woman holding a book
A net receipt is the amount of revenue received minus deductions for customer returns, sales discounts, rebates, or promotional offers. It can sometimes be referred to as the net income of a business or the net royalty payment an author, musician, or actor receives from the sale of their creative work. In the case of royalty payments, an artist typically receives a percentage of net sales determined by the publisher, production company, or record label.
The business world generally considers a net receipt to be the amount of gross receipts remaining after accounting for product defects, returns, promotional discounts, and unsold product. For example, the food industry will often have to remove expired and damaged products from its factories and retail shelves. The entire value of this product is deducted from the amount of revenue a business receives. Deductions cannot occur in the same period the merchandise was sold.
When businesses account for the sale of goods, they generally record the full sales price as gross income. Customers purchasing the goods may not pay full price. They may receive volume discounts, sale item discounts, or payment term discounts. This is what is called rebates.
Since the number of returns and refunds can vary, most companies account for them as they occur. A net receipt for a given period shows the total amount of revenue received, as well as the number of returns and discounts that occurred during the same period. The net income recorded for that period is what is left after subtracting the amount of sales and markdowns from the total income amount.
Most artists receive a net pay receipt for the sale of their creative work. For example, an author who writes a book and signs a contract with a publisher authorizes the publisher to manage the production, marketing, and distribution of the book. The publisher sets a certain unit selling price and controls the amount of revenue the book generates. The publisher also controls discounts and returns, which reduces the book’s revenue value.
The author then receives a net receipt of these revenues in accordance with their publishing agreement. Typically it will not be for the full amount of net income received by the publisher. This is because the company incurs costs and risks to publish, market and distribute it. Since the publisher would not have generated revenue without the author’s work, it shares this net income with him.