Whether you’re just getting started in business or you’re pretty well established, some of the accounting and business terminology can be confusing. To help you run your business more easily, we’re using this edition of our accounting FAQs to explain what turnover means, and why it’s useful to understand for your business.

What is turnover?

Your turnover is the total amount recorded or invoiced as a sale within a specified time period. For instance, “our turnover last month was £1 million”, means that the business has invoiced one million pounds for products or services provided in that period.

How do I calculate turnover for my business?

The way that you work out your business’s turnover depends on whether or not the business uses cash basis accounting. Using cash basis, you only account for what’s been paid. This only tends to apply to tiny businesses though, with most businesses operating on an accruals basis.

If you don’t use the cash basis, then your turnover includes the value of any services which are carried out or products that are sold within a given time period, regardless of whether or not you’ve received payment, or even raised an invoice.

An example of working out turnover

A business wants to know its turnover for February.

• In February the business invoiced for £70,000 worth of sales.
• The business also carried out £10,000 of worth of work in the same time month, but as at the end of February the business hadn’t yet invoiced the client.
• The business’s turnover for February is £70,000 plus £10,000 = £80,000

What turnover means for your business

Tracking turnover can help identify trends occurring in a particular time period, which is useful for future planning. Turnover is a useful figure to look at, but remember turnover is vanity, profit is sanity.

If very high turnover is matched by very high costs, then the business is only making enough money to stand still, rather than grow. Your profit and loss statements show how much the business has left over once expenses are deducted from income.

Learn more about profit and loss

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About The Author

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.

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