Revenues (English “revenues sales”) or simply sales are all sales revenues that bring in your products or services. To calculate, you multiply the amount of your products or services by the respective sales price. Deduct them are then deductions such as discounts , rebates or discounts . The sales tax is not taken into account, it is only about the net sales of your company.
Is sales equal to sales?
The terms sales and revenue are interchangeable, they both mean the same thing and are therefore used synonymously . This includes not only the sales revenue from your goods or services, but also the revenue from renting and leasing.
You only have to differentiate between value-based and volume-based sales . Because the quantitative turnover relates to your sales volume, i.e. how many products or services you have sold. The value-based sales refer to the sales quantity multiplied by the sales price (= revenue).
What is the difference between sales and profit?
The difference between sales and profits is easy to explain. Because in every company there are first of all costs in order to manufacture the products. If these are sold in the end, the proceeds are not also the profit.
You first have to subtract your expenses and costs from the income in order to calculate the profit. The profit results from the sales revenue minus expenses and costs. In addition, there are other types of income that also play a role in the company’s bottom line. Because your interest income or other income also represents a profit.
Controlling sales, profit and costs
The evaluation of all your company figures is also called controlling. You can carry out this controlling with the help of some so-called standard instruments. A well-known example of this is the balance sheet. From this you can see that various of these controlling instruments are even mandatory in some companies. Still others are extremely helpful and should be used in every business. Some are only recommended when needed.
The Federal Ministry for Economic Affairs and Energy has described a corresponding list of controlling instruments in detail. There are many more instruments that can help you control customers, competitors and liquidity.
Mandatory instruments can therefore be:
- Income surplus calculation (EÜR), but only for freelancers and small businesses
- Profit and Loss Account (GUV), for all companies with double-entry bookkeeping
- Balance sheet, also for all companies with double-entry bookkeeping
Recommended instruments can be:
- A target / actual comparison
- A contribution margin calculation and a break-even analysis
- A cost type calculation, but for small companies
- A cost center and cost unit accounting
- A BWA (business analysis), which is used to determine the current earnings position of medium-sized and larger companies.
If necessary, the following can be used:
- Time series
- Company comparisons
Expense of sales method
You can use the total cost method to calculate the success of your company. This is a production income statement in relation to the units of measure you have produced. According to Section 275 (2) HGB, this must contain certain items.
There is also the cost of sales method, which represents a sales income statement. It does not refer to the quantities you have produced, but to the units of measure sold. Here, too, § 275 (3) HGB stipulates which items you have to include in the calculation.
You have to identify the following positions:
Sales
– Production costs of the services provided to generate sales
= Gross profit on sales
– distribution costs
– general administrative costs
+ other operating income
– Other operating expenses
= Operating profit
+ Income from investments
+ Income from other securities and loans from financial assets
+ other interest and similar income
– Depreciation on financial assets and on securities held as current assets
– Interest and similar expenses
+/- taxes on income and earnings
= Earnings after taxes
+/- other taxes
= Annual surplus / annual deficit
Sales in company figures
To determine how well your business is doing by business standards, you can usually use a variety of business metrics. For example, the return on investment or your return on sales. The return on sales or return on sales ( “Return on Sales” = ROS ) can be calculated by dividing your profit (i.e. the annual sales after tax) by the sales. This will give you a percentage of your company’s profitability. Ideally, the profitability is above 5% , but it depends on the particular industry.
Revenue in the income statement
Your sales are at the top of the GUV (profit and loss account). This concerns all of your company revenues that you have generated in the relevant financial year through your regular operational business activities. These revenues are only reduced by the reductions that are also shown, such as discounts, bonuses or discounts. In addition, you are not allowed to include sales tax as revenue, because you pass this tax on to the tax office.
What are sales according to HGB?
In the Commercial Code you will find a precise definition of sales in § 277 (1):
” Revenues from the sale and rental or leasing of products as well as from the provision of services by the corporation after deduction of sales deductions and sales tax as well as other taxes directly related to sales are to be reported.”
Redefinition: sales according to BilRUG
The Accounting Directive Implementation Act (BilRUG) has been in force since January 1st, 2016 and is mandatory for all companies. The GUV is also affected by the various changes and, among other things, it also redefines sales. Where previously the sales revenues resulted directly from the normal operative business , i.e. the sale of the products, the term is now broader . Because the BilRUG also allows the inclusion of goods, products and services that are atypical for normal operational business .
Origin and composition of sales revenues?
How are sales generated?
You can only generate revenue by selling products and services or by leasing or renting them . The calculation is done by multiplying the quantity sold and the sales price.
What does sales consist of?
The sales revenues result from your GUV invoice. This includes the proceeds from the sale of your products, merchandise, services or even for rentals and leases.
According to the new definition of the BilRUG, there is also other operating income that has nothing to do with normal business activity. For example, revenues that are generated in the company’s own canteen or revenues from the sale of scrap metal or the rental of workers.
Due to the redefinition of sales by the BilRUG, the taxes associated with sales must be deducted from the sales. For example, sales tax, for real estate also energy and electricity tax. The immediate connection is important.
Negative sales?
Since you earn money for the sale of your products, this revenue cannot be negative. You would have to hand over the product and pay the customer something in addition. At the end of the day, at most when calculating the profit, there can be a negative result, i.e. a loss if your proceeds do not cover your expenses.
Differentiation of sales revenues in gross and net
In the end, you can differentiate between two types of revenue: net revenue and gross revenue . The gross proceeds represent the amount you receive for selling a certain amount of goods multiplied by the sales price. To determine the net sales, you have to deduct all discounts, rebates and credits from the calculated gross sales. These sales revenues play a particularly important role in the balance sheet because they are a productivity indicator of your company. Let’s take a closer look at these two.
Net sales / net sales
Two items have to be deducted from the sales received in order to determine the net proceeds.
value added tax
On the products sold, you earned 19% (or 7% ) for sales tax , which you can later offset with the tax office. However, this tax is not part of the income of your company. Therefore, you have to deduct these to determine the net sales.
Sales deductions
In addition there are any sales deductions, which, unlike other sales deductions are immediately deducted from the net value. For example, immediate discounts that do not appear on the booking accounts later.
