What is revenue and how does it differ from profit?

Every novice entrepreneur facesneed to carefully understand the financial terminology. Even if a very competent accountant is working for him, he needs to understand the basics of production and income generation himself. In particular, it is important to know what revenue is, what is its difference from profit, how its level affects the work of the enterprise and how it can be planned.

Concept and methods of accounting

Very often in those who only conceivesown business or is at the very beginning of the business path, there is a misconception about what revenue is. Often it is confused with the company's net income, because of which there are miscalculations in the planning of activities. As a result, bankruptcy generally results. Meanwhile, it's very simple to understand the difference. Revenue is the result of the sale of the products, works or services provided. It consists of cash receipts received as payment for goods (barter) and receivables. In addition, revenue is the financial result of investment activities when selling non-current assets or securities. However, it is mainly determined by the total income from the main activity.

To account for revenue, accountants use two methods:

• Cashier - when payment is accepted for the proceeds,received on accounts in cash or commodity equivalent. This method is used by enterprises whose revenues do not exceed one million rubles per quarter based on the results of the last year of operation.
• The accrual method - when revenue is calculatedimmediately upon the shipment of the goods to the buyer or on the provision of services, regardless of the actual receipt of payment. In this case, the higher the risk of unpaid debt, so the company is allowed to create a reserve fund, reducing taxable profits.

Calculation and planning

Revenue is the main source of financialreceipts on the enterprise, on its regularity depends the stability of turnover and work in general. That is why it is extremely important to timely analyze the revenue from sales and plan its receipt.

The analysis is based on the difference between the volumesreleased and sold products. In addition, it is important to consider the factors that influence the receipt of revenue. The main reason for the low level of profitability of an enterprise may be the release of unclaimed or substandard products. To monitor this situation, it is necessary to conduct market research of the market. In an effort to increase revenue, the company can improve the quality of products, reduce production rates (with overproduction), change or expand the assortment based on the results of such analysis.

In addition, revenue can be affected by:

• interruptions in work caused by various reasons;
• erroneous price policy;
• wrong marketing approach;
• violations of contractual terms by suppliers, carriers or buyers;
• inflation, changes in legislation.

Among these factors are those on whichaffect the entrepreneur himself, and there are independent of him. However, a regular analysis of revenue can, for example, show the need to change the supplier of raw materials or the carrier. After all, on the quality of partnership relations the result of work depends not less than on the characteristics of the products or services provided.

When planning revenue, you need to make three calculations. The first is a pessimistic forecast, suggesting the worst case scenario. The second is optimistic, taking into account the ideal confluence of all circumstances. The third is the real calculation, which is something middle between the first two. On it also it is necessary to be guided in the course of activity.

And yet the basis of planning is alreadyreceived proceeds from the sale of products. The formula for calculating it is simple: РхЦ = В, where "Р" means the sold products in units (or the work performed, services rendered in quantitative terms), "Ц" means the price for each unit, and "B", respectively, the revenue received. Only after performing the calculation and conducting the analysis, it is possible to build the growth prospects of the enterprise.

Distribution

Having understood what revenue is, it is necessary to deal withits further distribution. The initial source of the enterprise's funds is the authorized capital. In the course of further activity, all necessary payments are made directly from the cash register. Thus, the revenue covers the necessary payments to the budget, tax and social payments, utilities and raw materials, staff salaries and other costs associated with the release and sale of products. Only what remains after the production of all necessary payments is the net income or profit of the enterprise.

From all the foregoing it can be seen that the purpose of the workeach entrepreneur - an increase in total income. For this growth to be stable, it is important to clearly understand what revenue is and what factors affect its receipt. Competent analysis and planning to a large extent help the company to work successfully and develop, and the owner - to get a well-deserved profit.