Revenue streams can be defined as “the various sources from which a business earns money from the sale of goods or the provision of services.” A business typically has many revenue streams: sales, rentals, interest and so on. Each stream is tracked and evaluated separately — and accountants have the job of keeping it all straight.
To perform those tasks, an accountant must first identify a business’s various income streams and set up books for each one. They must then properly allocate credits and debits to their streams. The accountant can then track the company’s income and expenses in diverse areas — and, hopefully, spot problems before they become emergencies.
Learning what an income stream in business is and how to juggle multiple streams is an important part of academic accountancy programs, such as University of North Dakota’s master’s in accountancy online. This education can prepare graduates to manage this essential task, as well as understand the general accounting terminology they will need to navigate the world of professional accounting.
Types of Revenue Streams
So, what types of revenue streams are accountants likely to be dealing with? A company may have dozens, some more important and some less, depending on the particulars of the business. The website Hustle to Startup identifies seven of the most common revenue streams:
- Selling Assets. Selling items is an extremely common revenue stream. Your customer buys the item and then owns it outright. Countless examples of this business model exist. A grocery store sells food; a toy store sells toys. People go in, pay for the product and it’s theirs. The business records the purchase as a credit.
- Fees for Usage. This revenue stream involves money that comes from how often or how much someone uses a service. An example would be a cell phone company that charges based on how much data people use or how many phones are on their plan.
- Subscription Fees. A subscription fee is a revenue stream generated when someone buys ongoing access to your product or service. When people sign up for Netflix, for example, they pay a subscription fee for the privilege of streaming whenever they like. When they join a gym, they pay a single monthly subscription fee to visit the gym as often as they want.
- Renting, Leasing and Lending. This revenue stream comes from letting customers use an asset for a fixed period of time. They don’t own it, but they have the temporary right to it. Airbnb makes good use of this revenue stream. People allow visitors to stay in their homes for specified periods. They receive money — a revenue stream — in return for this permission. Another example is ZipCar, where people can rent automobiles for short-term use or individual trips.
- Licensing. This type of revenue stream is common in the creative world. It comes from allowing third parties to use your creative content, for a fee.Photo banks such as Shutterstock are a prime example. They maintain large repositories of copyrighted photography and illustrations, and people pay a per-image fee based on its usage. For example, if the image will be used in a book with a print run of 100,000 copies, the fee will be greater than if the print run is 5,000 copies.
- Brokerage Fees. A brokerage fee is earned when someone “matchmakes” people with other people, or people with companies. Examples include real estate agents, who match home sellers with home buyers; financial managers, who find their clients good investment opportunities; and corporate headhunters, who search for the ideal candidates to fill high-powered job openings.
- Advertising Fees. An advertising fee is money you earn by promoting a product or service. For example, if you have a website and Joe Schmoe’s Shoes pays you to put an ad on it, the money you earn from Joe Schmoe is a revenue stream. If you let someone pay to put up a billboard in your front yard, same deal.
The Role of Accountants
So, what do accountants have to do with all this? Everything! Accountants have their fingers on the financial pulse of everything a business does. The following accounting functions are intimately tied up with a company’s revenue streams:
- Examining financial documents and making sure they are accurate and complete
- Generating financial documents and reports
- Keeping financial records organized and current
- Looking for and correcting errors in financial data
- Investigating oddities in financial statements
In addition to these basic functions, accountants must also be able to provide higher-level analysis of income. On its website, Corporate Finance Institute discusses some types of analysis that are generally required:
- Revenue as a key performance indicator (KPI) of business. Accountants must be able to analyze a company’s performance in terms of income. Furthermore, they must be able to perform this analysis for each individual revenue stream.
- Performance prediction. Accountants must be able to look at the numbers and predict how well a certain revenue stream is going to perform. Is it doing about the same as usual, better than usual or worse than usual? This type of evaluation is essential to a business’s well-being.
- Different forecasting models. Accountants use different forecasting models for different revenue streams and have to develop the correct model for each stream to most accurately predict performance.
Between all these duties, accountants are basically like the doctor of a company. They constantly evaluate the organization’s health and raise red flags if anything starts to go awry. It is a major responsibility — but a satisfying one. Accountants know how things are going before anyone else does. They can therefore play a huge role in a company’s continuing success.
University of North Dakota’s Master’s in Accountancy Online Degree
University of North Dakota’s Master of Accountancy (M.Acc.) online program helps students master accounting principles and general accounting terminology, as well as related skills necessary to reap the career benefits of accounting at the highest levels.
UND is accredited by the Association to Advance Collegiate Schools of Business International, which only recognizes about 30% of business programs in the United States. The master’s in accountancy online program offers practitioner and fundamentals tracks. Coursework is done online, which allows busy professionals to study accountancy and earn their degree without disrupting their work or personal lives.
For more information, contact UND today.
Revenue streams definition – Corporate Finance Institute
Types of revenue streams – Hustle to Startup
Basic accounting functions – Career Builder
Types of higher level analysis – Corporate Finance Institute