Net

The net amount usually means the amount that remains after various deductions, whether it is our salary or our company's profit. Deductions mostly mean taxes, but we usually refer to the amount after all deductions as net.

We usually talk about a net amount when the usual items have already been deducted from something. For example, income tax from the profit, value-added tax, VAT from the price of a product or service - obviously this is the more common meaning of the word. The opposite of net is gross, which is the amount from which the items leading to net are deducted. 

In the gross-net topic, the most important entrepreneurial knowledge is to never forget which one we are talking about. If one of our suppliers tells you an amount, it must always be clarified whether he means gross or net. Of course, we also always have to clearly indicate that we are telling someone else gross or net numbers in the given situation. 

That is why it is important to always consult with at least one accountant when preparing a business plan or a financial plan, so that we are aware of what deductions are charged to the gross sales, for example. Thus, during planning, for example, we should really calculate the net amount when we want to find out whether our company is operating profitably.

Many people try to extract as much net as possible from their business, and therefore even take on illegal solutions. Needless to say, this is not only wrong, but also against the law. Not only our business, but even our entire life path can be broken if the tax authorities appear on the scene. Let's not do that. 

It is also possible to reduce the tax burden of a business using completely legal methods. There is the choice of company form as an option. There are tax schemes that reduce the tax burden, but here too it is important to know the exact conditions and follow the rules.