Magazine article Business Credit

Four Ways a Revenue Analysis Can Benefit Your Business

Magazine article Business Credit

Four Ways a Revenue Analysis Can Benefit Your Business

Article excerpt

No one likes to work on the premise of lowered expectations. It goes against the grain of competitive business. But the reality is that business works on a curve. Customers fit somewhere along that curve; and at any given time, they can be rising above or dropping below the ideal arc. If your finance department can tell at a glance how much a customer has spent, and how much that spending has made for the business, then a huge headway has been made and many misfortunes have been avoided. Why make finance manually calculate who gets orders shipped on credit? Know with certainty, with a few clicks, when a customer pays late, on time, or even early. Arm yourself with the software tools to know who is in it for the long haul, and who is just there for a quick sale. Here are four ways a revenue analysis can benefit your business.

Customer Revenue Analysis

One immediate benefit of the customer revenue analysis is that it allows your business to recognize the revenue generated rather than the units sold. This is an important factor to keep in mind, as you might find some of your customers only purchase products when they're on sale, therefore generating far less revenue than sales on products at list price. The customer ranking should take into account the customer revenue analysis so that customer profitability is part of their ranking. Another way a customer revenue analysis could be used is by comparing an individual customer to the "average customer," and average customers within the same ranking. This points out which customers need attention. What is the average customer? The average customer in this situation is the mean revenue recognized from all your customers and from all customers in the same customer ranking. This analysis allows your business to see the traits and uncover trends of the customers' revenue generated in total, by ranking and for an individual customer. As the great management consultant and author Peter Drucker once said, "What gets measured, gets managed."

Sales Revenue Analysis

A sales revenue analysis is a breakdown that allows your business to see how the business is performing in comparison to previous years, and estimate how it should perform in the future. The sales revenue analysis shows which products are generating more revenue for the firm in any given time frame. The time frame could use historical data for trend analysis or projected estimates. These projections can offer your business key insights, including when it's generating more revenue in some months than others throughout the year. These trends could move in cyclical, seasonal or monthly trends, depending on your industry of course. For example, a tax consultant is likely to generate most of his revenue in the first four months of the year due to tax season. A tax consultant could still generate revenue during the rest of the year, but it is a significantly smaller amount than in regular tax season.

It is extremely beneficial to pull these trends on an annual, monthly or even daily basis if possible. This will greatly assist in reviewing estimated versus actual revenue. Another aspect to consider when looking at a sales revenue analysis is recognizing the trend of specific product sales to help decide which products or services will be allocated more funds. Some products just sell better at different times of the year, like Christmas socks during December. …

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