The Abacus — Unpredictable Revenue Streams
By Admin

May 25, 2010

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When it comes to budgeting revenue, do you budget only the revenues that you have a direct influence over?  Whether you sell services or products, how good you are at evangelizing your company will dictate how much revenue you receive.  You have a direct correlation to this.  Business 101, right?  Of course, there are the external factors, laws & regulations, etc. that play a part, but that’s a topic for another day.

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Well what about those revenue streams that are either short term in nature, unpredictable in timing and amount, and ones where you just go to the mail box for the check?

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It doesn’t always come in the form of a check though.  Currently, President Obama signed into law the HIRE Act.  One of the provisions of this act was that a company who hires any person who has been unemployed for 60 or more days will not have to pay the 6.2% tax of Social Security on that person’s wages.  In theory, the government would like you to use this money that you are saving.  This will expire on December 31, 2010, so it is not indefinite.

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Additionally, many local governments have installed red light cameras at key intersections in their cities.  They are supposedly saying they are installing the cameras for our safety, but they are generating an enormous amount of revenue.  I’m not going to question their motive here but give them the benefit of the doubt.  My question is, if they are not budgeting these fines into the city budget (remember it’s all about safety), then what are they doing with the money?

The key question is what to do with this money?  Here are some thoughts:

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1)      Add any additional revenue to the capital improvement fund.  Computers become obsolete real quick these days so the extra funds may be needed sooner rather than later.

2)      Use the funds for a sales incentive program.  Bonuses paid to the top sales person for the month gets X amount of dollars or a weekend getaway.  This doesn’t have to be done monthly, just when you have a surplus.  Remember, you can’t predict this revenue.

3)      Give to the company’s favorite charity or cause.  This serves a dual purpose of creating good will in the community with the company’s name attached to it and serves as a sort of quasi-advertising.

4)      Bolster the advertising for a period of time.  Hey, you didn’t expect the revenue.  Why not parlay it into some additional exposure.

5)      Kick the company Christmas party or summer picnic up a notch.  Instead of pizza, burgers and hot dogs, you could actually order steak, chicken and shrimp.

6)      Add it to the company profit sharing contribution made once a year if your company has 401(k) plan with a profit sharing component.

7)      Use the funds towards starting a health and wellness program for the company.  Gym memberships, non-smoking incentives, nutrition instruction, etc.  Eventually the thought is to integrate this into the company’s actual budget.

8)      Don’t do anything with it.  Just let it bolster the company’s bottom line.  Could be you need to produce financial statements to third parties and the profit needs to be as much as possible.

Do you have any ideas with what to do with unpredicted revenue? It’s coming sooner or later, you know that.   What will you do with your unpredicted revenue?