When running a business, tracking revenue and sales is imperative. In the retail industry, yours is one of the most important metrics to look atgross sales.
Because running a retail business involves a lot of overhead: thecost of goods sold, site administration and shipping, as well as rent and utilities forstationery stores– Knowing your gross sales is the key to staying afloat.
This article explains gross sales, how they're calculated, and what they can say about your business.
table of contents
- How to Calculate Gross Sales
- Gross sales vs. Liquid sales
- Understanding the Gross Sales Formula
- Gross sales determination example
- What can gross sales tell you?
How to Calculate Gross Sales
The formula for calculating gross sales is Total Units Sold x Original Sales Price = Gross Sales. A company's gross sales are the total sales of all its products and/or services during a given period of time. The number, known as top-line sales, represents a company's total sales without deductions, returns, or discounts.
Gross sales vs. Liquid sales
Now that we know what gross sales are let's talk about its cousin,liquid sales. Together, these metrics give business owners a bird's-eye view of how their business is progressing.
Gross sales show the company's total sales, while net sales show the total profits.
gross sales formula
You can calculate your gross sales using the following formula:
Total units sold x Original selling price = Gross sales
There must be no discounts, bonuses orReturnsincluded in this number. The aim is to get an idea of your company's total sales over a selected time period.
For example, to find out how your business is doing in a given month, you can query monthly and yearly gross sales.
net sales formula
You can calculate your net sales with the following formula:
Gross Sales - Reimbursements - Reimbursements - Returns = Net Sales
Deduct these three items from your gross income:
- Discounts for early payment of invoices on large orders:Sales or promotional discounts are excluded.
- Sell Bonus:Also known as rebates, these are reduced sales prices due to defective products. Products may be refused if defects are found in the store, but this also applies if customers return defective products. If they decide to keep the product, you can refund part of the purchase price, or they can return the entire order.
- Refunds and Returns:This includes all product returns. The customer may have been disappointed with the quality of the product,delivery delays, you received the wrong items or the product did not meet expectations.
You can use net sales or net income to calculate your company's profit. Gross sales are the sum of all sales while net sales subtract all rebates, rebates and returns to calculate your business profit.
Understanding the two numbers is crucial for your financial statements. However, gross sales give you a clear picture of your company's overall performance and how many sales transactions are actually taking place.
track your finances
Shopify POS makes it easy to report and review your finances, including sales, returns, taxes, payments, and more. View your financial data for all sales channels in the same easy-to-understand back office.
Understanding the Gross Sales Formula
You've already learned the basic formula for gross sales, but let's dive into it so you know exactly how to calculate it.
First you have to decide what period of time you want to measure. If you look at the first quarter of 2022, it collects all sales made during those three months (January to March). When calculating your gross sales, only consider the original sales price. Ignore any discounts or promotions you have made.
Find your exact sales figures by logging into yourpoint of sale systemor online sales panel. To track progress, it is also advisable to track it in a separate spreadsheet.
If your POS dashboard includes discounts and rebates, it may already be calculating net sales for you, so you'll have to figure that out yourself.
Calculate the exact quantity of each product sold. Perhaps you sold 50 units of Product A and 75 units of Product B. Product A costs $299 and Product B costs $199.
So your gross income is (50 x $299) + (75 x $199) or $29,875.
If you dig a little deeper, you'll find that 10 units of Product A were discounted by 25% due to early payment, which you'll use to calculate your net sales.
For example, you would take 25% of $299 ($74.75), multiply it by ten ($747.50) and subtract it from your gross sales ($29,875 - $747.50) to get net sales of $29,127 .50 in the quarter.
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Gross sales determination example
Let's look at a real-life example. Using an eCommerce business as an example, we'll show you what that might look like for your own retail business.
Our invented case study is based on the Shopify storeetc.. On their website we can see that they sell organic, vegan and paleo snacks.
In the list below we can see that nomz offers a range of products. We'll examine just a few of their self-proclaimed bestsellers in this case study.
The company features four bestselling products on its homepage: Energy Bites Assorted Box, Daily Nourish Superfood Mix, Ultimate Variety Pack, and a 12-pack of its Nomzicles.
To see if sales are steadily increasing, let's compare sales revenue from March 2022 to February 2022. First, we need to determine how many of these top four products were sold.
Let's say the numbers look like this:
- Sortimentsbox Energy Bites – 127
- Daily Superfood Blend for Nutrition – 346
- Ultimate Tension Pack - 72
- Nomzikel - 12er pack - 298
Next, we need to determine how many products are sold based on their original selling price.
- Sortimentsbox Energy Bites – 127 x 33 $ = 4.191 $
- Nourishes Daily Superfood Blend – 346 x $56 = $19,376
- Ultimate Variety Pack – 72 x $ 115 = $ 8.280
- Nomzikel – 12er Packet – 298 x 40$ = 11,920$
Total gross sales in March 2022 was $43,767. If we compare it with February and January gross sales, we can see fluctuations in gross profit. From those totals, we can deduct deductions like rebates, discounts, and returns to see what the net sales were.
Knowing how to calculate the metrics yourself is a great way to get a better idea of what the numbers are telling you.
💡PROFITS:Only Shopify POS brings your retail and online data together in a single back office: customer data, inventory, sales, and more. to vieweasy to understand reportsto spot trends faster, seize opportunities, and drive your brand's growth.
What Gross Sales Can Tell You
Why should you care about metrics like gross sales? Because gross sales numbers can help you discover a variety of things about your business.
rotation in a given period of time
As mentioned, gross sales shows your total sales over a given period, whether it's the last month, quarter, or year.
You can track growth trends by looking at data like this and understanding the ups and downs in your industry to helpdemand forecast. Most industries experience slow sales periods throughout the year. January tends to be the slowest month for the retail sector.
Depending on your product offerings, this might be different for you. If you know your earnings during this period each year, you can better plan them.slow retail months.
consumer buying trends
Calculating your gross sales can also give you a deeper idea of how many units of each product were sold during a given period of time. This information can give you a good idea of consumer preferences and buying trends. You can also see if the most popular products change with the seasons.
Write down your most popular products so you can better serve customers with similar products. If you have products that just aren't selling, you can move them to your website's homepage to get more exposure and feature them inmoney bandor offer discounts to increase sales.
Knowing your gross sales helps you understand how products move in your business, how much revenue your store generates, and what your customers are buying. Be sure to track these metrics on a monthly, quarterly and yearly basis so you know where your business stands.
💡PROFITS:To see how much a customer has spent shopping in your store and online with you, select the customer's profile in Shopify POS.
Calculate your store's gross sales
To gauge success, look closely at your company's sales figures. Calculate your gross sales, net sales and profit. Using the formulas in this article, you can get a clear picture of your company's total profit and cash flow.
Based on these numbers, set realistic sales targets for your retail store. Setting goals can inspire your team to work aggressively towards achieving them, thus maximizing business growth.
Increase store sales with Shopify POS
Shopify POS has all the tools to help you convert more store visits into sales and increase sales. Make more relevant product recommendations, convert abandoned store sales to online sales, and track store and staff performance in an easy-to-understand back office.
Gross sales FAQ
What does gross sales mean?
Gross sales are the total amount a company earns from selling its products or services before deducting taxes, costs and expenses.
How are total gross sales calculated?
Total gross sales can be calculated by adding the cost of all goods or services sold during a given period. This number does not consider discounts, returns or discounts.
What is the difference between gross and net sales?
Gross sales refer to the total amount of revenue generated by a business before deducting any deductions such as taxes and expenses. Net sales refer to the total amount of revenue a business generates after all deductions such as taxes and expenses are taken away.