Revenue vs Sales: Understanding the Differences for Business Success

When people say "sales," they mean money made from selling products or services. 

The revenue figure is a bit bigger. It includes sales revenue plus other income like investments or rentals. Understanding this difference helps you see how well your business is doing.

Business in America is going strong. By the end of 2024, U.S. businesses sold about $1.908 trillion worth of goods and services. That's a lot of opportunity for businesses of all sizes.

Whether you run a small side hustle or a big franchise, all business owners benefit from staying on top of their company’s financial health. We’ll show you how these terms align with your core business goals to drive sustained revenue growth.

What is revenue?

A company’s revenue is the money it makes from the sale of products or services. It's often called the "top line" because it appears at the top of a company's income statement. 

There are different types of revenue:

• Gross revenue. The money a company brings in from sales before taking out any costs or returns. For example, a clothing store sells $10,000 in one month and earns $10,000 in revenue.

• Net revenue. What's left after subtracting returns, refunds, discounts, and allowances from gross revenue. It shows the money that stays in the company. Say our clothing store from above pays out $800 in returns and $200 in discounts. Its net revenue is $9,000.

• Non-operating revenue. The money made from activities outside the main business, like earning interest, investments, or renting property. For example, the clothing store earns $500 per month by renting out a small corner of their shop to a coffee stand.

• Deferred revenue. The money a company receives in advance for products or services it will deliver later. It appears on the balance sheet as a liability until the product or service is provided. For example, a gym collects $1,200 for an annual membership but counts it as revenue month by month as the service is provided.

Overall revenue can show how well a company connects with its customers. Instead of focusing only on gross versus net numbers, consider what revenue tells you about a company's popularity, how people feel about its brand, and whether its prices are right.

What are sales?

Sales in business mean the money a company makes from selling products or services within a given period. There are two main ways to look at sales:

• Gross sales. The total amount of money from all sales before taking anything out. If a store sells 100 items at $10 each, gross sales are $1,000.

• Net sales. What the company keeps after subtracting returns and discounts. If a store has $20,000 in gross sales but customers return $2,000 worth of items, the net sales are $18,000.

Most businesses care more about net sales because it shows the actual money the company gets to keep.

Gross sales are described purely in monetary terms, yet different products or services might vary significantly in profit margins. So, equating sales with revenue without discussing costs could be misleading.

When calculating gross profit, you take net sales and subtract COGS (an acronym for the cost of goods sold). Further subtracting your operating expenses from that total leads to your net income, an important bottom-line metric for any business model.

Revenue vs sales: The key differences

Sales reflect direct customer transactions, while revenue accounts for all earnings from your customer base plus additional sources. 

Here are the main differences between revenue and sales. 

Where they come from

Sales are the money you get directly from selling your products or services to customers. For example, when a store sells a shirt for $100, that's considered a sale.

Revenue includes sales and money from other sources, such as interest, dividends, or investments. A SaaS company makes most of its money from subscription fees (sales) but also earns extra from interest on its savings (non-operating revenue).

How they can be used

Sales figures help you see if customers like your products and your marketing is working. But you can't spend all this money freely because some must cover your costs, discounts, or returns.

Revenue gives you a bigger picture of all your money and helps with planning your budget, paying debts, and making investments. Since revenue can include one-time income (like selling old equipment), a temporary boost in revenue might not mean you have more money to spend long-term.

When they are counted

Sales are usually counted when the transaction occurs, when the customer takes ownership of a product, or when they receive a service. The exact timing depends on whether you use cash or accrual accounting. 

Revenue recognition can be more complicated, especially with complex contracts. For example, subscription services might collect payment upfront (sales) but slowly count it as revenue over months of service delivery.

Revenue and sales in accounting

Revenue and sales are related but different in accounting. Both refer to money a company earns, but they're recorded differently depending on accounting methods and business types.

The two accounting methods

Cash accounting

You only record transactions when money changes hands. A sale counts only when you receive payment. It shows exactly how much cash you have, but might not show your true financial situation if customers pay you later.

Accrual accounting

You record earnings when you earn them (when you deliver products or services), even if you haven't received payment yet. If you deliver a product in January but get paid in February, you still count that sale in January.

Accrual accounting shows a more accurate picture of your business activity but requires careful tracking of what clients owe you and what you owe others.

Revenue recognition standards

GAAP (Generally Accepted Accounting Principles)

GAAP outlines strict guidelines for when and how revenue can be recognized. It focuses on "transfer of control." You can count revenue as earned when the buyer gets the benefits and risks of ownership.

💡 Example: A software company might only recognize a portion of revenue each month if they provide ongoing service to client. 

IFRS (International Financial Reporting Standards)

Similar to GAAP rules but with some differences in how they handle complex sales (ex., how performance obligations are identified and how multi-component contracts are separated).

💡 Example: If you sell a product that includes installation, you might need to recognize the revenue from the product sale and the installation service separately. 

How to increase sales and revenue

Now that you understand sales and revenue, here are some tips for increasing them in your business: 

1. Optimize your sales funnel. Analyze each stage of your sales funnel to spot and fix any drop-off points using data analytics services. Regularly track conversion rates and customer lifetime value metrics to guide continuous improvements.

2. Create a content marketing program. Get article writring and content strategy services to produce valuable articles, videos, and social media posts that address your audience’s needs. Consistent, high-quality content boosts brand credibility and draws in qualified leads.

3. Develop personalized marketing campaigns. Personalization can lift revenue by anywhere from 5% to 15%, according to McKinsey. Segment your audience by behavior and interests, then tailor offers and messages for each group. Personalized emails, product recommendations, and ads increase engagement and conversion rates.

4. Implement financial tracking. One study found that businesses using accounting services see an 11.5% lift in revenue on average. Get bookkeeping services to record your revenue, expenses, and cash flow accurately. Use a financial dashboard for real-time visibility into accurate forecasting and your company’s profitability.

5. Design a customer retention strategy. Build loyalty and rewards initiatives that encourage repeat purchases and referral business. Team up with CRM specialists and email marketing experts to deliver personalized follow-ups and strengthen long-term customer relationships.

6. Diversify income streams. Explore new products, services, or partnerships that fit your brand’s strengths and market opportunities. Business strategy consultants can help identify untapped niches and design pilot programs before a full-scale launch.

Hire sales professionals on Fiverr today

Knowing the difference between sales and revenue helps your business succeed. While using strategies like improving your sales process and writing better sales copy, think about hiring sales experts on Fiverr to grow faster. 

These external consultants can create personalized campaigns, keep customers coming back, and find new ways to make money without paying full-time salaries. With expert help and the right knowledge, you'll improve your business operations and become more profitable quickly.

Revenue vs. sales FAQs

Are revenue and sales the same?

No, sales and revenue are not the same thing. Total sales refer to money made from selling products or services in a specific period, while total revenue includes sales income plus other revenue streams like investments or rentals.

What are examples of sales and revenue?

Sales examples include a clothing store selling $10,000 worth of clothes or a software company collecting subscription fees. Revenue examples include those same sales plus additional income like interest earned on company savings, rental income from property, or one-time gains from selling equipment.

How do you calculate sales and revenue?

You calculate sales by adding up all the money earned from selling products or services in a specific time period. You figure out revenue by combining your sales figures with all other income sources, such as interest, investments, and rental income.