Key takeaways
- Gross sales revenue is units sold multiplied by price per unit, added up across products.
- Net sales revenue takes away returns, allowances and discounts.
- Revenue belongs to the period in which you delivered the goods or service.
- Sales revenue is the top line; profit only appears once costs come off.
What is sales revenue
Sales revenue is the income a business earns from selling its goods or services in a period, before any costs are taken off. It is often called the top line, because it sits at the top of the income statement.
It is narrower than total revenue. Total revenue can also include income that has nothing to do with selling, such as interest on cash or rent from sublet office space. When people talk about sales performance, they mean sales revenue.
What is the sales revenue formula
The basic formula is units sold multiplied by the average price per unit. Where you sell several products, work it out for each one and add the results together.
Most reports then move from gross to net, because the headline price is rarely what the business keeps.
- Gross sales revenue = units sold multiplied by price per unit
- Net sales revenue = gross sales revenue minus returns, allowances and discounts
- For a service business: gross sales revenue = the total value of work invoiced in the period
- For subscriptions: revenue = the share of each subscription that falls inside the period
What does a sales revenue calculation look like
A sales revenue calculation starts from gross sales and works down to net, as in this illustrative example. Harbour Coffee Supply, a made-up wholesaler, sells 2,000 bags of coffee in March at £12 a bag. Its gross sales revenue for March is £24,000.
During the month, customers return £600 of damaged stock and the business gives £900 of volume discounts. Net sales revenue is £24,000 minus £600 minus £900, which is £22,500. That £22,500 is the number to put in a monthly sales report.
When do you count sales revenue
Count sales revenue in the period you earned it, which is usually when the goods are delivered or the service is performed. This is accrual accounting, and it is how most businesses report.
Cash timing is a separate question. An invoice raised in March and paid in May is March revenue. An annual subscription paid up front is spread across the twelve months it covers. Accounting standards such as IFRS 15 set the detailed rules, so check edge cases with your accountant.
How is sales revenue different from profit
Sales revenue is what comes in from sales; profit is what is left after costs. Take cost of sales away from net sales revenue to get gross profit, then take operating expenses away to get operating profit.
This is why a team can grow revenue and still lose money, for example by discounting heavily or winning customers that are expensive to serve. Dividing operating profit by net sales revenue gives return on sales, which shows how much of each pound of revenue the business keeps.
How to calculate sales revenue, step by step
Use the same method every period so the figures compare fairly.
- Pick the period you are measuring, such as a month or a quarter.
- For each product or service, multiply the units sold in that period by the price per unit.
- Add the results together to get gross sales revenue.
- Subtract the returns, allowances and discounts given in the period to get net sales revenue.
- Check the figure against your invoices or accounting system before you report it.
Where Pebbles Ai fits
Common questions
How do you calculate sales revenue for a subscription product?
Count the part of each subscription earned in the period. A year paid upfront is spread across its twelve months, so each month records one twelfth of the price rather than the whole payment.
Do you include VAT in sales revenue?
No. VAT you collect belongs to the tax authority, so report sales revenue net of VAT. The same applies to other sales taxes.
Is sales revenue the same as cash received?
Not always. Revenue is counted when it is earned, while cash can arrive earlier or later. Track both, because a business can be profitable and still run short of cash.
About this page. Written by the Pebbles Ai team for people who run sales, marketing and growth. Last updated .
