Gross Sales: What You Need to Know
Posted: Thu Jan 23, 2025 6:58 am
You've probably heard the term before. You've seen gross sales . Sales are a very important metric for business, but their importance is often greatly exaggerated. While sales are a good indicator of the sheer volume and overall cash flow of a business, they don't tell the whole story of a business. In this blog, we'll tell you what you need to know about gross profit.
What is Gross Profit and How is It Calculated?
There is a term called gross profit. Gross refers to the figure before deducting charges such as taxes and expenses. So gross sales is used to represent the total amount of money a business receives after sales. It is the sum of all sales and other figures (if applicable). Check out the image below to see the exact formula you can use to calculate gross profit.
Total Sales Formula
Sales revenue = Total sales revenue Gross profit = Sales revenue + Discounts + Returns + Allowances
Total sales vs. net sales
If there is a term like " gross ," it is used to refer to the benin telegram database money earned before deductions. " Net " is used to refer to the money earned after these deductions. Gross profit is always higher than sales because it includes taxes, raw material costs, employee salaries, etc.
example
Golf club manufacturing and sales company
They manufactured and sold 100 sets of golf clubs for $999 each.
Total sales are $999*100 sets = $99,000.
However, it cost the company $45,000 to make the clubs, plus another $25,000 in employee salaries and marketing the set.
This results in sales of $99,000-$45,000-$25,000=$29,000.
The company made a whopping $29,000 from selling all those golf clubs.
Which number reflects your company's profits: 99,000 yen or 29,000 yen? It's quite simple: the latter is the more accurate number. It's the money your company actually makes.
What is Gross Profit and How is It Calculated?
There is a term called gross profit. Gross refers to the figure before deducting charges such as taxes and expenses. So gross sales is used to represent the total amount of money a business receives after sales. It is the sum of all sales and other figures (if applicable). Check out the image below to see the exact formula you can use to calculate gross profit.
Total Sales Formula
Sales revenue = Total sales revenue Gross profit = Sales revenue + Discounts + Returns + Allowances
Total sales vs. net sales
If there is a term like " gross ," it is used to refer to the benin telegram database money earned before deductions. " Net " is used to refer to the money earned after these deductions. Gross profit is always higher than sales because it includes taxes, raw material costs, employee salaries, etc.
example
Golf club manufacturing and sales company
They manufactured and sold 100 sets of golf clubs for $999 each.
Total sales are $999*100 sets = $99,000.
However, it cost the company $45,000 to make the clubs, plus another $25,000 in employee salaries and marketing the set.
This results in sales of $99,000-$45,000-$25,000=$29,000.
The company made a whopping $29,000 from selling all those golf clubs.
Which number reflects your company's profits: 99,000 yen or 29,000 yen? It's quite simple: the latter is the more accurate number. It's the money your company actually makes.