The more honest version of revenue. While gross revenue counts every sale at sticker price, net revenue accounts for everything that came back as refunds, discounts, or allowances - the revenue you actually keep.
Definition
Net Revenue - gross revenue minus returns, refunds, discounts, allowances, and similar customer-facing adjustments. The revenue genuinely retained by the business.
Formula
Net Revenue = Gross Revenue − Returns − Refunds − Discounts − Allowances
Common uses
- Honest period comparison - lets you compare a discount-heavy month to a regular one fairly
- Starting point for gross profit - gross profit = net revenue − COGS
- External reporting - public companies report both gross and net
Watch out
A widening gap between gross and net revenue signals rising discount levels or rising returns - either way, worth understanding.