The difference between gross profit and net profit

Gross profit vs net profit (comparison)

Gross profit shows how much money your business makes after meeting some costs. Net profit shows how much you make after meeting all costs.

A business’s gross profit is the money it has left after paying for the goods and services it sold (COGS). It’s net profit is the money left after paying absolutely all expenses and taxes.

Gross profit versus net profit illustration. Gross profit is revenue minus the cost of goods or services sold. Net profit is gross profit minus all other expenses and taxes.

The difference between gross profit and net profit is operating expenses and taxes. You have to subtract those costs to get from gross profit to net profit.

Gross profit

  • Is money you make on sales
  • Creates a pool of cash for running the business
  • Does not guarantee a net profit

Net profit

  • Is surplus cash (money made) after all expenses have been paid
  • Can be distributed to owners or reinvested into the business

See other terms

Profit margin

You can search for experts in our advisor directory

Find an advisor
Small business guides

Xero small business guides

See all our guides & articles

Keep track of your performance with financial reporting

Find out more