Business gross receipts, or gross sales, is a measure of how much revenue is generated from an organization's trade without taking into account any allowances, discounts or credits that might have been coupled with the product to generate the sale. While gross sales is a useful metric for keeping track of how popular a small business's product is for inventory purposes, it is a relatively poor measure of business performance since it does not consider expenses or profitability.
- Establish the time period you wish to measure. Any financial measure is established within a certain time period. Common time periods to consider when measuring a business's activity are monthly, quarterly and annually.
- Determine if your business operates under the cash or accrual accounting system. The cash accounting system recognizes sales upon receiving the cash from the customer, while the accrual system recognizes income when the product is delivered or the service to the customer is completed. Most companies operate under the accrual system, although small businesses and individuals often operate under the cash system.
- Gather all receipts and invoices of product sold or services rendered for the period. These provide you with the amounts you need to add together to determine gross sales.
- Add all relevant sums from produce sold or services rendered during the financial period in question to determine business gross receipts. If you operate under the accrual system, add only those sales where you delivered the goods or completed the service within the specified time period you are considering. If you operate on the cash basis, recognize only the sales where you received payment within the time period.
