Have you ever wondered how sales and revenue can be used to help you build a profitable business? This comparison of revenue vs sales is for you.

What sales can you use to predict the future of your company?

Both revenue and sales are critical metrics in business to measure the company’s performance. Revenue is the amount of money earned from selling products or services.

The amount of products or services that were sold by a company is called sales.

Sales and revenue are two terms often used interchangeably today in business writing. However, they have distinct meanings.

Let’s learn what each means, and when to use them.

Revenue vs Sales: An Overview

For any business to be successful or grow, revenue is an important metric.

Revenue is often interpreted as a measure of how much the company made from its customers in one year. This is not what your company should use to measure.

A company’s overall performance can be best represented by looking at its revenue and sales over time. This is why we present this overview.

If you focus on revenues (bookings) instead of success, you will have lower than stellar results over longer periods.

This is a great example for startups looking to increase their long-term growth.

Let’s say that a company has 2 potential customers who buy its product in months 1 and 2.

If sales are only measured by how much money was made in each quarter from these two clients, without taking into account revenues received from all clients throughout the year, the company will experience a loss after the first year.

You can also see what happens when each client enters the equation if you use revenue and dollars relative to total revenue for that quarter.

These are projected numbers versus actual 2015 results (about ten months), which could look something like this high-level figure (2,800 visitors per month).

What’s Revenue?

Revenue is the sum of sales revenue and additional income sources generated through company operations.

Revenues typically include:

1. Any other revenues, like advertising revenue, are not included.

2. Financial products can now advertise on TV or radio, in addition to traditional print advertising. This is often the result of consolidations between companies involved in finance and banking. Online portals that offer commercial content might also start to include commercials in their digital media, such as search results.

3. Advertising during sporting events and shows can also increase a company’s advertising revenue figures over this period.

4. Different companies might use different branding principles to attract potential customers in these limited time windows.

Although “revenue” is a common term in American and Canadian contexts it can confuse international financial reporting purposes due to its wider meaning.

It is commonly referred to in Canada as “Revenue”, whereas English-speaking countries tend to refer to it more broadly as their income before expenses (i.e. profit).

Revenues were also known as “additional sources” but this term has been replaced by net operating earnings or the op.

The first step in collecting revenue is to submit an invoice by representatives of one company. They then lodge the invoice electronically with the appropriate payment collection agency.

Contact revenue is when a visitor contacts you directly to obtain information about your products or services. This can be done via phone calls to recruiters.

What’s Sales?

The amount of money that customers spend on a company’s products or services is called sales.

This revenue issue can arise when companies need to disclose all sales income sources in their filings. Clients may be able to follow these figures and mischaracterize earnings.

Some companies may include discounts in sales, even though they aren’t part of the gross sale price.

Many businesses that have retail operations include clearance or promotional discounts as part of their sales. This is in addition to the previously-recorded cost of goods sold and inventory translation adjustments.

Key Differences between Revenue and Sales

Customers generate most of the sales revenue, while vendors are less common. Other sources of non-operating revenue include gifts, awards, windfalls, and, in rare cases, ‘purchases with proceeds from crime’, which can be extra taxes on company earnings.

Sales vs Revenue

Two different methods of measuring the same concept are sales and total revenue. Revenue is the actual amount of money a company collects during a given period. Sales are how much money customers bring in.

Sales include discounts and returns, but revenue doesn’t.

Source Revenue vs. Sales

Many companies use the revenue to measure their income, efficiency, and profitability. They are not interchangeable.

Although declining sales are a major reason for a company’s negative liquidity, it does not necessarily mean that the company has lost revenue.

Some businesses may experience declining sales but still, manage to increase their adjusted gross profit margins over time. This means that they are likely to be profitable.

Common FAQs

1. What’s the difference between total and net sales?

This is the income earned by selling products or services. After subtracting expenses from gross revenues, net sales are the business’s operating revenue. Net sales, also known as a bottom line, can be used to calculate profits or losses and help evaluate the company’s financial performance.

Gross profit refers to only what is left at the end of an accounting period. Any remaining amount could be carried forward through other periods and accumulated assets.

For example, the cost of shipping a product can be included in net sales (including returns or allowances), as long as it was paid within that accounting period. If they are not paid during the accounting period, they will still be included in gross profit/loss.

Total sales is the sum of all sales made by a business or its affiliates during a period. This includes wholesalers and retailers. This figure may not always include the same item in revenues. It could also include allowances and discounts if these amounts are separately accounted for (e.g. stock purchase plan).

It is important to record total sales figures because they include both revenue from contracts with customers and royalties/licensing fee paid to other people who use your trademark.

2. are you familiar with net income and deductions?

After subtracting all expenses, costs, and taxes, net income is the net income that shareholders have. Net income is different from net sales, which includes revenue as well as other factors such as cost of goods sold (COGS), operating costs (OPEX), and non-operating income.

Deductions can be described as expenses.

To make deductions for certain types of items, we need to have actual gross sales and costs. If Gross Sales exceed deductions (revenue), then this can indicate that a company made a profit selling more services at lower prices, but with the same expenses. However, if transaction prices are higher than deductions then a company could suffer significant losses as their expenses are higher and they are unable to deliver goods and services on time.

3. What is the difference in sales and revenue?

Revenue refers to the money a business generates during a period.

The revenue generated by selling products or services is called sales.

4. What is the difference in income and revenue?

Income is money you make from any job or business. Revenue is the sum of a company’s money in a certain period.

For example, let’s say you own a restaurant with a $100,000 annual income but your year-end revenue was $200,000.

5. How can you calculate sales and revenue?

Sales: A company’s total revenue from a product or service.

Revenue is the amount of money a company makes after deducting the cost of goods sold, selling costs, and taxes.

Conclusion

We have discussed many differences between sales and revenue in this article. Although these are two terms that are not interchangeable in business, the comparison will show you that both terms can be used for accounting purposes.

We didn’t include any other important similarities between revenue and sales, as they are all interconnected.