What is turnover?

Definition of turnover

Turnover is accounting terminology for sales. Your business's turnover is the sales it makes over a given period of time.

Unless your business is using the simplified cash basis of accounting, your business's turnover is the sales it has invoiced for as well as the sales it has made but not necessarily invoiced for.

Turnover is usually the top line of a business's profit and loss account, which starts with its income.

If a business is registered for VAT then its turnover will be its sales without VAT, because the VAT element is not money the business has earned and will keep; it is money that has to be paid over to HMRC.

Example of turnover:

A business prepares its accounts to 31st March each year.

In the year to 31st March 2016 it had invoiced £45,000 worth of sales. It had also carried out £3,000 worth of work which had not yet been invoiced for as at 31st March 2016.

The business's turnover for the year to 31st March 2016 would be:

£45,000 + £3,000 =£48,000.

Keeping track of your business's profits

With FreeAgent there's no need to run a report every time you want to track profit. You can see exactly how much profit you're making this year in an easy-to-read snapshot view directly from the dashboard.

Got questions? Ask Emily!

FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.

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