Find out how to calculate your revenue and see 6 unmissable tips to increase it – WAU
Billing is the set of value generated by sales for a given period. Find out the difference between gross and net sales and how to calculate them.
It is very common for entrepreneurs to be interested in subjects that are linked to topics such as leadership, marketing, sales and others that are associated with bringing more customers or even in the development of their product.
However, there are many other issues that are of similar importance and are essential to keeping the business running smoothly. One is about the company’s financial health.
After all, it is nothing new for anyone no business can thrive if there is no cash, let alone if it does not have a sense of predictability than when it will actually enter.
Therefore, it is necessary to understand some essential concepts to deal with this issue, such as billing. Know that he is very connected to the challenge of any company, in knowing how to measure your financial health and whether it is in order.
Especially because, there are theories and studies that point out that most companies cannot survive more than 1 year. Know that one of the reasons for them to close their doors prematurely is linked to the lack of basic knowledge of how to manage the business
As we want your company not to be one of them, we prepared this post about billing so that you can understand the concept in a complete way! Are you interested? Then, follow the rest of the post to understand what it represents and also how to calculate it.
What is billing?
Well, before we get to the practical part, it is interesting that you understand very well what the billing concept is.
Know that the billing of a company is nothing more than the result of the sum of your sales that were made in a given period. It is usually measured month by month and also year by year.
It is important to remember that it corresponds to the sales of both products and services that are provided.
Therefore, we assume that in the cash flow, the billing should be responsible for a large part of the inflows of money for the company.
Understand by means of a basic example: A tire shop charges R $ 10 for the service of changing the tire of a car. If she provided this service 5 times in the month, then her turnover will be R $ 50.
Realize that the billing is very linked to the quantity and the price that is charged to the consumer.
Obviously, if we look only at billing, there is no coherent view on the company’s financial performance. After all, he may even be in the millions, but if his spending is absurdly higher, his financial health will be seriously compromised.
Despite this, it is very important, among its benefits we highlight the help in the analysis of the productive capacity of the business and its participation in the market. In addition, it must be taken into account when paying taxes and duties.
There are two types of billing, gross and net. We will present each of them in more detail below.
Gross sales it is the amount that the company received for the sales of its products or for the provision of its services in a given period.
Know that there is a big difference between revenue and gross revenue. The revenue corresponds to the amount that the business has already sold and received, that is, if the customer has split the purchase in 6 times, the current month’s revenue will only count on the first installment.
Gross sales increase whenever there is a sale, regardless of whether the total payment has entered or not. That is, regardless of whether the customer has paid the purchase in installments or not, the invoicing for that month will have the full amount of the purchase.
Net revenue it consists of the gross billing amount, but it is necessary to withdraw what was paid from taxes related to the taxes that are levied on the sale.
Examples of such taxes may be the IPI, which is responsible for the sale of a commodity, or the ISS, which refers to the provision of services, among many others.
How to calculate billing?
Now that you know what billing is, as well as its difference to business revenue, let’s show you how to calculate it, both gross and net.
Calculating gross sales
Let’s use the example of a company that sells tables. Well, if the company sold 1000 units of them last month for R $ 100. So, we came to the conclusion that the gross revenue will be:
Gross Revenue = $ 100 X 1000 = $ 100,000
The gross billing value seems interesting, doesn’t it? Well, now understand how the billing will be taking taxes into account. See how is the calculation of net sales.
Calculating net sales
Let’s take into account that in our example there is only the ICMS tax to be taken into account, which in this case will be 18%
18% of R $ 100,000 = R $ 18,000
Therefore, net sales will be:
Net Revenue = R $ 100,000 – R $ 18,000 = R $ 82,000
Yes, the value has already decreased considerably, right? Remembering that the value of the net billing is what will really be with the company, in our example the 18% tax goes to the government.
Well, remember that there are other taxes to be included. Therefore, it is interesting to know more about the taxes that you need to take into account by requesting the assistance of an accountant.
How to increase the company’s revenue?
Know that one of the main challenges of every business is also to understand what actions can be taken to increase the company’s revenue, as well as analyze how it can influence other issues, such as profitability.
We have prepared some tips for you to make this possible. Follow!
1. Don’t just look at billing
The first tip refers to something we have already talked about here: do not look at billing in isolation.
As it was presented, the company may be earning very well, but its profitability may be well below what is necessary. So, it will not do any good if the turnover is gigantic if she is spending much more than he.
We already know that this could lead the company to bankruptcy, because if the costs are higher than the billing, the losses that will be generated month by month may lead it to this sad ending.
Then, try to analyze the billing together with other financial metrics. This is the first step for you to understand how your company’s financial health is doing, so that you can focus on increasing your revenue.
2. Know how to deal with the “break-even point”
One of the ways to broaden the company’s financial health view and not just look at billing is to understand the concept of the business breakeven point.
The break-even point is something very simple, it represents the amount of products that the business needs to sell or services that it needs to provide to match revenues with expenses. Therefore, a minimum number is determined so that it does not have a loss.
An example follows to facilitate understanding: if the company spends R $ 5,000 reais every month and sells a product for R $ 500, it will need to sell 10 units to reach the break-even point.
Therefore, the company will start making a profit when it is able to market more products than is determined by calculating the break-even point.
With this data in hand, it will be possible to analyze your company’s billing at an acceptable level and focus on strategies to increase it.
3. Analyze your profit margin
Well, one of the ways to increase your revenue is to analyze your profit margin to identify whether it is possible to increase it.
Therefore, increasing your profitability, consequently the billing will also increase, because one of the ways to do this is by increasing the margin, which will reflect in the price. In other words, if before my company sold a product for R $ 100 and now it is selling for R $ 200, it more than doubled its turnover.
Obviously, before deciding to do this, it is necessary to look at many factors, such as competition, consumer acceptance, among many others.
4. Increase your productive capacity
Know that increasing the company’s productive capacity will also reflect on your sales. In other words, if it manages to earn in quantity of products produced or services rendered, the revenue will increase in the same proportion.
So, check the feasibility of developing actions for this. In many cases, the company even manages to increase its production, stabilizing costs, that is, in addition to growing revenues, profit will also grow!
Know that this can also be done by expanding your product or service portfolio. So, try to identify the opportunities that exist in this direction to contribute not only with the expansion of your productive capacity, but also with your sales!
Needless to say, this helps a lot in the company’s financial health, doesn’t it?
5. Reduce costs
Finally, our last tip is to seek to reduce the company’s costs. After all, there are several scenarios in which this is possible, managing to reduce your expenses, or else passing this reduction on to the final product and thus being able to sell more.
Then, make a survey of expenses, see which ones are in excess and try to talk to those responsible about what can be done to reduce them.
To go deeper into this topic, see our ebook on reducing trading costs through content marketing.