Net sales are a measure of a company’s profit — often reported on income statements. They are the portion of revenue that remains after deductions, which include:
Allowances: When a price is reduced due to a problem with the product or service, such as its quality or condition, an incomplete shipment, or incorrect price.
Discounts: Rewards customers receive when they meet certain america phone number list criteria. For example, a seller may reduce the total price of a product or service if the buyer pays in full rather than in installments.
Returns: Merchandise sent back to the seller by a buyer for any number of reasons, including defective or incorrect items, excessive goods, or articles shipped late.
Here’s the formula to calculate net sales:
Gross sales – (allowances + discounts + returns) = net sales
Let’s return to the example above. When Casey calculated her net sales, she included allowances for customers who bought defective items. Last year, there were only two customers who demanded a discount of 50% on damaged sweaters, so she included an allowance of $35 (2 x $17.50) in her gross sales report. Casey also factored in a 25% coupon code redeemed by 20% of her customers. A redeemed coupon code for a unit price of $35 equals a discount of $8.75 per sweater. If this applies to only 20% of her deals, that would mean 2,000 units, totaling a discount of $17,500. She also had a product return rate of 2%, or 200 units. At $35 a unit, that totals $7,000.