Monthly Average Order Value Formula
Learn how to calculate monthly net average order value from gross sales, discounts, refunds, allowances, and completed orders.
Monthly average order value (AOV) estimates the net revenue retained from each completed order in a reporting month. Calculating net sales before dividing by completed orders shows the effect that discounts, refunds, and allowances have on revenue per order.
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Monthly Net Average Order Value
Where:
Subtract discounts, refunds, and allowances 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 monthly sales recorded before deducting sales discounts, refunds, returns, credits, and allowances. | currency |
| salesDiscounts - Sales discounts | The total discounts deducted from sales during the month. | currency |
| refundsAndAllowances - Refunds and allowances | Customer refunds, returns, credits, and sales allowances recorded for the month. | currency |
| completedOrders - Completed orders | The number of completed customer orders included in the monthly sales figures. | number |
Step-by-Step Calculation
Record gross sales
Start with the total sales amount before reductions for discounts, refunds, and allowances.
grossSales
Calculate total sales adjustments
Combine all discounts with refunds, credits, returns, and allowances that reduce gross sales.
salesDiscounts + refundsAndAllowances
Calculate net sales
Net sales are the sales revenue remaining after the recorded reductions are deducted.
grossSales - salesDiscounts - refundsAndAllowances
Calculate monthly net AOV
Divide monthly net sales by completed orders to estimate the net revenue retained per completed order.
(grossSales - salesDiscounts - refundsAndAllowances) / completedOrders
Calculate gross AOV for comparison
Gross AOV shows the average value per completed order before discounts, refunds, and allowances.
grossSales / completedOrders
Calculate the sales adjustment rate
This percentage shows how much of gross sales was reduced by discounts, refunds, and allowances.
((salesDiscounts + refundsAndAllowances) / grossSales) * 100
Monthly net AOV calculation example
Total sales adjustments
$2,500 + $1,500
$4,000
Net sales
$50,000 - $2,500 - $1,500
$46,000
Monthly net AOV
$46,000 / 400
$115.00 per order
Gross AOV
$50,000 / 400
$125.00 per order
Sales adjustment rate
($4,000 / $50,000) × 100
8.00%
Final Result
The estimated monthly net average order value is $115.00 per completed order, based on net sales of $46,000.
Assumptions
- ✓Gross sales, sales discounts, refunds and allowances, and completed orders all relate to the same monthly reporting period.
- ✓Net sales are calculated by subtracting sales discounts, refunds, and allowances from gross sales.
- ✓Each completed order is counted once, even when it contains multiple products or services.
- ✓The sales figures use a consistent treatment of cancelled orders, returns, credits, taxes, and shipping income.
Limitations
- !The result is an accounting estimate and may differ from operational or marketing AOV definitions used elsewhere in a business.
- !The calculation does not separately identify the causes of refunds, such as product returns, fraud, service issues, or post-period credits.
- !A single monthly result can be affected by unusual large orders, bulk purchases, or timing differences in refund recognition.
- !The formula measures revenue per order and does not account for product costs, shipping costs, payment fees, or profitability.
Common Mistakes to Avoid
Dividing gross sales by completed orders when the intended result is net AOV after discounts and refunds.
Including orders from a different month than the sales and adjustment figures.
Counting cancelled or unpaid orders that are not represented in the sales total.
Entering refunds as negative values when the calculator already subtracts refunds and allowances.
Using refund amounts that were already deducted from the gross sales figure, which double-counts the reduction.
Related Formulas
Frequently Asked Questions
What is the formula for monthly average order value?
Monthly net AOV equals gross sales minus sales discounts, refunds, and allowances, divided by completed orders.
How do you calculate net sales for AOV?
Subtract sales discounts and refunds or allowances from gross sales: net sales = gross sales − sales discounts − refunds and allowances.
Why calculate gross AOV and net AOV separately?
Gross AOV shows order value before reductions. Net AOV reflects the revenue retained after discounts, returns, refunds, and allowances.
Can monthly average order value be negative?
It can be negative if recorded discounts, refunds, and allowances exceed gross sales for the reporting month. This can occur because of timing differences or unusually high returns.
What happens if there are no completed orders?
AOV cannot be calculated because dividing by zero is not defined. Use a period with at least one completed order.
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