Why are discounts not applied when determining gross sales?

[secondlifeatl]

We have discounts applied every day. This means that the gross sales number that is used in all the sales reports means absolutely nothing to us. We have had days where are "gross sales" were considerably larger than another day and yet the actual amount of money collected was significantly less because of the discounts being applied. Who actually needs to know how much your sales would have been if you hadn't applied discounts? That number is irrelevant to any accounting procedures.

[Minion · Accepted solution]

Hi @secondlifeatl 

This is actually a common accounting formula, and not just with Square reports. Your net sales would reflect your truer picture of your revenue. 

"Gross sales is a metric for the total sales of a company, unadjusted for the costs related to generating those sales. The gross sales formula is calculated by totaling all sale invoices or related revenue transactions. However, gross sales do not include the operating expenses, tax expenses, or other charges—all of these are deducted to calculate net sales."

In all honesty, for me personally, I do like to look at what my sales would have been before discounts, as it puts me back into perspective when making a sale with a customer.  Did I try and oversell, adn offer to large of a discount?  Could I have gotten away with maybe only offering $25 off vs. $50 off. I guess it sort of hits that greed button inside that tells me to quit selling myself short so much. /shrug

[secondlifeatl]

Hi @Minion 

Thank you for attempting to make sense of this, but it still does not make sense. Gross Sales, in your definition, is a sum of your sales (the revenue brought in by the sale). Because of the discount you did not bring in that amount of revenue for that purchase so it makes no sense to list it. Discounts are not a net sales item. If they were then you would have to list them in your tax filings (for those of us who live in areas with a sales tax). 

We have used other POS systems in the past and none of them list Gross Sales without accounting for the discounts. Your Gross Sales should be the revenue you brought in that day (everything you collected from the customers). By not including the discounts your Gross Sales is over-inflated.

Also, we were still able to look at what we could have made that day (hypothetically) if we did not use discounts simply by adding them back to the Gross Sales figure. Currently we have to do the opposite, so most of the charts and figures on the Sales Reports and Sales Trends screens mean absolutely nothing to us.

[Minion]

Hey @secondlifeatl 

Yeah' I'm honestly not sure any other way of explaining it.  I pretty much just took that definition of gross sales from here .  

Maybe someone else who knows more about the accounting side of a business can chime in and give a better explanation, but  I pay an accountant to handle it all as it is far from my strong suit lol. 

[JUYBoutique20]

Most companies want your gross sales when applying for a line of credit or anything like that.  Same as when you're applying for a personal line of credit, the number they want is the one before taxes or any other deductions you have coming out.  I mean some people don't care to look at gross and that's ok.  It's good to have when needed though.

[secondlifeatl]

I understand the need for Gross Sales, but it is the way it is shown in Square that is different from other POS systems we have used in the past. Say we sold $10,000 worth of merchandise, but we had a 50% off sale that day and so we actually only had sales of $5,000 (including taxes, so Gross Sales in other POS systems). Which number would a company asking for your sales numbers want if they were to determine your eligibility for a line of credit? Using the Square Gross Sales number ($10,000) grossly inflates your revenues. In this example, our Gross Sales would be $10,000 and our Net Sales would be about $4,600 (8% sales tax).

It really isn't that big of a deal for us when we are doing our accounting. It just means the Reports Page in the Square Dashboard is meaningless to us. I just figured a company as technologically savvy as Square would be able to figure out how to make the Dashboard more useful.