sales even if they are not actually included in the gross sale price.
For example, many businesses with retail operations will include discounts from promotional or clearance events as a component of sales that previously would have been classified as cost of goods sold or as inventory translation adjustments.
In general, sales revenue is generated by customers and less often by vendors. Non-operating revenue sources are generally windfalls, gifts, awards and in rare cases 'purchases made with proceeds of crime' which are extra taxes on corporate earnings.
Sales vs Revenue
Sales and total revenue are two different ways to measure the same concept. Sales measures how much money is brought in from customers, whereas revenue is what a company actually collects for any given period.
Also, sales include discounts and returns while revenue does not.
Revenue is an important financial term that many companies use to measure their income, efficiency and profitability. The two terms are not interchangeable.
Deteriorating sales may be one of the top reasons for a company's negative cash flow but this does not necessarily mean that revenue has dwindled as well.
Some businesses can be experiencing declining sales yet still manage to increase adjusted gross profit margins over time, which means they're likely profitable as well.
1.What is the difference between net sales vs total sales?
The income that is made by selling goods or services. Net sales represent the operating revenue of a business after all expenses are subtracted from gross revenues. As it is the net amount, net sales can be used to calculate profits and losses (also called bottom line) in order to evaluate a company's financial performance over time.
In contrast with gross profit, which refers only to what remains at the end of an accounting period, any remaining portion could be carried forward through other periods as an accumulated asset.
As an example, the price of a product shipped can be factored into net sales (including returns and allowances) as long as it is paid during that accounting period.. If not, then they are still included in gross profit/loss.
Total sales are the total value of all sales made during a given period by a business firm or its affiliates, such as retailers and wholesalers. However, this figure is not always the same item in revenues may also include discounts and allowances where these amounts are accounted for separately (for example under stock purchase plan).
Total sales figures have to be carefully recorded because it includes both revenues from profits on contracts with customers; royalties/licensing fees paid to others that use your trademark or brand.
2.What do you understand about net income and deductions?
Net income is net income available to the shareholders after all costs, expenses and taxes are subtracted. Net income differs from net sales which not only includes revenue but also other factors like cost of goods sold (COGS), operating expenses (OPEX) and non-operating income or expense.
In simple words, deductions are expenses.
In order to make deductions of some types, we need actual figures for gross sales and cost. If Gross Sales is greater than deductions (revenue) are less then it can mean that company made profit by selling more goods or service at lower prices but with the same expenses incurred related to those sold on ,if deductions are higher than transaction prices then a company may have a lot of losses from its operations because their expenses are higher making them unable to deliver goods or services in timely manner.
3.What is the difference between sales and revenue?
Revenue is the amount of money generated from a business in a given period.
Sales refers to the revenue that is generated from selling goods or services.
4.What is the difference between income and revenue?
Income is the money that you earn from your business or any job. Revenue is the total amount of money that a company makes in a given period of time.
An example would be if you own a restaurant and have an income of $100,000, but the revenue for the year was $200,000.
5.How do you calculate sales vs revenue?
Sales: The total amount of money that is received by a company in the form of a product or service.
Revenue: The amount of money that a company makes after subtracting the cost of goods sold, selling expenses, and taxes.
In this article, we have gone through a lot of differences between revenue vs sales. These are only two different terms in the business world, but after going through the complete comparison, you will come to know that when it comes to accounting purposes both can be easily differentiated.
There might be other key similarities among revenue and sales which we didn’t cover here as they all are interlinked with each other.
If you're looking to connect with contacts across your entire revenue operations (Leads, Prospects, Existing, and Churned Clients) Cliently would be a great way to engage at scale. Sometimes multiple tools can leave blind spots in who's engaging, how they're engaging, and when to engage, this is where Cliently could benefit you the most.