What is turnover?

September 2023 | Published by Xero

Turnover (definition)

Turnover is another word for sales revenue. It’s the money a business receives from selling goods or services over a certain period.

If your turnover increases, that’s the same as saying your revenue (or money from sales) has increased. Turnover is more frequently used in Europe and Asia, while North Americans tend to stick to ‘revenue’ or ‘sales’.

Turnover meaning in business

Turnover is the money received from sales. When it goes up, it means you’re bringing in more revenue. When it goes down, you’re bringing in less.

Turnover is not your profit, however. You need to pay your production costs and general business expenses out of your turnover before arriving at a profit. The only exception is if you hear someone talk about net turnover. They may be referring to profit. To avoid confusion, it’s a good idea to think of turnover as revenue.

What turnover is not

Turnover only counts money made from normal business sales and not other sources, such as:

  • interest on savings
  • subletting property or equipment (unless you’re a rental business)
  • selling business assets like vehicles, tools or property
  • money received from investors or lenders

How to calculate turnover

Turnover example

A business teaches 60 students per week at $50 per lesson. Its weekly turnover is therefore $3000 (60x$50).

Reporting turnover

Turnover is recorded on your profit and loss (P&L) statement, under the section ‘sales revenue’. Deposits in your business bank account might also reflect your turnover, but be aware that credit sales won’t show here until your customer has paid.

What is annual turnover?

Annual turnover is sales revenue collected over a 12 month period. You can calculate your turnover over any period that makes sense or helps you understand how the business is performing.

Other meanings of turnover in business and accounting

Turnover can also refer to:

  • the frequency that staff leave a business
  • the number of times a product is sold and restocked (inventory turnover)
  • how quickly payments are collected from customers (accounts receivable turnover)

See related terms

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This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.