What does “bottom line” mean?

Sarah Hiraki

 · 06/03/2020  · 06/03/2020

The phrase “the bottom line” refers to a business’s net income, which is typically shown at the bottom of an income statement – net income and “bottom line” can be used interchangeably.

Where does the phrase “bottom line” come from?

According to Grammarist, the phrase originated in the mid-1960’s in America, and refers to the literal bottom line of a profit and loss/income statement where net profit is typically displayed. Now, the phrase is used both literally and figuratively – to mean both net profit, as well as a critical goal or factor for an organisation or individual. For example, “ACME tourism’s bottom line is ensuring families have fun on their holidays.”

What is an income statement?

An income statement is the type of document on which you would find the bottom line. It typically spans a financial year, and outlines a company’s revenue, minus expenses and losses.

How is net income calculated?

Net income is the result of the following equation:

Net Income = (Revenue + Gains) – (Total Expenses + Losses)

How is the bottom line used in business?

So, what’s the bottom line of the bottom line? Net income can show, at a glance, whether a business has made a profit or taken a loss in the given period. Net profit funds themselves can be used to reinvest into the business, or to pay off business debts. Net Profits are also used to pay dividends, or payments to shareholders that provide incentive to remain as shareholders.

How can I impact the bottom line?

Companies that want to make a difference to their bottom line can make changes to increase their revenues or decrease their expenses. This might be having a look at your processes and looking for ways to make them more efficient. It could be tapping into a new market, or advertising to a new audience. It may be discontinuing a product or service that just wasn’t paying off.

However you do it, it’s vital that you’re tracking all of your incoming and outgoing funds with a great business account. Revolut Business offers the tools you need to get more from your business, such as:

- Open Banking

With Open Banking, you can link all of your external bank accounts to your Revolut Business account, enabling you to see all of your business transactions in one place. That means more control over every pound, dollar and euro that goes in or out.

Learn more about Open Banking and Revolut Business.

  • End-to-end expense management

Our company cards help you to automate your expenses and capture receipts in the app instantly. We’ll even send your team helpful reminders to add expense details and receipts images, so you’ll never have to nag again. Then it’s up to your accountants and administrators to simply review expenses and reject or approve them – and even upload or import files to their accounting platform of choice.

  • Easy subscriptions

You can create a virtual card for each of your recurring payments – such as software subscriptions and office space membership. This means never overspending again on subscriptions – you can manage, limit and cancel your subscriptions from one place.

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