How to Calculate Net Revenue
Net revenue is a business and accounting term that refers to a company's sales after accounting for such items as rebates, returns and exchanges for credit. The math is not difficult; rather the challenge is the tracking of and quantification of these items. The end result is to reach a real, final sales number, which is usually lower than the initial reported sales figure.
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Calculate Total Sales for a Month
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Calculate the total sales figure for the company for a particular month. In small businesses, this can be a manual process of adding up individual paper receipts. For larger, more sophisticated companies, there is likely to be an accounting system that can provide this number very quickly. Assume for this example that the total or gross sales figure for a given month is $10,000,000.
Total Up All Rebates
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Add up the total dollar amount of rebates promised to sales customers. For example, total rebates might be $900,000.
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Determine Total Returned Merchandise
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Add up the total dollar value of items returned for cash during the month. Assume for this example $750,000 in returned items.
Add Up Returns for Credit
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Add up the total dollar value of items returned for store or company credit. Credit means that the store or company will in effect owe the customer this amount of money in the future, so it needs to be taken into account in net revenues. For example, assume that returns were made for credit of $500,000 during the month.
Calculate Net Revenues
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Add up the three amounts to get 900,000 + 750,000 + 500,000 = 2,150,000.
Subtract 2,150,000 from 10,000,000 to get 7,850,000.
In this example, gross revenues are $10,000,000 and net revenues are $7,850,000.
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