Net Revenue
Total revenue minus returns, discounts, and allowances.
Definition
Net revenue (or net sales) is your gross revenue after deducting returns, refunds, discounts, and sales allowances. If you invoice $100,000 but give $5,000 in discounts and process $2,000 in refunds, net revenue is $93,000.
This metric shows actual revenue recognized from sales. It's more accurate than gross revenue for understanding business performance because it accounts for the reality that not all billed amounts are collected or kept.
Why It Matters
Net revenue is the true top-line figure for financial analysis. Investors and lenders look at net revenue, not gross, to assess business size and growth. High discount rates or return rates reduce net revenue and may signal pricing or quality problems.
Tracking the gap between gross and net revenue helps identify issues: excessive discounting, high refund rates, or customer satisfaction problems.
Examples
- 1
A business bills $500,000 (gross), offers $25,000 in discounts, processes $10,000 in refunds = $465,000 net revenue.
- 2
E-commerce gross revenue $1M, returns 8% ($80,000), promotional discounts 5% ($50,000) = $870,000 net revenue.
- 3
SaaS company invoices $200,000, gives $15,000 in annual prepay discounts = $185,000 net revenue.
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