what is a revenue deficit 
a revenue deficit occurs when realized net income is less than the projected net income this happens when the actual amount of revenue and the actual amount of expenditures do not correspond with budgeted revenue and expenditures this is the opposite of a revenue surplus which occurs when the actual amount of net income exceeds the projected amount understanding revenue deficita revenue deficit not to be confused with a fiscal deficit measures the difference between the projected amount of income and the actual amount of income if a business or government has a revenue deficit that means its income isn t enough to cover its basic operations when that happens it may make up for the revenue it needs to cover by borrowing money or selling existing assets to remedy a revenue deficit a government can choose to raise taxes or cut expenses similarly a company with a revenue deficit can make improvements by cutting variable costs such as materials and labor fixed costs are more difficult to adjust because most are established by contracts such as a building lease a revenue deficit is not indicative of a loss of revenue disadvantages of revenue deficitif not remedied a revenue deficit could adversely affect the credit rating of a government or business that s because consistently running a deficit could imply that a government is unable to meet its current and future recurring obligations it also implies that the government or business will have to disinvest or cover the shortage by borrowing running a revenue deficit places many planned government expenditures in jeopardy as there are not enough funds to cover the costs often a government with a revenue deficit is using savings allocated to other divisions of the economy for its expenditures example of revenue deficitcompany abc projects its revenue to be 100 million and expenditures to be 80 million for a projected net income of 20 million at the end of the year the company finds that its actual revenue is 85 million and its expenditures are 83 million for a realized net income of 2 million that resulted in a revenue deficit of 18 million the projections for both the expenditures and revenues were off which could negatively affect future operations and cash flows if the subject of this example were a government funding for required public expenditures such as for infrastructure and schools could be seriously compromised by identifying and employing cost cutting measures the company can avoid revenue deficits in the future it can explore more cost efficient ways of doing business such as finding suppliers who can supply materials at a lower cost or by vertically integrating processes along its supply chain the company can also invest in training its workforce to be more productive 