Managing small business revenue to improve overheads

Small business revenue is the lifeblood of any small business. Managing it efficiently not only reduces overheads, it helps you avoid financial difficulties at the end of each week or month and around tax time.

What is revenue?

Revenue is the income a business generates by selling its goods and services. It is the gross income generated by your business and shouldn't be confused with profit. Profit is what is left of your revenue after you have paid all of your expenses.

Knowledge is power

Monitoring your revenue can help your business avoid nasty surprises, says Anna Tantau of Page Tantau Chartered Accountants. 

"For example, when a business needs $20,000 for the month and gets to the end of the month $5000 short, panic sets in - and when bills don't get paid things can go downhill quickly," she says. 

"But if you had that information a week earlier, you could get on the phone to debtors and make sure you hit the end of the month in a comfortable position."

How to monitor revenue 

According to Anna, there are three key aspects to monitoring small business revenue:

• Keep detailed sales records

To have an accurate picture of your revenue you need to know precisely how much stock you have sold, at what price and when.

• Keep accurate expense records

To stay on top of your expenses and plan for the coming months, keep a detailed record of all business outgoings. This information is also crucial around tax time.

• Know your monthly expenses

From the information gathered above, create a budget. This will ensure your business can meet its monthly expenses and help you plan the next accounting cycle. 

Managing revenue

Given the importance of revenue to keeping your business afloat, you need to ensure that any potential threats are minimised. 

According to Anna, the following could all impact your small business revenue:

• Non-payment of bills

If people don't pay you it will be difficult for you, in turn, to meet your financial obligations. Employ a professional bookkeeper to keep a tight rein on your accounts and be proactive in chasing up outstanding invoices.

• Lack of expertise

Bookkeeping is time consuming and requires a thorough understanding of tax laws. Get an accountant to streamline your financials and free you up for the job you specialise in.

• Lack of stock

If people can't buy it, they won't pay you for it. Accurate inventory records will ensure you have the goods your customers demand when they demand them.

• Not offering what people want

Revenue depends on the demand for the products your business supplies. Falling revenue may indicate falling demand, so don't hesitate to abandon products that don't sell and invest in marketing more popular products.

Revenue review

When it comes to revenue, too much information is rarely enough. To avoid financial tight spots, ask an accountant today for advice on protecting and growing your revenue. It may be the most profitable thing you do all year.