“Gross spending” is a term used in finance and accounting. It is important in calculating budgets, and estimating costs and revenues. Businesses figure gross spending to give them an idea of how much money their companies will spend over a certain period of time or on a particular project. This helps them determine whether some investments will be profitable and to budget accordingly.
The term “gross” refers to the whole picture. No subtractions are made for any revenue or income that a company receives. Real gross domestic product (GDP), for example, is the total of goods and services produced by labor and property in the United States, according to the U.S. Department of Commerce. Real GDP does not account for how much the United States spends. It is concerned only with output.
“Spending” is just one part of a budget. The other side of the equation is revenue and income. Spending is expenditures made for an entire company, a certain project or another particular aspect of a business, for example. It is not concerned with how much money the business makes to offset costs; it focuses only on how much money leaves the company.
“Gross spending,” therefore, is the total amount of money the company spends on a particular project, in a certain department or throughout the entire company, for example. Depending on the aspect of the business for which a company must know the gross spending, the value of gross spending can change. Gross spending does not take into account any revenue that the spending eventually will generate for the company.
Why It Matters
A business owner may want to know how much total money is spent on a particular project to help figure out whether it is a good investment. With sales forecasts and gross spending reports, company executives can calculate profitability of the project. This also is important at the level of federal government in determining budgets for different programs. Gross spending does not take into account any revenue a particular program budget will receive. Net spending, on the other hand, considers revenue a program will create. Considering net spending instead of only gross spending sometimes can create more room for additional provisions and program expansion.