What is Net Sales?
Net sales is the amount that any given business is paid for a product or service. As returns and allowances can sometimes reduce total sales, net sales allows you to have a better overview of your company’s actual sales.
Net sales is a calculation that many businesses and organizations use as part of their top tier reporting.
Net sales is often factored into a business’s income statement and is of most interest to the team that deals with a business’s financial statements.
How Do You Calculate Net Sales?
NetsSales is calculated by taking an organization’s gross sales and subtracting discounts, returns, and allowances.
Need an example?
Sales (or gross sales) of $100,000 minus discounts of $1,000 and sales allowances of $500 = the company’s net sales of $98,500.
It’s important to note that a business’s revenue is generally generated by selling a product or service, but it can also include other ways that a company has generated revenue – the sale of a property owned by the business, for example.
What Is the Difference Between Gross and Net Sales?
Unlike gross sales, net sales takes into account discounts, returns, and allowances – net sales is calculated by taking an organization’s gross sales and then subtracting these things. On the other hand, gross sales is the total of all sales of a product or service over a given time period.
See our full list of over 50 Small Business Terms here.
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