At first glance, the concept of turnover vs. sales seems straightforward. The terms are often used interchangeably to describe a company’s gross revenue or profits for a given time span.
The words turnover and sales are so close in some situations that they can be used interchangeably. There are complexities, however, and some of them are important for SMEs in the United Kingdom to comprehend. Let’s get this bash going…
Does turnover mean revenue?
Staff turnover is an important metric for a company owner to track, but it has no direct correlation to sales. Another measure that retailers and manufacturers monitor is inventory turnover (or the rate at which stock is replenished). This figure is unrelated to sales, though the faster a company hands over its inventory, the faster it harvests cash.
What is the difference between revenue and turnover?
The terms “turnover” and “revenue” are often used interchangeably, and in some contexts they even mean the same thing. Assets and inventory turn over when they flow through a business, by being sold or by outliving their useful life. When the assets turning over generate income through sales, they bring in revenue. However, “turnover” can also refer to business activities that don’t necessarily generate sales, such as employee turnover.
Turnover, Revenue, and Profit
While turnover and sales aren’t always the same, they often go hand in hand, such as when the company earns more by handing over inventory more regularly. A high inventory turnover rate that produces sales does not always imply that your business will be profitable. If you reduce all of your inventory to clearance rates in order to sell it quickly, your turnover rate will be high, and you’ll probably make a lot of money, but your profit margin will be low because you’re not charging enough in relation to your inventory costs.
What do you mean by the turnover of a company?
Turnover refers to a company’s gross revenue over a given time span. ‘Gross sales’ or ‘profits’ are other terms for it. Benefit, on the other hand, is a measure of earnings.
Read more articles on ACCOTAX.
Need Accountants in London? Talk to our ACCOTAX accountant so we can help you get started. Call us today to discover the difference we can make to your business.
