Business Turnover: What is it and What Does it Mean?
As a small business owner in the UK, you may have come across the term "business turnover" without really knowing what it means. In this blog post, we'll give you a run-down of what business turnover is and how it differs from other terms like revenue, income, and sales.
By the end of this post, you'll have a better understanding of this important financial metric.
What is Business Turnover?
In short, business turnover is a measure of how much money a company brings in during a given period of time. This figure can be calculated on a monthly, quarterly, or yearly basis. businesses usually use annual turnover to track their progress over time.
There are two different types of turnover:
Gross turnover is the total value of all goods and services sold by a company in a given period of time, before any deductions are made.
Net turnover is the total value of all goods and services sold by a company in a period of time minus any taxes, fees, or other deductions.
For most businesses, net turnover is a more accurate reflection of their true earnings.
How is Business Turnover Different from Revenue?
Although business turnover and revenue are similar concepts, there is an important distinction between the two terms. Revenue refers to the money that a company actually keeps after deducting any costs associated with producing and selling its goods or services. In contrast, turnover simply refers to the total amount of money brought in without taking any deductions into account.
For example, let's say that Company A sells 100 widgets for £10 each. The company's gross turnover would be £1,000 (100 x £10). But after deducting the cost of producing the widgets (£500), Company A's revenue would be only £500 (£1,000 - £500). Thus, while revenue is always less than or equal to turnover, it provides a more accurate picture of a company's profitability.
Other Terms Related to Business Turnover
As we mentioned earlier, business turnover is just one financial metric used to gauge a company's performance.
Other common terms include:
• Sales: This term is often used interchangeably with "turnover" or "revenue." However, sales usually refer to the total number of units sold rather than the total monetary value generated.
• Income: Like revenue, income takes into account the costs associated with producing and selling goods or services. It can also be referred to as "profit."
• Profits: This term refers to the money left over after all expenses have been paid. It includes things like salaries, rent, taxes, and interest payments on loans. Profits can also be referred to as "net income."
Business turnover provides valuable insights into how much money a company brings in over time. Although it's similar to terms like revenue and income, it's important to understand the distinctions between these concepts so that you can accurately track your company's financial progress. By doing so, you'll be in a better position to make informed decisions about your business's future growth.