The Differences Between Order Intake & Revenue
Order intake and revenue are closely related, but distinct finance and accounting concepts. Order intake refers to receiving or processing a customer’s order, while revenue is an official accounting of sales earned from business activities. In some cases, order intake and revenue occur simultaneously, but order intake commonly precedes revenue recording.
In general terms, order intake means that you receive an order from a buyer for a particular number of products. In some cases, orders are immediately executed. The customer wants the goods delivered as soon as possible after placing the order. In other cases, companies order quantities of goods for future use. These are often called bookings, or reservations of goods. Manufacturers of large, expensive equipment often produce a limited supply of goods in a period of time. They take orders or bookings in advance to help project revenue and to ensure production meets demand.
The timing of order intakes versus revenue varies based on the method a company uses to record revenue. A cash accrual business only records revenue when payment is collected. Thus, order intake would precede revenue. An accrual accounting system means you record revenue when earned, even if you collect payment later on account. In some cases, a company that recognizes revenue on an accrual basis may still delay recognizing revenue for a period of time after order intake. Bookings for future delivery have a higher potential for cancellation or modification than goods or services ready for a delivery. An entertainer may book a bunch of shows in advance, but have one or more cancel before show time. Thus, it is safer to recognize the revenue at the time of the show rather than at booking.
Revenue occurs in two basic forms -- from normal operations and from irregular activity. Operating revenue is money generated from regular product and service sales. A retail business generates regular revenue from daily sales of goods and services, for instance. Revenue is normally recorded at the point-of-sale. Similarly, a B2B company using an accrual system would recognize revenue from business accounts at the point of sales, whether cash is collected upfront or payment is made on account.
Whereas operating revenue may correlate with previous orders, non-operating revenue typically has no connection to order intake. This is money generated from unusual or irregular business activities. A simple example of non-operating revenue is when a company sells a piece of equipment. The revenue is considered asset sale revenue. Some companies earn investment revenue as well. Non-operating revenue is harder to predict in many cases because it doesn’t follow order intake or bookings.