Business operations rely on the balancing act of revenue and expenses to exist in the consumer market today. Revenues are the actual income that a company takes in, mostly coming from the sales from its various goods and services offered to its target market. Expenses, on the other hand, are the figures which show the various costs used to generate revenue. The balancing act ensues where the people assigned to monitor such activities can weigh things out on whether the actual performance and pricings bring back income for the company originating from all efforts for all products served and services rendered.
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For costs, this includes the administrative and operative expenses. The people who do the sales, administrative support personnel and utilities used are often the major components for such expenses. Close monitoring for such should be done since realizing costs above the anticipated actual costs will surely affect the expected income of organizations. The allowance for bad debts as well, stemming from receivables that may not be collected due to insolvency or for some monetary related reason are not yet included in costs, hence careful analysis on the actual closing of deals and delivery of goods should be considered as well.
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This balancing act is similar to that of a gambling undertaking. Assessments are not 100% full proof. Due emphasis as well should be done on credit standings, financial reliability and their relationship with other existing suppliers should be gathered prior to contract signings or closing deals. While these latter parts may not be found in standard practices and methodologies, bonus information will surely help in the proper assessment of the balanced relationship of revenue and expenses and how organizations can profit rather incur losses which will hurt the overall existence of the business.
Useful Articles for Reference:
How To Forecast Revenue and Growth? by Asheesh Advani
Raising Money Using Convertible Debts by Asheesh Advani
Originally posted on June 22, 2006 @ 11:01 pm