What Is Revenue Allocation?


2 Answers

James Milford Profile
James Milford answered
Revenue allocation is the distribution of revenue, or total income, through a business, corporate or government structure. It often involves a complex process of determining how and where to funnel revenues in order to best maintain the viability and operating structure of an organisation.

I'm going to create a hypothetical company to base an example around. My company is in the pet services industry, and I manage a group of devoted professionals that includes animal groomers, nutritionists, trainers, and why not animal whisperers and psychologists.

Of course, each of these management ventures is going to make me a nice amount of money. What I do with that money is a matter of revenue allocation. It's my responsibility to figure out how to best distribute my revenues across all areas of my business real estate, salaries, marketing, purchases, my own personal income over a set period of time. Do I fund all my branches equally? Do I focus on an underperforming branch in hopes that I can stimulate new business? These are the questions I'd have to ask myself.

Moving on, the main issue with revenue allocation is that it's not an exact science and can be a source of conflict. Money is a hot-button topic after all, and you'll rarely find two people who can agree on how it should be distributed. Additionally, there are many documented instances of people deliberately mishandling revenues, and many tales of financial corruption contain an element of irresponsible revenue allocation.

If you're interested in reading up on a real-world case of revenue allocation gone terribly awry, then look up the reports on Nigeria's relatively recent issues over the improper distribution of funds.

Another closer to home example of contended revenue allocation is the entire entertainment industry. We have all heard complaints raised against the high salaries that athletes and celebrities earn, and we should all be familiar with the argument that these people are greedy. Much of this argument stems from the price of tickets these days, with many people believing that the entertainment and sports industries could stand to adjust their revenue distribution so that it favours the consumer.

I'm sure that you can come up with more examples yourself. Good luck on whatever you needed this information for!
Karl Sagan Profile
Karl Sagan answered

Revenue is the money that a company receives from the sale of goods or services, and revenue allocation is a complex process of determining how and where to funnel them. As a vacation rental owner, I can tell you that my aim of a revenue management strategyis selling the product to the customer at the best time for the good price and on the right channel like vrbo vs airbnb, and in general, it's important for every business.

Answer Question