When you look at the income statement, you could really see there’s two main parts to it.  Part one is the revenues.  Part two are the expenses.  In terms of total dollars, they may be close to each other, although hopefully the revenue number continues to be a little bit greater than the expense number.

Here’s the challenge – while the numbers might be relatively close, usually the space provided is very different.

Revenues might be even just shown as one number on the income statement.  Meanwhile, expenses could have 25 or more line items on the income statement
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Do you get the picture?  Does it look out of proportion to you?

I’m not saying that it needs to be in proportion to the dollars.  However, revenues are such an important number to companies.  Don’t they deserve to have more than only one line in the income statement?

Here are some ways that you might split out the revenues:

1.  Major product line.

2.  Territory.

3.  Division.

You get the picture.  What kind of meaningful split on your revenues could be put into your financial statement to make it more meaningful?  Now, your controller might baulk at this.  It could be a little bit more work, but then the objective is not to make things easy for the accounting department.  It’s to make the reporting more relevant.  It might mean doing a slightly different setup in your general ledger in order to capture a little more detail in the revenue line.  However, believe me, I always find that this is very worthwhile.

So, take a good look at your income statement and what kind of treatment you’re giving to the presentation of revenues.  Consider giving revenues the split it deserves and you could find yourself getting greater insight during the year on, perhaps, one of the most important numbers in your income statement.

Jon Paul, MBA, CPA, CMC, CM&AA

President, Value Added Finance Resources
Bringing new insights on results and maximizing company value