So what’s the difference between revenue, profit and cash flow and why should you care?
This presentation will explain the difference between the these three, vital metrics that make up the foundation of your business. The slides also cover the dangers of having any of the three out of sync.
2. Revenue vs. Profit vs.
Cash Flow
Well,ifanyofthethreeareoutofwhack,your
businessisintrouble.Beforewegetintothedangers,
let’stakealookatthedifferencebetweenthethree.
So what’s the difference between revenue,
profit and cash flow and why should you care?
3. Revenue
Revenue is the total amount of the sale of
goods and services.
Mayalsoincludemoneyearnedfromothersources
suchasinterest,feesandroyalties.
Revenueisgenerallydescribedintermsofa
specifictimeperiod.
ie.aparticularmonth,quarteroryear
4. Example
A service company invoiced* $100,000
in March
Thebusinesshasearnedrevenueof$100,000for
thatmonth.
*Inthiscase,thebusinessisnotreceivingpaymentinactualcash,
ratheritis‘owed’$100,000.Oncethey’veinvoicedacustomer,
thatamountisconsideredrevenue.
Revenueinagiventimeperiodcanincludeinvoicedmoney,aswell
ascashpaymentsthathavebeenmadeatthetimeofapurchase.
5. The Top Line
Your revenue appears in the top line* of
your Income Statement
*Intheexample,ifyouwerereferringtotheIncomeStatement
fromthemonthofMarch,thetoplineofthatstatementwould
containthe$100,000inrevenue.
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7. Profit is your revenue minus your expenses.
Profitsimplymeansthatyoumakemoremoneythanit
coststodeliverthegoodsorservices.
So,ifyourexpensesare$40,000on$50,000revenue,
youhavea$10,000profit.
Revenue - expenses = profit
Profit
10. The amount and timing of the payments
you receive and the expenses that you pay.
Ifyou’repaidintwostagesof$25,000dollarseach
1.$25,000at30days*
2.$25,000at60days**
*Soyouneedtopayallofyourexpensesforthefirstmonth
beforeyouget$25,000toworkwith.
**Youthenneedtowaitanadditionalmonthtogettherest
ofyourcashoutoftheproject.
Cash Flow
12. Cash Flow
Many businesses have been caught in a
cash flow crunch.
Focus on understanding when the cash will land
in your bank account and become available for
paying expenses.
13. Profit margins can become very slim when:
• thelowestpriceoftenwinsacontract
• marginsaretight
• productivitydips
• expensesarehigherthanpredicted
Whenitcostsmorethanexpectedtodeliver,
companiesenduptakingaloss.Toomany
unprofitable saleswillsinkacompany.
Profit
16. Sign up for a 30 day free trialofDryrunandgaininsightinto
yourbusinesswithasimplewaytopicturerevenue,profitand
cash flowscenarios.
Blaine Bertsch
Founder Dryrun.com
Take my FREE MINI-COURSE for more detail on calculating profit margins
and discover how to put the knowledge to use in your business!
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