'Gross' and 'net' appear on invoices and financial statements often, and confusing them can distort your bookkeeping. Here's the distinction.
Gross amount
The total amount before any deductions — this typically includes the subtotal plus tax, before any fees or withholding are subtracted.
Net amount
The amount remaining after deductions — such as payment processing fees, withheld taxes, or agreed discounts — are subtracted from the gross figure.
Why this matters for freelancers
If a client withholds tax at source (common in some countries for freelance payments), the amount you actually receive (net) may be lower than your invoiced total (gross) — understanding this prevents bookkeeping confusion.
Payment processor fees
Platforms like PayPal or Stripe often deduct a processing fee before depositing funds — your invoice reflects the gross amount owed, but your bank deposit reflects the net amount received.
Keeping your records accurate
Track both figures in your bookkeeping — the gross invoiced amount for your income records, and the net received amount for reconciling actual bank deposits.
The takeaway
Always invoice the full gross amount owed; handle any deductions or fees as a separate line in your own financial tracking, not by silently reducing the invoice total.