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Gross revenue is the amount of money a business makes, without consideration of the costs incurred by a business that subtract from that revenue. A retail company that sells a product, for example, makes a revenue based on sales for that product, but will also need to consider the cost to purchase that product from vendors, expenses for paying employees, overhead costs for running the business, and lost revenue due to returned products or theft. Gross revenue refers only to the amount of profit made based on sales of products or services, or other revenue sources such as royalties or investments, without consideration for other expenses.
Sometimes also referred to as the “top line,” gross revenue is not a major consideration for many companies, though it can be of importance in some situations. Since this revenue does not reflect the costs of doing business, this does not necessarily reflect how well a company or business is actually doing. The term “top line” refers to the placement of the gross revenue on a budgetary analysis, since it is typically placed at the top of such a report. Expenses, then, are located below this amount and ultimately result in the “bottom line” at the bottom of the report, which indicates gross income or profit.
A number of different expenses can impact the difference between gross revenue and the gross income for a company. New companies often have tremendous start-up costs that must be overcome before any amount of revenue can become income or profit. Retail companies typically subtract the costs of products that are sold, since most retail businesses sell products that are purchased from vendors, rather than selling products that are made by the company itself. Even a company that manufactures products for sale to other companies must consider the costs of raw materials and construction costs that subtract from the gross revenue of a company.
Other costs can include employee pay and benefits, overhead costs for running a business, and potential loss of sales due to returned products and theft. Once these expenses are subtracted from the gross revenue at the top of a budget report, then the resulting amount is the gross income for a company. This amount is typically what is reported to shareholders and business analysts, since this income reflects how well a company will be able to continue operating. New companies, however, may sometimes report gross revenue rather than income, since the initial “bottom line” for such a company is often a negative total, and the revenue may more accurately reflect customer interest or sales.
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