An overview of revenue vs income. Revenue and income are both important tools to understanding the performance of your business. Income is what’s left of your revenue after expenses are subtracted.
What is revenue?
Revenue is your business’ total intake from selling products and services. For sales-based companies, revenue is often calculated by using the following formula:
Revenue = Sales Price x Units Sold
Revenue, sometimes called gross income, is used as a “top line” measure of a company’s success. In other words, “how much did we sell this period?”
Learn more about revenue meaning.
What is income?
On the other hand, income (or net income) is what’s left of your revenue after expenses are subtracted. This is often referred to as the bottom line. Income can be calculated by using the following formula:
Income = Revenue - Expenses
A simple equation, but the thing that can be tricky here is that people often describe the terms in this formula using different words for the same ideas.
For instance, revenue is often called total sales or turnover, and in some cases expenses might also include ”direct costs” or known as the cost of sales or the cost of goods sold (COGS), especially for businesses that make or resell products.
What’s the difference between revenue and income?
Both revenue and income (in these terms, and by their many other names) are important building of an income statement – the master document that shows a business’ performance over a period of time. On an income statement, you start with revenue and gains (plusses), and then begin subtracting expenses and losses (minuses).
Because of this, Revenue comes first, and can be viewed in simplest terms as the total amount of money a business has taken in from sales. Income, is revenue minus expenses – thus will always be a smaller figure than revenue. Income will be displayed at the bottom of the income statement, and gives a business a clearer picture of how much they were left with after this period of time.
Let's look at the following example: Avocado Ltd is a fictional firm that makes and sells fruit-shaped furniture in London. Over the past year, it achieved £100k in sales, but spent 50k on raw materials.
Income = (£100k Revenue - £50k Expenses) = £50k
Getting your business finances under control
If you’re looking to start a business or simply get a better handle of your business finances, we recommend you start with a great business account that gives you super clear information and helpful tools to manage your business. Revolut Business offers a suite of features that will help supercharge your growth by keeping you organised – which is the first step toward calculating your gross income and becoming more profitable.
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.
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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