- Advertisement -
Wednesday, August 5, 2020
Home Money A Guide To Business Turnover And How To Calculate It

A Guide To Business Turnover And How To Calculate It

- Advertisement -

Every entrepreneur wants to know where his/her business stands at a particular point of time. In this case, it will be wise to use markers like Business Turnover. It indicates business health. But the question is how to calculate it the correct way.

Related Post: How to perform a financial statement analysis?

What is Business Turnover?

Turnover is considered to be the total sales achieved by the business within a specific time period. Often it is termed as ‘income’ or ‘gross revenue’ and not the same as profit. The latter measures earnings.

Business Turnover measures business performance. It is important to know your business turnover figure throughout your business tenure, right from securing investment to planning, measuring performance to company valuation, in case, the plan is to sell it off.

Calculation steps to follow

Calculating Business Turnover is easy. Having accurate records can help add together total sales. Generally, turnover is measured for a specific time period, like tax year.

  • To calculate gross profit, subtract sales cost from turnover.
  • To calculate net profit, take gross profit. Subtract all expenses including tax liabilities.

Also Read: Boosting Your Company’s Green Potential

Why turnover is crucial for a business?

Why turnover is crucial for a business?

Entrepreneurs are to understand their turnover to calculate what is required to meet the target profit. When compared to turnover made, if there is noticed low gross profit, then it becomes essential to reduce sales cost, like renegotiating supplier contracts.

In case, there is low net profit as turnover proportion, then consider ways to enhance the overall efficiency of your business. For instance, can savings be made on a few administrative expenses? Is it possible to claim the allowable expenses of your business?

Also Read: Tips on How To Grow a Business in 2020

Difference between profit & turnover

In business, turnover is not similar to that of profit. Rather, turnover can be stated to be the total income that your business earned during a specific time period like net sales figures. But profit refers to earnings made after the deduction of all expenses. It is possible to measure profits in two different ways. Gross profit is determined by deducting the cost of services/goods sold from sales. It is also referred to as ‘sales margin’.

The amount left over during a particular time period after deduction of all expenses like tax and administration is ‘Net Profit’. Several potential definitions are present for this, which does not directly refer to finances. ‘Turnover’ for example may also mean employee numbers leaving the business in a specific time period, termed as ‘churn’.

You can calculate ‘accounts receivable turnover’, which is time length taken for customers to complete their payment if credit is offered to them.

- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here

blank
- Advertisement -

Stay Connected

Must Read

A Basic Guide on Sole Proprietorship

By definition, sole proprietorship identifies a single people, who is handling all the business operations. This is a commonly found type of business ownership....
- Advertisement -

Top 10 IT Infrastructure Tech Companies

In the past few years, enterprise infrastructure for technology companies has changed significantly. The changes are quite dramatic when compared to the early days...

A Quick Walk through Multi-Level Marketing (MLM): Workflow, Terms and Prerequisites

Over the past few years, many marketing models have surfaced. Most of the time, ambitious marketers are caught in the midst of a pyramid...

Six (#6) Components of the business continuity plan

By definition, the Business Continuity Plan is required to identify procedures that can prevent any kind of damage to the execution of the business....

All Time Random Articles

7 Effective Online Marketing Strategies for Construction Businesses

New marketing tactics and techniques have been introduced to the construction industry since online marketing really started being effective. Online marketing has allowed for...

5 Killer Tips for Organizing Your Small Business

No matter what kind of work your small business does, you’re probably always looking for ways you and your employees can become more productive....

40 Most Successful Inventions of All Time

Here’s a brief tour through some of the most important innovations in human history. Let me know in the comments if you think I...

Lies People Tell You About Starting a Business

Startup activity is on the rise. According to the 2015 Kauffman Index, more than half a million Americans start businesses each month. Still, not all...

South Africa is developing Drones for Mines

South Africa is developing drones for the mining industry for inspections in potentially unsafe areas underground, removing the need to put humans in harm's...
- Advertisement -
Select Language »