Revenue generation is the manner by which a company sells its goods or services to produce an income. This is not to be confused with a company's overall profits, as the two figures are drastically different.
Revenue generation is the total amount of monies collected for the duration of a specified time. This amount of money is taken into consideration when analyzing the overall profit made from sales. Subtracting expenses from revenue provides a base number for profit margins. It is necessary to ensure that all expenses are included when subtracting from revenue generation. If not accurately subtracted, profit margins are drastically affected.
An accurate understanding of revenue generation also affects how a company is run. The number of employees, company supplies and physical assets affect how much revenue the business generates. Before calculating the net income of a company, the aforementioned expenses need to be subtracted from the revenue generated from sales.
Good bookkeeping is essential to ensure that all revenue generation is properly noted. Revenue generation affects the various types of government reporting and insurance requirements that companies are required to comply with. This also affects taxes that are owed to the government based on revenue. Documentation is key to reporting a company's revenue.