Revenue

What is revenue?

Revenue is the money a company earns from selling goods or services in a period, counted when the work is delivered under accounting rules. It is the top line of the income statement, before any costs. A signed contract becomes revenue as the work is performed, so a sale and its revenue can land in different months or even different years.

Why it matters to a revenue leader

Revenue is the number the board, the lender and the sponsor read first, and it rarely moves in step with what the sales team sold. In a services company, a large installation booked in March may turn into revenue over three quarters as crews finish the work. A revenue leader who forecasts bookings and lets them be read as revenue sets up a miss in a strong selling quarter. Knowing how your contracts convert to revenue lets you forecast the number finance will report.

A fire protection company with 14 sellers books $3.2 million of new contracts in the first quarter, mostly sprinkler retrofits. Only $1.1 million becomes revenue that quarter, because crews complete the rest of the work over the following two quarters. The board sees $1.1 million of new-work revenue while the sales team celebrates $3.2 million.