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Beginner

What is revenue

Also known as: sales, turnover, top line, sales revenue

Definition

Revenue is everything a business sold in a period, before any costs and without the VAT on the invoice. It is the P&L's top line, not profit and not cash.

Why it matters

Revenue is where every other number on the P&L starts, but on its own it says the least: it is neither the cash in hand nor the profit.

Common mistakes

Confusing revenue with profit and spending on the strength of sales volume.

Related terms

Worked exampleIllustration

A clinic's month: revenue, cash and profit

A clinic, one month, prices excluding VAT.

  1. Revenue is treatments times price, 120 × 300, excluding VAT.

    ₪36,000

  2. The invoices add VAT on top. The clinic passes it on to the state, so it is not part of revenue.

  3. Customers still owe ₪8,000 at month end, so the cash received is 36,000 - 8,000.

    ₪28,000

  4. The month's costs are ₪30,000, so the profit is 36,000 - 30,000.

    ₪6,000

One month, three numbers: ₪36,000 of revenue, ₪28,000 in the bank and ₪6,000 of profit.

Illustration

Formula

The numbers

120Treatments
₪300Price per treatment
₪36,000Revenue, excluding VAT
The clinic's month as the formula. The VAT on the invoices is added on top and passed on to the state, so it is not revenue.

One revenue, three different numbers

Revenue minus costs

  1. Revenue₪36,000
  2. The month's costs-₪30,000
  3. Profit₪6,000

Profit: ₪6,000.

Revenue minus what customers still owe

  1. Revenue₪36,000
  2. Still owed by customers-₪8,000
  3. Cash received₪28,000

In the bank: ₪28,000.

Revenue ₪36,000, profit ₪6,000, cash in the bank ₪28,000. Revenue is the biggest of the three and the least useful on its own.

The clinic's month split two ways: what is left after the costs, and what actually reached the bank. The VAT on the invoices goes to the state, so it is not revenue and is not drawn.

Definition

Revenue is the income a business earns from its ordinary activities in a period: the total it is entitled to for the goods and services it delivered, whether or not the customer has paid yet. Under IFRS 15, revenue is recognised when, or as, the business delivers what it promised and the customer gets control of it: at a point in time for goods, and over time for a service delivered over months. Payment is not the test. Revenue is counted after returns and discounts, which is how it differs from gross sales, and without the VAT on the invoice. A VAT registered business (osek murshe) collects the VAT for the state and passes it on, so it is never revenue, and an exempt dealer (osek patur) charges no VAT at all. Three words get mixed up in Israeli practice: revenue is what was earned in the period, shown by tax invoices, receipts are the cash that actually came in, and turnover is the everyday word for the total business done. Revenue is the top line of the P&L, literally its first line, and every other line is subtracted from it.

Why it matters

Many owners confuse revenue growth with a business that works. A company can grow its revenue and still go bankrupt if customers pay late or if costs grow faster than sales. An owner who quotes turnover with VAT included overstates it, and that skews every ratio worked out from it.

Directly related: Gross Profit, COGS, Net Profit.

Formula

Revenue = Quantity Sold * Unit Price - Discounts and Refunds

Improvement tips

  • Track revenue by product or service line to see where it really comes from.
  • Record revenue without VAT, and keep invoiced revenue and cash received as two separate numbers.
  • Do not rely on one customer or one channel for most of your revenue.
  • Review your prices regularly so they keep up with your costs and with demand.

Common mistakes

  • Quoting turnover with VAT included. The VAT belongs to the state and was never revenue.
  • Recording revenue before the work is delivered.
  • Chasing top line growth at the expense of margin.

Related terms

FinanceBeginner

Gross Profit

Gross profit is revenue minus the cost of goods sold (COGS): what is left from sales after goods, materials and direct labour. Rent and salaries come from it.

FinanceBeginner

COGS

COGS (cost of goods sold) is the cost of the goods or services sold in a period: goods, materials and direct labour. Revenue minus COGS is gross profit.

FinanceBeginner

Net Profit

Net profit is what a business keeps from revenue after every expense, cost of sales, running costs, interest and tax. It is the bottom line, not cash.

FinanceBeginner

Cash flow

Cash flow is the money coming into and going out of a business's account in a period. A profitable business can still run short of cash when customers pay late.

FinanceBeginner

P&L

A P&L (profit and loss statement, or PnL) sums up a business's revenue and expenses for a period and shows if it made or lost money. Profit on it is not cash.

FinanceBeginner

Gross margin

Gross margin is the share of revenue left after the cost of goods sold: (revenue - COGS) ÷ revenue × 100. At 60%, 60 agorot of each shekel remain.

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Quick check

A clinic gives 120 treatments at ₪300 each, excluding VAT, and customers still owe ₪8,000 at month end. What is its revenue for the month?

Choose an answer

Frequently asked questions

Do I need to understand revenue before starting a business?
Yes. A revenue estimate is where every business plan starts: how many customers, at what price, how often. Everything else in the plan is subtracted from it.
When does revenue first become relevant for a new business?
With your first sale. From then on, record every invoice without VAT, so your revenue figures are right from day one.
How do I estimate revenue before launch?
Multiply the number of customers you expect by your price and by how often they buy, then take off the discounts and refunds you expect. Check the result against businesses like yours before you rely on it.
Should I focus only on growing revenue at the start?
No. Revenue that costs more to deliver than it brings in makes the business bigger and poorer at the same time. Watch gross profit alongside it.
Why does revenue matter for a business that is already running?
It shows the volume of business and whether demand is growing, and it is the figure that every other line of the P&L is subtracted from.
What goes wrong when a business focuses only on revenue?
Costs can grow unnoticed, and the business grows its sales while losing money. Impressive sales numbers can still end in a cash crisis.
How do I track revenue without stopping daily work?
Invoicing software or a point of sale system records every sale as it happens. Look at revenue without VAT, by month and by product line.
How can a struggling business raise its revenue quickly?
Go back to past customers with a relevant offer, sell more to current customers and raise prices where the value allows. Deep discounts raise revenue but can cut profit, so check the margin before you use them.
What does revenue mean in plain words?
Revenue is the total of what your business sold in a period, before any costs and without VAT. It is also called sales, turnover or the top line.
Is revenue the same as profit?
No. Revenue is the total of your sales. Profit is what is left after you subtract all the costs of the business from that revenue.
Is VAT part of my revenue?
No. A VAT registered business (osek murshe) adds VAT to its invoices and passes it on to the state, so its revenue is the amount before VAT. An exempt dealer (osek patur) charges no VAT at all, and its status is measured by its annual turnover, which it declares to the VAT authority every year by 31 January. Educational material, not tax or legal advice.
Is revenue the same as the money that came in?
Not always. Revenue is what you earned in the period, shown by your tax invoices, whether or not the customer has paid. The money that actually came in is your receipts. For tax, many small service businesses report on that cash basis and businesses with stock report on accrual, and your accountant tells you which applies. Educational material, not tax or legal advice.

Sources: IFRS Foundation, IFRS 15 Revenue from Contracts with Customers, 2014, checked September 2026, gov.il, the exempt dealer's annual declaration to the VAT authority, checked September 2026

Last reviewed: 2026-09-23

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Struggling with the numbers side of your business?

Alex helps Israeli owners get cash flow, pricing and profit under control. The first call is free.

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