How to calculate net sales

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rochona
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Joined: Thu May 22, 2025 5:25 am

How to calculate net sales

Post by rochona »

Not everyone is a born financial analyst, so don’t feel bad if you’re not entirely sure — you’re in good company. Just 45% of sales leaders have high confidence in the accuracy of their forecasting (including their projection of gross and net sales), according to Gartner.

Even if you’re crushing your sales quotas, you need to have a deeper understanding of how your sales are trending to adapt strategies and keep an edge over the competition. Knowing the difference between gross and net sales — and how to track them — is key to this effort.

This guide will explain everything you need to know about the difference between gross sales and net sales and offer resources on the best tracking tools available online.

What you’ll learn:
What are gross sales vs. net sales?
Why do you need to track and understand gross vs. net sales?
How to calculate gross sales
How to add gross and net sales to an income statement
Tools for tracking gross and net sales
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What are gross sales vs. net sales?
Very simply, gross sales are the total amount of your sales without factoring in deductions (costs incurred to close those sales). Net sales are your gross sales minus deductions such as allowances, discounts, and returns. These are both calculated at regular interviews throughout a fiscal year, typically monthly or quarterly.

Why do you need to track and understand gross vs. net sales?
Gross sales provide an objective measurement of your company’s ability to generate revenue. With this data, you can make informed decisions about what you need to do to increase sales to hit predetermined targets. It’s also a good measure of how successful your team is at closing deals.

When you track net sales, you can see what deductions are impacting your bottom line — things like product promotions, discounts, and coupons. With an overall view of your net sales, you can find ways to reduce deductions that cut profits or add incentives to encourage more sales.
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