Net sales for your business shows your total sales revenue minus all sales returns, allowances, and discounts. The net sales figure appears in your company’s income statement in terms of reporting your firm’s financial health. This number more accurately reflects your business’ sales performance versus raw numbers for revenue or income.
An Example of Net Sales
For example, imagine you had total sales revenue of $100,000 for one quarter. Customers returned $10,000 in merchandise during that same three-month period. You also sold some damaged products and clearanced goods at discounted prices. The total mark-down for sales during that quarter came to $5,000. Therefore, your net sales for those three months amounts to $100,000 minus $10,000 minus $5,000, or a total of $85,000 in net sales.
How to Read Net Sales Figures
If your company has high gross sales revenue but low net sales, you may offer too many discounts on your base prices. If the low net sales is the result of a high amount of returns, you may need to investigate the reason customers are returning your products. Net sales figures also give you an idea as to whether you’re reaching your financial goals.
You can also look at net sales on a quarterly basis to track how your revenue performs at different times of year. For example, net sales figures may indicate that you offer deeper discounts in November and December as part of winter holiday sales. However, your total sales revenue jumped by 50% because more people buy your merchandise during the holiday gift-giving season. Net sales may actually increase during this time period because of the sheer volume of sales you have during a busy shopping time.
QuickBooks Online allows you to track and manage sales all in one place. Then, you can use the software to generate customized reports that gauge the financial health of your business. 4.3 million customers use QuickBooks. Join them today to help your business thrive for free.