How to Calculate Net Sales for Your Small Business

Net sales is a key business metric that shows revenue after subtracting returns, allowances and discounts.

This figure can help you determine a company’s actual sales performance, as it represents the real revenue from sales activities.

Gross sales, by comparison, can be misleading because they don’t include costs like returns and discounts like allowances.

When calculating net sales, businesses should exclude taxes to ensure the figure reflects actual earnings from sales transactions.

Gross sales refers to the total revenue a business earns from selling its products or services, without any deductions.

Net sales is more indicative of the real financial health of a company because it reflects the money truly earned from sales.

Understanding the difference between gross and net sales can significantly impact your company’s business strategy.