Chapter 3 Managing Revenue

Abstract

Maximising revenues is as important as minimising costs to achieve profits. The usual (sales and marketing or revenue management) approach is to try and gain additional business – and we will cover some of this here. However, since this is a book about control we’ll be looking more at ways of ensuring that you get all your revenue from existing customers.
If you work in a section where only costs occur, much of this chapter may seem irrelevant, but you may have ‘revenue’ from a subsidy or allowance and you certainly still have customers. I hope you will gain an insight into practices in other sectors that may help you in the future, if not just now.
You have to ensure that everything a customer consumes is actually paid for and that you aren’t giving it away, wasting it or losing it to fraud. This applies to a take-away, a drink, a package holiday or a five-star meal – all can lose revenues by inadequate control. In some sectors this may be more obvious as they have much stronger control mechanisms – in others it may be difficult to see easily where problems might occur.
We look at pricing in Chapter 5 but it’s important to recognise now that there shouldn’t be a conflict between marketing and control – the stakeholder approach means that everybody is interested in the business doing well. The controller wants good revenues as well as the marketing or revenue manager because this should result in good profits, which means good employment for them (in all its aspects).
By the end of this chapter you should be able to:
- Identify the features which may impact on revenue maximisation
- Understand the differences between revenue management and revenue control
- Identify where shortfalls can occur, using ratios
- Calculate ratios for a range of revenue areas
- Utilise methods of improving revenues.