Tallying up total sales for the day seems to be an easy enough calculation. Just sum up all the sales that happened today. Done.
If only it were so easy. Is taking a sale the same as making a sale? What if a customer places an order, but you don't have the inventory to fulfill it? Or, there's no time left today to pick, pack, and ship? Or, you have yet to manufacture a product the customer ordered? Counting one of these as a completely finished sales transaction depends on the state of the transaction.
Think of "state" as Cohub's measure of whether you've done your part in getting the goods on a sales order into the hands of your customer. Retail, where sales are made and paid for on-the spot, are the easiest sales order states to measure. But this tidy chain of events gets messy for orders that take days, weeks, or, in some cases, months to complete. With the job still unfinished, it's premature to say that you’ve earned the revenue.
Cohub takes order states into account in the reporting of total sales calculations. On the main dashboard, for example, you'll see the metrics “Earned Revenue” and “Unearned Revenue” for the current day and month.
Earned Revenue is the sum of sales orders with the state of "completed". These are orders that have been finished and paid for during the current day and month.
"Completed" means that you’ve finished all the work required to take payment from the customer. In retail, simply taking the customer's payment completes an order. An e-commerce order requires a few more steps before you can say it's been completed.
“Paid for” means you’ve either received payment for the goods you’ve sold or have requested to be paid at some point in the future. Payments can take the form of cash, captured payment card transactions, or invoices issued to customers based on previously established credit terms*.
Unearned Revenue represents the sum of sales orders that you've taken in either the current day or month, but still require further action on your part before they are completed. In Cohub, the state of these orders is called "placed". In simpler terms, placed means you've got a sales order from a customer, but you have yet to deliver the goods.
Let's consider the e-commerce order mentioned earlier. It's the most common component of unearned revenue. An order placed on your website still needs to be picked, packed, and shipped before the order is considered complete. In some cases, this fulfillment process can take several days to finish. Once the order is shipped in Cohub and payment is settled, the state of the formerly placed order changes to complete and its value moves from unearned to earned revenue. Now, you’ve actually earned some scratch! Ding, ding!
* You may wonder why invoices are included in earned revenue calculations. After all, you haven't gotten paid yet. But, in accounting philosophy, you have. Invoices are IOUs from your customers and become part of your AR (accounts receivable). Cash and AR both appear as asset classes on company's balance sheet and are mathematically equivalent, though in practice cash is far less risky than AR. When a customer pays an invoice, it reduces AR and increases cash.