Accounting Average Order Value Formula
Learn how to calculate net average order value from gross sales, discounts, refunds, and completed orders.
Net average order value (AOV) estimates the revenue retained per completed order after sales reductions. It helps make order-level revenue comparable across reporting periods when the same treatment of sales, discounts, refunds, and orders is used each time.
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Net Average Order Value
Where:
First subtract discounts and refunds from gross sales to find net sales. Then divide net sales by the number of completed orders.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| grossSales - Gross sales | Total sales before discounts and refunds for the reporting period. | currency |
| discounts - Discounts and promotions | Total coupon, promotion, and price-reduction amounts applied to orders. | currency |
| refunds - Refunds and returns | Total refunded or credited value for returned or cancelled orders. | currency |
| completedOrders - Completed orders | Number of fulfilled or completed orders in the same reporting period. | number |
| netSales - Net sales | Sales remaining after discounts and refunds are deducted, not below zero. | currency |
Step-by-Step Calculation
Record gross sales
Use total sales before discounts and refunds for one selected reporting period.
grossSales
Calculate sales reductions
Add all discounts, promotional credits, refunds, and return credits included in the selected reporting method.
discounts + refunds
Calculate net sales
Subtract reductions from gross sales. The max function prevents a negative net-sales result.
netSales = max(0, grossSales - discounts - refunds)
Calculate net average order value
Divide net sales by completed orders to estimate retained revenue per order.
averageOrderValue = netSales / completedOrders
Compare gross AOV
Gross AOV shows the average sales value before discounts and refunds.
grossAverageOrderValue = grossSales / completedOrders
Measure the reduction rate
This expresses discounts and refunds as a percentage of gross sales when gross sales are greater than zero.
discountAndRefundRate = ((discounts + refunds) / grossSales) * 100
Monthly online store net AOV example
Add discounts and refunds
$5,000 + $2,000
$7,000
Calculate net sales
max(0, $50,000 − $5,000 − $2,000)
$43,000
Calculate net AOV
$43,000 ÷ 1,000
$43.00
Calculate gross AOV
$50,000 ÷ 1,000
$50.00
Calculate discount and refund rate
($7,000 ÷ $50,000) × 100
14.00%
Final Result
Estimated net average order value: $43.00 per completed order.
Assumptions
- ✓All amounts and completed orders relate to the same reporting period.
- ✓Each completed order is counted once, including a completed order later refunded when its refund is included in refunds.
- ✓Net sales are gross sales less discounts and refunds.
- ✓Taxes, shipping, marketplace fees, and payment-processing fees are excluded unless they are included consistently in the sales amounts entered.
Limitations
- !The calculation does not distinguish partial from full refunds; it uses the total refund value entered.
- !Different order definitions, such as including subscriptions, exchanges, or replacement orders, can change AOV.
- !AOV is an average and can hide large differences in product mix or customer spending.
- !The result is an accounting estimate and may not match revenue recognized under an organisation's reporting policy.
Common Mistakes to Avoid
Using gross sales from one period with completed orders from another period.
Subtracting discounts twice when gross sales already reflects discounted selling prices.
Leaving out refund credits issued during the reporting period.
Including cancelled-before-completion orders in the completed-order count.
Comparing AOV across periods that treat tax, shipping, or marketplace sales differently.
Related Formulas
Frequently Asked Questions
What is the formula for net average order value?
Net AOV equals gross sales minus discounts and refunds, divided by completed orders: (Gross Sales − Discounts − Refunds) ÷ Completed Orders.
How is gross average order value calculated?
Gross AOV is gross sales divided by completed orders. It shows average sales per order before discounts and refunds are deducted.
Why can net AOV be lower than gross AOV?
Net AOV is lower when discounts, promotional credits, refunds, or return credits reduce the sales retained from orders.
Should refunds be subtracted from average order value?
For a net AOV measure, subtracting refunds reflects the revenue reduction. Use the same approach for every period you compare.
What happens if discounts and refunds exceed gross sales?
This calculator sets net sales to zero rather than a negative amount. Review the underlying period and entries if reductions exceed gross sales.
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