Net revenue
net REV-eh-noo
Gross revenue minus refunds, credits, and discounts. What your business actually keeps after adjustments.
Net revenue is what remains after you subtract refunds, credits, chargebacks, and discounts from gross revenue. A company that invoices $1M but issues $50k in refunds and $30k in credits has $920k in net revenue.
Net revenue is the number that matters for financial reporting and revenue recognition. Gross revenue can be inflated by aggressive billing practices that get reversed. Net revenue reflects what you actually earned and kept.
For SaaS companies, the gap between gross and net revenue is usually small (2-5%). If the gap is larger than 10%, you have a quality problem: either your product is not delivering value (high refund rate), your sales team is overpromising (high credit issuance), or your billings system has errors.
Examples
Calculating net revenue.
Gross revenue: $500k. Refunds: $15k. Credits issued: $8k. Chargebacks: $2k. Net revenue: $475k. The 5% gap between gross and net is typical for a healthy SaaS company.
A high refund rate signals a problem.
A company's gross revenue is $200k/month but net revenue is $160k/month. The 20% gap comes from $30k in refunds (customers leaving within the first month) and $10k in credits (support team issuing credits for outages). The product team investigates the first-month churn and finds onboarding is broken.
Net revenue retention versus net revenue.
Net revenue retention (NDR) and net revenue are different concepts. NDR measures how existing customer revenue changes over time (expansion minus churn). Net revenue is total revenue minus adjustments. A company can have 120% NDR (existing customers are expanding) while net revenue declines if new customer acquisition slows.
In practice
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Frequently asked questions
What is the difference between net revenue and gross revenue?
Gross revenue is the total amount billed before any adjustments. Net revenue is gross revenue minus refunds, credits, chargebacks, and discounts. Net revenue is what you actually keep. Financial statements typically report net revenue.
What is a normal gross-to-net revenue gap?
2-5% for a healthy SaaS company. If the gap exceeds 10%, investigate. Common causes: high first-month refund rate (onboarding problem), frequent SLA credits (reliability problem), or billing disputes (sales overpromising). The gap should be stable or shrinking over time.
Related terms
The annualized value of your active subscription contracts. The heartbeat metric of every SaaS business.
The accounting rules for when you can count revenue as earned. Not when you sign the deal or collect the cash, but when you deliver the service.
Revenue minus cost of goods sold, expressed as a percentage. For SaaS, this is revenue minus hosting, support, and delivery costs.
Bookings is what you sold (total contract value when signed). Revenue is what you earned (recognized over the delivery period). They are never the same number.
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