October 11, 2022

Sales revenue: a guide to calculation

Sales revenue is one of the most critical indicators in business, which determines the company's viability.

If you have a sales department, you understand how it works: the manager, guiding potential customers through the interaction cycle, fixes some parameters, such as conversation time, conversion rate, growth, or decline in the number of deals closed compared to the previous period. It determines the effectiveness of its work. However, it is equally important to determine the efficiency of the entire company.

What is sales revenue?

Sales revenue is the company's revenue from selling goods or services. It should be fixed in the monthly profit and loss statement for the month after the product is delivered or the service is performed. This is the most relevant indicator for a company of any size: the basis for calculating KPIs, forecasting development, and strategic decisions.

Sales revenue includes two indicators: gross and net revenue.

Gross revenue includes the total amount of money a company receives from selling products or services. It is a good indicator of how well the company implements its offers on the market.

Net revenue is gross income minus production costs. It gives a clearer idea of ​​what profit your company receives.

There is also non-operating revenue – the company's income that comes outside the main business of selling goods or services, for example, accrual from deposits in a bank account.

The importance of sales revenue

Sales revenue helps your company:

  • measure profitability
  • evaluate the pricing strategy
  • plan operating costs
  • determine the possibility of investment
  • form scaling strategies
  • show the right to receive a loan or credit
  • analyze revenue trends over some time

Sales revenue does not include sales tax. When a customer makes a purchase, the company acts as an agent for local and state authorities. The sales tax goes to the government, not the business, so it is not part of the seller's income.

Product companies can calculate sales revenue by multiplying the number of units sold by their average price.

Service companies can calculate revenue from sales by multiplying the number of customers by the average price of services provided.

You can create a report for any given interval to fix sales revenue. Typically, companies report earnings monthly, quarterly, and annually. Separate accounts should be made for each revenue stream the business has. It can help managers understand how each revenue stream contributes to the company's overall revenue.

Strategies for forecasting sales revenue

Sales forecasting is undoubtedly a challenging business. Only 45% of managers have high confidence in the accuracy of their organization's forecasts.

There are several strategies you can use to make your prediction as accurate as possible:

  • record accurate data at different stages of the sales cycle
  • use past sales reports to extrapolate future trends
  • you can also view competitor reports and conduct market research
  • consider seasonality, natural periods of sales decline, and growth

Sales revenue is more than just a number. It is a crucial indicator of your company's health and longevity and a starting point for developing a growth strategy.

Take a look at Zendesk Sell app, which will help you create comprehensive sales reports to have a complete picture of the company's state of affairs and take the business to new heights. It is a modern CRM system that provides complete visibility of business processes and saves time on analytics.

If you need a free Zendesk consultation, leave your request for a call from our specialist.

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