How to calculate total sales

Total sales or gross sales is defined as the value of all invoices for an accounting period, such as a month or a year before making adjustments. Typically, adjustments include customer discounts, refunds, and returns. There isn't a complicated sales formula for gross sales because it is simply the sum of all transactions.

Tracking sales revenue is of particular interest to retailers because the success of a business in the retail industry depends heavily on generating as much dollar volume as possible. A sales revenue formula is required to calculate net sales. Net sales are gross sales after deductions are made to adjust gross sales for certain items.

Frequently, businesses offer customers discounts to encourage timely payments. For instance, a wholesale company might offer retailers a 2-percent discount when an invoice is paid within 10 business days. Such discounts must be entered into a dedicated account and subtracted from gross sales.

Sometimes, a customer will return a product or request a refund. Since these transactions reduce gross revenue, they are deducted from gross sales.

When computing total sales, keeping accurate records of all transactions is essential. This includes sales receipts, invoices, and any record of payments received. Here are the steps you can follow:

• First, gather all your sales receipts and invoices for a specific accounting period. This could be for a week, a month, or a year, depending on your needs.

• Next, add up the total number of units sold as indicated on each invoice or receipt. Remember to include all sales even if some goods were returned or refunded later.

• Then, multiply the total number of units sold by their original sale price. This will provide you with your gross sales.

• After calculating the gross sales, you need to make adjustments. Deduct any discounts provided to customers from this amount. Also, subtract any refunded amounts due to returns or other reasons. These deductions result in what is known as net sales.

• Finally, review your numbers to ensure that they're accurate. This involves double-checking your calculations and cross-referencing your totals against bank deposits and other financial records.

As you can see, calculating total sales involves more than just adding up receipts. It requires diligent record-keeping and careful attention to discounts and deductions. By following these steps, you'll obtain an accurate representation of your business's total sales for a given period.