Organizations across all spheres often have underlying objectives that distinguish them from others. These may be in relation to their industry and products or, at times, in regards to a social cause. However, regardless of size or industry, all businesses have the same primary objective, generating profits for stakeholders.
In the pursuit of profit, and organizational stability and growth, tracking financial flows is essential. It allows senior management to have a clear picture of the company's financial health. Such insight allows you to forecast cash flows and make investment decisions.
One of the things you should be keen on is revenue. If you want to gain a clear picture of your company's revenues and more control of your growth plans, it's essential to prepare revenue reports.
In this article, you'll learn all about revenue reports, what they are, how to prepare them, and how ProfitWell can assist you.
When it comes to revenue reporting, accuracy is the most important thing. This is what will determine whether the insight you draw from it will be beneficial to your efforts. Here are some of the steps you should take to ensure this:
This gives you insight into your financial health and a basis to make future revenue predictions. More importantly, tracking and monitoring ARR helps you make more strategic decisions that can improve outcomes.
Identify high impact revenue channels
So, you've been noticing a steady increase in subscriptions each month. But, do you know how each marketing channel contributes to this rise?
One of the best practices to accelerate your growth is revenue attribution. This refers to the practice of linking marketing efforts with elements such as conversions, revenues, and profits, etc. If you know which marketing channels produce better results, you can allocate more resources to them, allowing you to capitalize on them fully.
Gain customer insight by cohort to improve retention
The ultimate goal of marketing is not securing one-off transactions with clients, but turning each client into a long-term one. As such, it's essential to go beyond service delivery and build relationships with your customers.
To ensure that customer churn stays low, perform cohort analysis. Using advanced analytics and behavioral science, you'll gain insight into the particular characteristics of each cohort. With this, you'll be able to take remedial measures that allow you to improve customer retention.
Achieve KPIs with data-driven strategic decisions
If it does happen, success is rarely ever accidental. Therefore, you must map out the success that you envision. To achieve this, you need to adopt data-driven strategic decisions.
Revenue reporting best practices
Reporting revenue does not necessarily guarantee that you'll enjoy the benefits it has to offer. For this, you'll need to:
Determine the metrics to report on
One thing that you should note, is that reporting on revenue is not just about preparing financial reports. For you to draw actionable insight from monthly and annual reports, you must know what you need to pay attention to.
If you have been in business for some time, you know that there's a difference between revenue and income and that your sales may not necessarily reflect on your net revenue. You may have clients but not make money if they don't pay or do so on time. To reduce such occurrences and guarantee a steady flow of income for your company, ensure that you have a consistent billing schedule.
As the name suggests, revenue reporting is all about tracking and reporting on your company's revenue. To have an accurate picture of your revenues, determine all of your revenue sources and ensure they are included in your reporting process.
Conduct monthly revenue reports
For you to have greater insight into your revenue streams and financial health, it's essential to track revenues regularly. So instead of waiting for the end of the fiscal year to report on earned income, prepare monthly revenue reports.
By doing so, you will notice changes in your revenue as they occur, allowing you to take the necessary measures early on.
Review trends over the fiscal year
At the end of each financial year, use the annual report and the monthly reports to identify the key trends over the year. Such insight will help you identify areas of your business strategy that you should adjust for the upcoming year. With this, you'll know the key areas to focus on with the monthly reports for the next fiscal year.
Use visuals to communicate your analysis
According to studies, people retain 65% of visual content, which is over 45% higher than written content. As such, when presenting revenue reports, be sure to include visuals such as charts and graphs. These allow you to present the information in an easy-to-understand format that ensures you're all on the same page.
3 Reasons you need to automate your revenue reports
Monthly revenue reporting is as tedious as it is beneficial. Fortunately, through automation, you can make it easier and seamless whilst still enjoying the benefits. Here are some incentives for automating the process:
1. Ditch manual number crunching and save time
Depending on the size of your company and the nature of business, your revenues may be high and spread across multiple channels. As such, there are a lot of things you must assess and account for when preparing financial reports.
This makes the process tedious and time consuming. In addition, with monthly reports, some of your employees will have to commit a few days each month to the process. Through revenue reporting automation, you can eliminate the hassle and expedite the process.
More importantly, your team can maintain their focus on the company's core functions throughout the month, thus increasing productivity.
2. Recognize revenue & prioritize the right KPIs
Undoubtedly, KPI reporting can help you achieve performance goals as they clearly communicate your progress. However, it's not just about tracking metrics and having KPIs. Your company must determine and track the KPIs that will help it excel.
In most cases, determining such key performance indicators is not straightforward. This is where a KPI reporting dashboard becomes an invaluable asset, as it will help you identify key KPIs to track.
3. Identifying why customers churn and adapt your retention strategy
Retaining customers is more beneficial to your SaaS business than acquiring new ones. Some of the customer retention statistics that best demonstrate this include:
You have 60-70% chances of selling to an existing customer in comparison to 5-20% with new ones
It's five times more expensive to acquire a new customer than retaining an existing one
A 5% increase in customer retention can increase profits by 25-95%
Whereas the subscription business model may seem easy on paper, growing and maintaining your customer base is a significant challenge. As such, instead of worrying about non-core function activities, you should identify tools you can use to automate and streamline processes.
This is where we can help. ProfitWell offer intelligent solutions to make it easier to manage different aspects of your subscription business. With ProfitWell Metrics, our free revenue reporting tool, you'll be able to perform cohort analysis and track growth, cash flow, and CAC/LTV metrics, among others.
Revenue reporting is an essential function for monitoring and controlling the progress of your business. Below are some frequently asked questions about revenue reporting that you might find helpful.
How often should I report on revenue?
For the best outcomes and to have more control over your company's progress, it's best to prepare revenue reports every month.
How do I make a revenue report?
You can make a revenue report on a spreadsheet. However, it can be a complicated and tedious process, prone to human error. Instead of worrying about the process and template, it's best to automate the process with a tool like ProfitWell's free revenue reporting tool for accurate and real-time data.
Is income and revenue the same?
To put it simply, no. Revenue refers to the sum total of the money earned from sales related to your core functions. On the other hand, income refers to the profit you earn from it.
Why do I need to attribute revenue sources?
Attributing revenue resources allows you to determine the products or services that are performing well in terms of revenue and those that are not. In doing so, you can know where to focus your efforts to increase revenue further.
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