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How Great Companies Track Revenue

May 28, 2015

How Great Companies Track Revenue
Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Revenue — it’s the amount of money your company brings in, through sales and services, before anything is taken out, such as the cost of a product or the expenses associated with it. Keeping track of revenue is a must if you want to your business to thrive and meet or exceed its goals. How your company tracks revenue matters, as well. The best companies use systems that give them a clear idea of what areas are working, what areas need a little help, and what areas are dragging the business down.

Methods that Work

One of the best ways to track how much money is coming into your business is to divide your revenue into a number of different streams, based on the source of the income. If necessary, you  might want to create categories based on location, too. For example, if you run a company that distributes produce and that has two warehouse locations, you can create a category for the amount of vegetables sold at location A, the amount of vegetables sold at location B, the amount of fruit sold at location A, and the amount of fruit sold at location B, and so on.

Dividing your revenue streams into categories allows you to see what areas are helping your business and which are not. Location A might not bring in a lot of revenue from vegetables, but might bring in twice as much revenue from fruit than location B. Knowing that can help you decide to reduce the vegetable side of the business and focus on fruit, for example, or decide to dedicate location A to fruit and location B to vegetables.

While creating some detail about each revenue stream is important when it comes to helping you see what aspects of your business are bringing in more income than others, it’s also important that the system you use  not become too complicated. In the case of the produce distribution company, it might seem that it makes sense to further divide the fruit category into apples, oranges, exotic fruits, but getting too detailed can end up complicating things, making it more difficult to see what is working for your company and want isn’t. Making each category very specific can also distract your from the larger picture. Apples might be more popular than oranges, but that doesn’t mean you want to stop offering oranges to customers, for example.

Analyzing Revenue

Analysis of the revenue should go hand in hand with tracking it. Once you know the amount of revenue your company brings in, you can begin to focus on ways to increase it or to maximize its value. In the case of the produce distributor, for example, vegetables not only bring in less revenue at location A than fruit, they cost the company more. In that instance, the business owner might actually not only improve revenue, but also profit, if he or she decides to focus that location on fruit sales and reduce the amount of vegetables bought and sold. Had the business owner not separated the revenue into two separate categories, he or she would never have been able to see that the vegetable side of the business was holding the company back.

Goals and Next Steps

Tracking revenue not only gives you an idea of how much money your company is bringing in and whether it’s able to bring in enough money to cover the business’ expenses, it can also help shape your company’s goals and help your company make the next steps needed for growth.

Working with a virtual CFO, such as the team at New Direction Capital, allows you not only to increase your company’s revenue but also to find ways to make the most of that revenue so that the business can move forward and continue to grow. Learn more about revenue tracking and achieving business growth by contacting us today.

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