True ROAS after RTO calculator
True ROAS counts only the revenue from orders that were delivered. Meta and Google count every order the moment it's placed, including cash-on-delivery orders that come back, so their ROAS is higher than what reaches your bank.
- True ROAS
- 3.20x
- Reported ROAS
- 4.00x
- Orders returned
- 80 (20%)
- Revenue from delivered orders
- ₹3,20,000
- Shipping lost on returns
- ₹9,600
The formula
- Returned orders = COD orders × COD RTO rate + prepaid orders × prepaid RTO rate
- Reported ROAS = all orders × average order value ÷ ad spend
- True ROAS = revenue from delivered orders ÷ ad spend
- Shipping lost on returns = returned orders × (forward shipping + return shipping)
Rates are shares between 0 and 1: 30% is 0.3. Returned products are assumed to go back into stock.
Worked example
₹1,00,000 of ad spend brings 400 orders at ₹1,000 each.
60% are paid by COD. 30% of COD orders and 5% of prepaid orders come back.
Shipping costs ₹60 each way.
80 orders come back (20%), so 320 are delivered. Ads Manager shows a ROAS of 4.00x, but true ROAS is 3.20x, and ₹9,600 went on shipping parcels that earned nothing.
Questions
Why is true ROAS lower than the ROAS in Ads Manager?
Meta and Google count an order when it's placed. Cash-on-delivery orders that are refused or never collected stay in their ROAS, but they never pay you. True ROAS leaves those orders out.
Should I enter order value with or without GST?
Use order value after GST is taken out, because the tax isn't yours to keep. Counting it makes every ROAS look better than it is. Keep product cost, fees and ad spend on the same basis.
Where do I find my RTO rates?
Your courier or shipping app reports them; in Shiprocket it's the RTO count against shipped orders. Work out COD and prepaid separately, because COD orders come back far more often. Use orders old enough to have been delivered or returned, usually a month or more.
Does this count the product that comes back?
It assumes a returned product goes back into stock, so the loss is the shipping both ways. If returns arrive damaged or need repacking, the real cost is higher than this shows.