Gross vs. net revenue: the difference that changes how you price.
Gross revenue is what the customer paid. Net revenue is what stayed with the business after VAT and card fees came off. The gap is usually 22-25% — and pricing decisions made from the gross number quietly lose money on every sale.
Gross revenue is what the customer handed you. Net revenue is what stayed after VAT and transaction fees were stripped out. For a typical European shop the gap is 22-25% of the gross — and if you price using the gross number, you're unknowingly subsidising every sale by that gap.
TL;DR
The definitions, kept simple
Gross revenue is the headline number on the till. Customer pays €1.247 today across all sales? Your gross revenue is €1.247.
Net revenue is what stayed in the business. Take the €1.247, subtract VAT (in Austria, 20% of the VAT-inclusive sales = €207,83), subtract card fees (1,4% of the €820 paid on card = €11,48). What's left — €1.027,69 — is net revenue.
Two things to notice: VAT was never yours (it's collected for the tax office — see the VAT explainer); card fees never reached you (the processor took them at settlement). Net is what your business actually earned. Everything from here — COGS, margin, EBIT — should be measured against net.
Your accountant would call gross "turnover" on the official P&L and net "revenue" or "net sales." Different jurisdictions, slightly different terms. The conceptual difference is the same everywhere.
The gap, by industry
The gross-to-net haircut depends on three things: your VAT rate, what share of your sales is on card, and the card processor's fee. Rough ranges from nouz customer data:
| Type of shop | Typical card share | Typical gap (gross → net) |
|---|---|---|
| Café (small city, EU) | 65-80% | 22-24% |
| Bakery (mixed cash / card) | 50-65% | 20-22% |
| Retail (urban EU) | 85-95% | 21-23% |
| Salon (booked + walk-in) | 70-85% | 22-24% |
| E-commerce (Stripe / Adyen) | 100% card | 23-26% (higher fees) |
E-commerce is the cleanest example because there's no cash to fudge the math. A Shopify shop with 100% card payments, 21% VAT, and 2,2% processor fee runs at roughly 24% gap. €10.000 of gross revenue is €7.600 of net. Every pricing decision needs to be calibrated to that 76%, not the 100%.
Why this changes pricing
Here's where the abstract becomes painful. Suppose you sell a candle at €18 gross (VAT-inclusive). The wax + wick + jar + label costs €5,40. You think your margin is (€18 − €5,40) ÷ €18 = 70%. Good margin, right?
Now do it on net. €18 gross at 20% VAT is €15 net. Minus a 2% card fee (say it's an online sale): €14,70 net. Margin is (€14,70 − €5,40) ÷ €14,70 = 63%. Still healthy, but seven points lower than you thought.
For a fast-moving product the seven points might be fine. For a slow-moving product where you were already debating whether to keep it: the margin is below your threshold and you didn't know. This is the trap. Decisions made on gross-based margins are decisions made on data that's off by 5-7 percentage points.
I had a yarn-shop owner come to me convinced she was running a 58% margin. We did the math on net. She was at 47%. She'd been pricing competitively to a number that didn't exist.
A worked example: a €12 jumper
A boutique sells a wool jumper. Customer pays €120 in-store on card. The jumper cost €36 to source. What's the real margin?
| Step | Amount | Note |
|---|---|---|
| Gross revenue | €120,00 | What the customer paid |
| − VAT (20%) | −€20,00 | Owed to the tax office |
| − Card fee (1,4%) | −€1,68 | Kept by card processor |
| Net revenue | €98,32 | What stayed with the shop |
| − COGS | −€36,00 | The jumper's sourcing cost |
| Gross margin | €62,32 (63,4%) | The real margin |
If the owner had calculated margin from gross — (€120 − €36) ÷ €120 = 70% — she'd have overstated her margin by nearly 7pp. Across 200 jumpers/year that's €1.336 of imaginary money. Not catastrophic, but it shifts the answer to "should we stock the slightly cheaper-margin scarf instead?"
The compounding effect is what gets you. Eight years of slightly-wrong margin data on 60 SKUs adds up to a category strategy that quietly drifts away from where the money is.
How to track both, daily
You need both numbers. Gross for reconciliation (matching the till); net for everything else (pricing, margin, EBIT, "did today work").
In a spreadsheet this means four columns per day: Gross, VAT, Card fees, Net. Computed left to right, with VAT as a percentage of the VAT-inclusive total and card fee as a percentage of the card-paid subset (transaction fees never apply to cash — see the help article on fees).
In nouz the split happens automatically once you've set your VAT rate and card processor at setup. You enter gross (or it comes from product sales). The P&L shows both numbers — gross is the headline, net is the one used for everything downstream. The statistics tab charts net revenue trend, not gross, because that's the one that drives business decisions.
If you take one thing from this piece: the next time you reprice something, do the math on net. If you take two: do an audit of your last 12 menu / SKU prices and recalculate the margins on net. You'll probably find one or two products that should be 50 cents higher.
FAQ
Why do I need to split out card fees daily? Aren't they small?
Per-transaction they're tiny (€0,02-€0,05). But at 65% card share and a 1,4% fee, the daily drag on a €1.000 revenue day is around €9. That's €2.700/year — enough to pay for a fridge. More importantly, you're subsidising every card transaction in your pricing if you don't account for it.
Should I price my menu / SKUs in gross or net?
Display in gross (customers want to see the final price). But calculate target margins in net. Work backwards: decide your target gross margin on net revenue, then add the VAT and fee to set the display price. That way the customer sees a clean price and you're hitting your real margin.
What about tips — are those gross or net?
Tips are usually pass-through (you collect, you pay to staff, net effect on the business is zero). They shouldn't hit revenue at all — ideally tracked in a separate "tips received / tips paid out" loop. If your POS lumps tips into gross revenue, deduct them before computing net.
What if my card processor charges a flat monthly fee instead of per-transaction?
That's a fixed cost, not a transaction fee. It belongs in your monthly fixed costs (and gets sliced into daily share, like rent). Only true per-transaction fees come off gross to get to net.
My accountant gives me gross numbers — should I push back?
Accountants prepare formal financial statements where the gross/net distinction is sometimes called "turnover vs. revenue." Both are present on a full P&L. For management accounts (the ones you use to run the business), net is what matters. If your accountant only sends gross, ask for both.