Strategic Revenue Management for Enhanced Profitability
Enhance your revenue management strategy with this session focused on revenue budget control, projections, variances, and profit planning. Learn to develop effective revenue variance reports, identify actions to address variances, and create strategic profit budgets for sustainable growth and profitability. Gain insights on accurate revenue projections, constraints, and tracking revenue variances to optimize financial performance. Plan revenue projections over five years by analyzing contracts, meeting client needs, and making realistic assumptions for future revenue sources.
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Presentation Transcript
Module 3: Session 4 REVENUE BUDGET CONTROL AND MANAGEMENT Module 3: Session 4 1 3/18/2025
Session Objectives Develop a revenue variance report Identify possible actions on revenue variances Develop a strategic profit budget Module 3: Session 4 2 3/18/2025
Revenue budget projection Accurate revenue projections help to predict peaks and valleys in income and profit in order to make necessary adjustments in operating activities. Module 3: Session 4 3 3/18/2025
Revenue projections In making projections, analyze your current contract or contracts in pipeline. Make an estimate of how much income you expect to bill on a month-by- month or year-by-year basis and enter these figures on a spreadsheet. Module 3: Session 4 4 3/18/2025
Revenue projections over five years For anticipated contracts, you will need to have periodic meetings with UNRA or District officials who are your existing clients and ask about their ongoing needs for road works. Project basing on past trends, ongoing and planned contracts, anticipated contracts. Make assumptions that are realistic and achievable. Module 3: Session 4 5 3/18/2025
Constraints to revenue projection Delays in concluding works contracts Forecasting of potential contracts in open bidding Estimation of completed works for invoicing Estimation of work variations Delays resulting from nature, industrial action, stock outs and machine break downs. Module 3: Session 4 6 3/18/2025
Revenue projection Revenue source yr1 yr2 yr3 yr4 yr5 Road 1 WIP LG Road 2 Road 3 Total Module 3: Session 4 7 3/18/2025
Tracking revenue variances Revenue source Budgeted Budget six months Actual six months variance comment Contract One Contract Two Contract Three Total Module 3: Session 4 8 3/18/2025
Profit projection Revenue source Contract one Contract two Contract three Total Comment Total revenues Total expenditure Profit Module 3: Session 4 9 3/18/2025
Analyzing revenue variances There are three basic variances to revenue Total revenue variance equals budgeted revenue less actual revenue; Sales volume variance equals (budgeted quantity actual quantity) x budgeted price. Sales price variance equals (budgeted contract price actual contract price) x actual quantity. Total revenue variance equals (sales volume variance + sales price variance) Module 3: Session 4 10 3/18/2025
Revenue variance analysis Volume variance will be caused by Fast or slow speed of construction Events such as strikes, bad weather, accidents Works stoppages due to say machine break down, material outage, absenteeism, poor supervision. Variations by client Price variance would be caused by not getting the price per unit anticipated in the budget because: Poor/better bidding or negotiation Increased/reduced competition Increased/reduced cost therefore higher/lower price Module 3: Session 4 11 3/18/2025
Group Activity (all) 1. Analyze the causes of revenue variances for the provided case. 2. Identify revenue variances that are un controllable and controllable under the provided case and from your experience. Module 3: Session 4 12 3/18/2025
