Gross sales and net sales are both important financial figures for anyone who works in analyzes selling information as part of their job. Both pieces of data give valuable insight into a company’s overall performance and financial health. Understanding the differences between gross and net scales can help you accurately interpret sales data and make decisions based on the most relevant figures.
What are Gross Sales?
They refer to the total amount of all sales receipts added together, reflecting the unadjusted amount of sales income that a company or person makes within a certain period of time. They include any sales transactions that generate revenue and exclude all costs, expenses, and other charges.
It provides an overview of a company’s income to create a baseline to help measure the impact of costs and deductions. Gross sales primarily function as a starting point to calculate other financial information because they only focus on the direct relationship between transactions and income.
What are Net sales?
Net sales are the amount of revenue a company earns after accounting for all relevant deductions and expenses. Since net sales provide a more complete idea of how much a company spends and earns through the sales process, they are key figures financial analysts use to understand a business’s income and overall financial health.
A company’s net sales figure indicates how much it has made from doing business over a certain period of time, allowing stakeholders to make future financial decisions based on the success of their current sales strategy.
Net sales provide business owners, investors, and finance professionals with a holistic view of how their expenses influence their overall earnings. You can calculate net sales by subtracting three key deductions from your gross sales figure.