In business, sales, revenue, profit, costs... are terms that managers need to memorize to come up with appropriate strategies in each market stage. In particular, increasing revenue and profits is always the company's focus. So what is sales ? What is the difference between sales and detailed revenue? Take a look at the article below to get the most accurate answer.
1. What is sales?
First let's look at what sales is . Sales are the total value of a company's products or services sold during a specified period of time. To determine sales, a business sums received orders and uncollected orders (for example, unpaid orders or sales by consignment).
Unlike revenue, a company's sales only consider the direct cash flows associated with processing sales of goods or services. And is considered a subset of the total sales generated by the company.
2. What is revenue?
After analyzing what sales are , let's move on to the concept of revenue. Revenue is the total value of an enterprise's economic profit arising from normal production, business and other activities of the enterprise during the accounting period. Does not include capital contributed by shareholders or owners contributing to capital increase. (according to VAS 01 standard).
Revenue is the value a company obtains from selling products or goods in the course of its business. Revenue is one of the important indicators that reflect the timing of analyzing a company's business processes. This allows you to evaluate whether the current state of your business is operating effectively or not.
3. Distinguish between sales and revenue
After learning what sales is and what revenue is, let's see the difference between the two concepts above.
Sales: The amount of money a company generates over a period of time by providing its products or services to customers.
Revenue: The total revenue generated by a business over a period of time.
– Calculation method
Sales: Multiply the total number of goods or services sold by the unit price. Other expenses (taxes, depreciation, etc.) are not deducted from income.
Revenue: Add revenue and all other income (investments, asset sales, rent, interest, etc.) and subtract other expenses (taxes, depreciation, etc.).
– Ability to reflect
Sales: A company's ability to sell goods and services for a profit.
Revenue: A company's ability to generate profits by using its resources to maximize profits.
– Position in financial statements
Sales: First line
Revenue: Bottom line
4. The importance of sales in businesses
Let's evaluate the importance of sales in a business after clearly understanding what sales is.
– Evaluate business performance
Choosing a good business location will bring a great product/service. But it's also just an expense that can lead to losses in your business if you can't generate revenue.
Sales can come from many different sources, and most business leaders have specific strategies for each sales channel. Based on your sales performance, you can determine whether your strategy is effective, and in case sales continue to decline and your company's profits are being adversely affected, you can timely action can be taken to remedy the situation.
– Cash flow management
Cash flow management is always an important factor for the sustainable development of the company. No department has a greater impact on cash flow growth than revenue.
The goal of a company is to consistently generate positive cash flow. That is, the amount of money received is more than the amount spent. One of the most effective ways to solve this problem is to increase your company's sales.
– Build customer loyalty
Customers only recognize your brand, products and services when they see your business grow, especially through sales. From there, customers can rate the authentic experience and recommend your brand to family and friends.
Only by achieving good monthly sales and revenue can you build customer loyalty and relationships. This directly improves your reach and brand growth.
– Promote business development
If the company achieves good sales, of course employees will be happy and motivated to do their job well. The profits they receive are measured not only by the amount of discount they receive for achieving KPIs but also by their mental rewards.
Therefore, if many employees are satisfied with the company's sales and growth, it will affect the service they provide to consumers. This creates a great company culture and environment that fosters positive growth for all employees.
Above is all the information about the article " What is sales" . Hope this article has provided you with practical knowledge. If you have any questions, please contact us for advice as soon as possible!