Have you ever wondered what revenue really is and why it is the "breath" of every business? Discover how to optimize revenue to improve business efficiency and sustainable development!
What is revenue?
Revenue is the total amount of money a business, organization or individual receives from selling goods, providing services or other activities in a certain period of time. Revenue is not just a number but also an important measure, reflecting the performance and scale of the business.
According to Vietnamese Accounting Standard (VAS) No. 14, revenue is defined as follows: "Revenue is the total value of economic benefits an enterprise receives during the accounting period, arising from normal production and business activities, contributing to increasing equity."
The role of revenue in business
- Performance Measures : High revenue shows that the business is creating value and has room for growth.
- Basis for calculating profit : Profit is the remainder after deducting expenses from revenue.
- Reinvestment capital : Revenue is the resource for businesses to continue expanding production scale and improving product and service quality.
Revenue Classification
Revenue in business is divided into many different types, depending on its origin and nature:
1. Revenue from sales activities
This is the main revenue from selling products or providing services.
For example : A business sells 1,000 shirts at 200,000 VND/shirt. Total revenue from this activity is 200 million VND.
2. Revenue from financial activities
Income from financial activities such as:
- Interest from bank deposits, stock investments.
- Dividends, profits distributed.
- Interest from lending capital.
3. Internal Revenue
Is the revenue between affiliated units within the same company. This often happens in large corporations, when branches sell goods to each other.
4. Unusual revenue
Unexpected income that does not occur regularly. For example : Sale of fixed assets, liquidation of land, or receipt of compensation from a contract.
Meaning of revenue
- Measure of business performance
Revenue indicates how successful a business is in selling goods and services. For example , high revenue is often associated with growth and customer satisfaction.
- Basis for calculating profit
Profit = Revenue – Costs . A business can have a large revenue, but if costs exceed a threshold, profits will still be low.
- Capital for development
Revenue provides an important source of capital for businesses to reproduce, repay debt and expand operations.
Revenue calculation formula
Depending on the business sector, revenue can be calculated using the following formulas:
- Formula for calculating total revenue
Revenue = Selling price x Quantity sold
For example : Enterprise A sells 500 products at 1 million VND/product. The enterprise's revenue is:
500 x 1,000,000 = 500 million VND.
- Net revenue
Net Sales = Total Sales – (Discounts + Returns + Indirect Taxes)
- Service Revenue
Revenue = Number of customers x Service price
For example : A foreign language center has 100 students, each student pays 5 million VND/semester in tuition. Revenue from tuition is:
100 x 5,000,000 = 500 million VND.
Revenue recognition conditions
- Sales revenue
Revenue is recognized when:
- The buyer bears the risks and benefits associated with the product.
- The business no longer has control over the goods.
- Revenue is reliably measured.
- The associated costs are clearly recorded.
- Service revenue
Revenue is recognized when:
- The business clearly identifies the completed work.
- The cost of performing the service can be measured accurately.
Distinguishing between revenue and related concepts
Revenue is a basic concept in business, but it is easily confused with other terms such as profit , income , or cash flow . Distinguishing clearly between revenue and related concepts not only helps businesses manage their finances better but also optimizes their development strategies.
|
Criteria |
Revenue |
Profit |
Cash flow |
|
Define |
Total revenue from business activities |
Revenue minus expenses |
Actual money received or spent |
|
Recipe |
Selling price x Quantity sold |
Revenue – Expenses |
Total revenue – Total expenditure |
|
Meaning |
Scale measure |
Measure of performance |
Liquidity Assessment |
Methods to increase revenue
1. Identify target customers
Understanding customer needs and habits helps businesses develop more effective outreach strategies.
2. Improve conversion rate
Optimize your website, ad copy, and customer service to turn leads into actual buyers.
3. Increase average order value
- Combo sales : Combine multiple products together.
- Cross-selling : Suggesting related products when customers make a purchase.
4. Increase the number of purchases
Implement loyalty programs, discounts on next purchases to retain old customers.
5. Use technology
Apply sales management software, CRM system to improve customer experience and business performance.
How to cut costs to maximize revenue
- Negotiate with suppliers
Negotiate better prices from suppliers to reduce your purchasing costs.
- Optimize production process
Eliminate waste and increase productivity.
- Strengthen financial management
Closely track expenses and identify savings opportunities.
Understanding what revenue is and the factors involved is the first step for businesses to manage and develop their business effectively. Optimizing revenue is not only about increasing sales but also requires cost management, using technology and building smart business strategies. This helps businesses not only survive but also develop sustainably in a competitive environment.
Brand Manager – Specializing in Providing Comprehensive Marketing Services for Brands
When it comes to increasing revenue and building a strong brand, the role of the Brand Manager becomes extremely important. This person is responsible not only for brand recognition but also for ensuring that marketing strategies are effectively executed to optimize business value.
A Brand Manager is not only the person who oversees the brand image but also the "conductor" leading all campaigns to increase sales and expand the brand's influence in the market. They use many marketing tools such as advertising, PR, social media and pricing strategies to ensure that the business's products or services have a strong position in the minds of customers.
Comprehensive Marketing Services from Brand Manager
- Market Research : Assess trends, customer segments and consumer behavior.
- Brand positioning : Build a clear and compelling brand story.
- Optimize sales channels : Ensure advertising messages reach the right target audience.
- Monitor campaign performance : Measure and optimize costs for each marketing activity.
