A business' total revenue may be made up of several different departments. As a simplified example, revenue may be generated from both the sales and service departments of a company. Although total revenue gives you an overall snapshot of sales, it doesn't tell you what department generated the majority of this revenue. Calculating each department's percentage contribution to the total revenue gives you a better idea of each department's performance. If you work in a business's accounting department, you may find you're asked to provide this information for outside investors or prospective clients. If you're tracking the data on an ongoing basis, this process will be easier when someday you're asked for the information.
In order to calculate a specific department's contribution to total revenue, you can use a series of simple calculations derived from readily accessible data.
Gather Department Information
The most time-consuming part of calculating revenue by department will be gathering the information. If the company has a balance sheet, you can usually find department revenue listed there. If the information isn't there and you don't work for the company, tracking down the revenue information may be more difficult. However, if you work for the business, you may be able to request each department to turn in revenue information, if your accounting team doesn't regularly pull reports including this information.
Determine Each Department's Revenue
Look at the company's balance sheet for total revenues and its breakdown for each department. For example, assume the company had total revenues of $500,000, $400,000 of which was produced by the sales department, while the service department contributed $100,000.
Divide each department's revenue by the total revenue. In the example, the sales department's $400,000 is divided by $500,000 to produce 0.80. Likewise, the service department's $100,000 is divided by $500,000 to produce 0.20.
Convert Revenue to Percentages
Multiply these figures by 100 to convert them into percentage format. In the example, the sales department generated 80 percent of the total revenue, while the service department only contributed 20 percent.
Use the Information
For businesses, tracking this information can be crucial to success moving forward. Each year, you can pull data on revenue by department and determine where changes may need to be made. Some businesses, for instance, decide to combine and even reallocate departments based on revenue shortfalls. A publishing company may decide that its nonfiction imprint isn't performing as well as its fiction lines. By scaling down the nonfiction imprint, it can then reallocate resources to fiction, where it can make the most of customer demand. It could also use this information when cutbacks are necessary, since the worst-performing departments, revenue-wise, could be reduced first.