Revenue: what it is and how to calculate it net of VAT and returns
Revenue (also called "turnover") is income from the sale of goods/services for a period, excluding VAT and excise taxes and net of returns according to company rules. The metric reflects the scale of the business and demand for its offering, and it serves as the basis for calculating gross profit, margin, and most financial KPIs.
What the metric measures
It shows the amount of income earned from sales in a given period. It is important to define the revenue recognition event in advance: upon shipment, upon signing of the acceptance certificate, or upon payment — and apply the same approach across all reports.
Calculation
- Revenue (net) = Σ(sale price × quantity) − VAT/excise taxes − returns − discounts/coupons (per company policy)
- For marketplaces, track gross (before fees) and net (after fees) in parallel, clearly labeling the difference
- Consolidate revenue in the base currency at an agreed exchange rate
Calculation example
Monthly sales including VAT are 1,440,000 and returns including VAT are 60,000. Revenue excluding 20% VAT = (1,440,000 − 60,000) / 1.2 = 1,150,000. This is the amount compared with the plan and past periods so that VAT and returns do not distort the picture.
Data sources
ERP/1C, cash register systems and POS, CRM and billing, online store CMS and marketplaces, payment providers. You need consistent SKU/category/channel reference lists and uniform rules for accounting for discounts, returns, and fees.
Interpretation
- Revenue growth may result from increased traffic/conversion, higher prices, or a change in the mix
- Analyze it together with gross margin to avoid growth "bought" with discounts
- Compare against the plan and the same period last year, taking seasonality and promotions into account
Useful breakdowns
- Products / categories / SKUs, brands
- Channels: online, offline, marketplaces, distributors
- Regions, points of sale, teams
- New vs repeat customers, loyalty programs
- Currencies and order types (retail/wholesale, B2C/B2B)
Dashboard visualizations
- Line or bar chart of revenue by day/week/month with year-over-year comparison
- Plan vs actual and variance, %
- Contribution of channels/categories to total turnover
- Choropleth map by region
- Revenue linked with AOV, conversion, and gross margin
How to set targets
Rely on history, seasonality, the marketing calendar, and operational capacity. Set monthly/weekly targets with control thresholds ("minimum — norm — target") and maintain a rolling forecast, updating assumptions about prices and promotions.
Common mistakes
- Including VAT in revenue or mixing the cash and accrual methods
- Inconsistent treatment of discounts/returns, double-counting marketplace fees
- Comparing unequal periods without seasonal adjustment
- Incorrect currency consolidation
Questions for discussion
- What contributed most to revenue growth this period: price, volume, or mix?
- Which channels and categories are exceeding or falling behind the plan, and why?
- Are promotions and discounts "eating" margin faster than turnover is growing?