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Exploring Net Sales

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If you’ve started a business, you probably have read a lot of information on what you have to do with it. Finding a building, having a business plan, getting loans, and finding a bookkeeper are probably all on the list of things you have to do. But, have you looked at your tax information? Have you figured out how you’re actually getting the sales from your hardware manufacturers representatives?

Gross sales are the total amount of sales before any money gets taken out. Basically, it’s the amount of money you would make if certain things didn’t cause you to sell an item for less.

Net sales are the amount that you actually put into your pocket. This accounts for any discounts that customers may get, the cost of actually getting the product, taxes that are taken out for the product, and anything else that goes into the process of selling the product.

Say that you own a company that makes a product, called Product A. You sell Product A for $20 including the cost of shipping.

In one month, you may sell 10 of Product A. Your gross sales for that month are $200, no ifs, ands, or buts. But, your net sales are a little different. Here’s some information that you’d need to know to figure out what your net sales were for the month.

  • Manufacturing cost for each 1 of Product A: $5
  • Shipping cost for each 1 of Product A: $5
  • 3 customers had a coupon for Product A for $2.
  • 1 customer returned 1 of Product A.

So, your net sales for that month would take all of this into account. Subtract $50 for manufacturing, $50 for shipping, $6 for coupons, and $20 for the one return and you get the total net sales for that one month of $74.