What is Business Turnover?
06/09/2022
Starting a new business is a strenuous process, especially if you’re a first-time business owner, and all of the jargon used in the business industry can make you feel like you don’t know where to start.
Turnover is one of the simplest yet often misunderstood terms, it refers to the complete sum of sales made over a period of time, and can sometimes just be called ‘sales’ or ‘gross revenue’.
Easy, right?
Turnover is what, in some cases, is used to determine whether your business should be charged VAT and how much that VAT should be. Also, turnover is a useful figure to have regardless, as it can help you understand vital parts of your business sales.
How to Determine Your Business Turnover
Determining your business turnover can include multiple factors, so it’s best to check that your accountants have precise facts and figures.
Turnover is simply the complete sum of sales made (usually) per annum, but can be determined over a longer period of time if you wish to do so.
This will help you pull further financial statistics out including calculating net and gross profit.
Difference Between Turnover Vs Profit
Turnover and profit are two completely different terms yet they are often mistaken for one another, so it’s important that you set these terms into stone.
Turnover is your overall sales, whereas profit is the sum of earnings left after all expenses have been deducted.
Your turnover will be a larger sum than your profit and that’s normal, as your expenses will chip away at the overall turnover.
Why Is Turnover Important?
Knowing your turnover is especially important when calculating your taxes, as it will give you a wider idea of the amount of tax you may be expecting.
Turnover is also important when it comes to comparing with other metrics, as an example, if your net profit is exceptionally lower than your turnover, it may be time to analyse your expenses.
With all of that being said, turnover is not the end-all and be-all, as it only tells one part of your financial story.
Turnover Doesn’t Determine Success
Turnover is not the epitome of all figures, as it only focuses on sales rather than any of the expenses or the actual profit that has come from those figures.
If you’re looking for a more accurate figure of success, turn to your net profit, as it will take into account your taxes, admin fees and expenses.
Also, keep in mind that your figures may be completely different from another business’, and that is down to your business’ size, employees, and services, so don’t be discouraged if your financial figures look different to your competitors.
That is everything when it comes to turnover, determine your turnover and compare it to your other statistics to gain a useful insight into your business.
Don’t be startled if your turnover figures seem low/high, speak to your accountant to figure out ways to navigate your turnover.
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