Annual business revenue is the total amount of money a company generates from the sale of products or services over a 12-month period. It is the grand total of income generated by the sales of products or services for a specific accounting period. Annual revenue is often referred to as “sales” on income statements or “gross receipts or sales” on business tax forms. It is calculated by multiplying the number of each product or service sold by its sale price. Annual revenue is everything a company earns from sales activity during a given year before subtracting costs and business expenses. It is a crucial metric for every business, as it is an excellent marker to track a businesss growth and health. Annual revenue is different from profit, which is the money left over after deducting the cost of inputs, expenses, and taxes from the income over a given period.
To calculate annual business revenue, you need to add up the revenue from all products and services sold during the year. Keep in mind that your accounting method determines the revenue you see on your income statement. For example, accrual accounting includes sales made on credit if you have given the goods or services to the customer, while cash-basis accounting only includes sales as revenue if the customer has paid you.
Here is an example of how to calculate annual business revenue:
Lets say a business sells different types of jewelry, including necklaces, rings, and bracelets. The business sold 500 necklaces at $200 each, 750 rings at $100 each, and 1,000 bracelets at $75 each. To calculate the annual revenue, you would multiply the quantity sold by the sales price for each item and add them up.
- Necklaces: $200 x 500 = $100,000
- Rings: $100 x 750 = $75,000
- Bracelets: $75 x 1,000 = $75,000
Total annual revenue: $100,000 + $75,000 + $75,000 = $250,000
Knowing your annual business revenue is important for assessing your companys financial health, taxes, and loan applications. It is also useful for tracking your businesss growth and health, as well as comparing your revenue year on year to see if it is increasing, staying the same, or declining.
