Revenue Mismanagement

 

Yesterday you said right revenue may not be the right indicator. Ways in which companies inflate revenue:

I understand the importance of total revenues but startups have a reputation for revenue inflation to make a case for the next round of funding and IPO. Turnover shopping is now an investment banking practice.

- I know startups that gross up revenues and include even GST in total revenues.

- I know startups that show credit notes, discounts and commissions as an expense instead of netting them off with revenue, even if it is from the same clients.

- I know startups that record pass through income as revenue. Some act as an Ad agency but show income and expenditure on both sides. Some include traded services from third parties on behalf of clients and shown on both the sides of P&L.

- Recognizing unearned income as revenue is a practice too. I know a startup whose report was qualified by the auditor for recognizing revenue while not even billing it for GST purposes.

Our financial ratios would be the best. Our audience market share would be good. Our profitability ratios, the RoE and RoCE would be very good. That is a measure I would love to live by. Because survival shouldn’t be dependent on others but on our own performance.  

Call me conservative, but I am free and independent because I earn and spend.