• Revenue is the total income a business generates from its regular activities, usually from sales of goods or services.
• Revenue is categorized into gross revenue, operating revenue, non-operating revenue, and deferred revenue.
• Proper revenue calculation is essential for understanding business performance and profitability.
• Tracking revenue over time allows for better financial decision-making and forecasting.
• Flex products like expense management, business accounts, and virtual cards can help streamline revenue tracking and financial visibility.

The following article is offered for informational purposes only, and is not intended to provide, and should not be relied on, for legal or financial advice. Please consult your own legal or accounting advisors if you have questions on this topic.

What is Revenue?

Revenue represents the total inflow of money a business earns from its core operations. It’s the starting point for measuring profitability and business growth. Revenue does not include costs, expenses, or deductions, as those are considered separately in your net income calculations.

Understanding revenue is critical for business owners because it:

• Shows the overall scale of your business operations
• Helps investors and lenders assess business performance
• Provides insight into which products or services generate the most income

Revenue is sometimes referred to as the “top line,” as it appears at the top of an income statement.

Types of Revenue

Revenue can take several forms, and understanding each type is key to analyzing a business’s financial health:

Gross Revenue

• Definition: The total revenue earned before any deductions, such as returns, discounts, or allowances.
• Use: Provides a clear view of overall sales performance.

How Flex Can Help: Using Flex business accounts to automatically record all income streams ensures accurate gross revenue tracking.

Operating Revenue

• Definition: Revenue generated from the company’s main business activities. For a retailer, this would be sales of products; for a service provider, fees for services rendered.
• Use: Reflects the core profitability of the business’s primary operations.

How Flex Can Help: Flex virtual cards and payment tools can categorize and track operating revenue automatically, helping owners see which operations are most profitable.

Non-Operating Revenue

• Definition: Income from activities not related to the core business, such as interest income, investments, or asset sales.
• Use: Helps business owners understand additional income sources outside of main operations.

How Flex Can Help: Flex dashboards can consolidate operating and non-operating revenue for complete financial visibility.

Deferred Revenue

• Definition: Revenue that is received in advance but not yet earned, such as prepaid subscriptions or services.
• Use: Important for accounting purposes to avoid overstating income.

How Flex Can Help: Flex tools can help track deferred revenue obligations to ensure accurate reporting.

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How to Calculate Revenue

Revenue calculation can vary depending on the type of revenue:

Example Basic formula for total revenue:

Revenue = Number of Units Sold × Price per Unit

For services:

Revenue = Number of Billable Hours × Rate per Hour

Example: Revenue Types & Calculation Methods

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How to Properly Track Revenue

Tracking revenue consistently allows business owners to make informed decisions. Best practices include:

• Use accounting software: Automates revenue tracking and integrates with bank and payment platforms.
• Categorize revenue: Separate operating, non-operating, and deferred revenue to understand profitability.
• Monitor trends over time: Monthly, quarterly, and yearly tracking can reveal growth patterns and seasonal effects.
• Reconcile revenue streams: Ensure all payments and invoices match accounting records.
• Leverage Flex tools:
  
  • Business accounts centralize incoming payments.
  • Virtual cards allow easy tracking of payments tied to revenue-generating activities.
  • Expense management helps reconcile revenue and outgoing costs.

Why Understanding Revenue Matters

Knowing your business’s revenue from all angles provides:

• Accurate financial insights: Understand which operations are profitable and which need attention.
• Better forecasting: Predict future cash flow and plan for growth.
• Improved decision-making: Allocate resources effectively, invest in high-performing areas, and manage expenses.
• Investor confidence: Clear revenue reporting strengthens credibility with potential investors and lenders.

Integrating revenue tracking with platforms like Flex ensures your financial insights are up-to-date and actionable.

Final Thoughts

Understanding what revenue is and how to track it is essential for all business owners. By breaking revenue down into gross, operating, non-operating, and deferred categories, businesses can gain complete visibility into their financial health. Integrating Flex products into revenue tracking helps streamline operations, reduce manual work, and maintain accurate records, allowing owners to focus on growth and profitability.