How to Calculate Revenues

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A company’s revenue is the difference between staying in business and closing the doors. Responsible owners use revenue analysis to drive everything from decisions in overhead costs, such as building rent and staffing, to selecting a price for goods and services. Business owners should calculate revenue monthly, at minimum, and compare revenue to expenses to determine potential shortfalls in operations or opportunities for gains in sales. A month-to-month comparison of revenue by individual product line or service is the best way to determine an increase or drop in sales in an individual area or product line.

Things You'll Need

  • Sales receipts
  • Refund receipts

Collect all receipts for the month for the sale of products and/or services. Do not include the receipt of refundable items, such as security deposits that will be returned to customers.

Add all the sales receipts together to get a total amount of sales for products and/or services.

Collect all receipts or other paperwork for refunds issued during the month.

Add all the refunds issued together to get a total amount of refunds issued.

Subtract the total refunds issued from the total sales receipts to get operating revenue for the month.

Tips & Warnings

  • For operating analysis purposes, revenue should not include non-operating income, such as interest earned on bank accounts.
  • If you are not certain how to calculate or analysis revenue, consider hiring an accountant to assist you.

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References

  • "Principles of Accounting"; A. Douglas Hillman, Richard F. Kochanek, Corine T. Norgaard; 1991
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