Definition of Business Turnover, Benefits, How to Calculate and Increase it

Business Turnover
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When doing business, turnover is one of the important things you need to pay attention to. Turnover is often used as a benchmark for whether your business is successful or not.

Continue reading this post to find out what turnover is and how to calculate it.

What is business turnover?

In general, turnover is also called gross income.

Turnover is the overall income from product sales in a certain period.

This period can be annual, monthly, weekly, or even daily.

Why is turnover called gross income?

This is because the calculation of turnover has not been deducted from payments for expenses or other costs in the business, for example, building rental, employee salaries, marketing, and so on.

That is why a large turnover does not always guarantee large profits.

It could be that the net profit obtained is less than the payment of expenses or other costs.

Benefits of Knowing Turnover

Then, why does gross income or turnover need to be calculated? Are you also wondering about the benefits of knowing turnover?

Some of the benefits of knowing turnover are:

1. Knowing Business Quality and Productivity

High business turnover can indicate that the quality and productivity of the business are also good.

Conversely, low turnover could mean there is a problem with your production or product quality.

2. Adjusting Business Expenses

By knowing business turnover, you can know when to invest and when to save on expenses. When turnover is high, you can use the extra profits for other business areas or expansion.

On the other hand, when turnover is low, you can also immediately adjust expenses so that the business continues to generate profits.

3. Book a profit and Loss Report Properly

Through turnover, you can also record a profit and loss report to find out the net profit of your business. From this bookkeeping, you can also see whether the business is growing, stagnating, or even losing money.

Differences Between Turnover and Profit

Before knowing what turnover is, you may have thought that turnover and profit were the same thing because they both show business income.

In fact, these two terms are very different. If turnover is gross income, profit is defined as net income. This means that profit is turnover minus expenses.

Therefore, profit is also often referred to as net, net, or net profit. From this profit, you can judge whether the business is successful or not.

Not only in terms of understanding, the goals of turnover and profit are also different.

If the goal of turnover is to determine the business’s ability to sell products in a certain period, the goal of profit is to be a source of funds to meet investment needs, company development, pay company debts, and finance raw material costs.

How to Calculate Turnover

Turnover is an important element in business. Therefore, you need to know how to calculate turnover to be able to see the company’s ability to sell a product.

From this, later you can create a better sales strategy with the hope that the profits you get will also be greater.

The way to calculate turnover is to multiply the number of products by the selling price, or use the following formula:

Turnover = Number of Products ✖ Selling Price

Turnover is nominal gross income. This means that this income has not been deducted from the expenses that must be paid.

To make it easier to understand how to calculate turnover, see the following example:

Muhd’s shop sells 100 products in the form of bags in one month. One bag is priced at 47,000 naira. The way to calculate turnover is:

Turnover = 100 x 47,000.00

Turnover = 470,000.00

So, the turnover of Muhd’s shop in one month is 470,000.00 Naira.

Tips for Increasing Turnover

Although not the only measure of business success, turnover is a measure of the scale of your business.

Turnover can determine whether your business is small, medium, or large-scale.

Therefore, to develop or increase a business, you can start by increasing turnover. Some tips that you can try to increase turnover are as follows:

1. Prioritize Product Quality

By paying attention to the quality of the products you sell, the opportunity for consumers to make repeat purchases becomes greater.

Selling products with better quality than competitors will also make other consumers switch to you. More loyal customers will automatically increase your business turnover.

2. Improve or Expand Marketing

After improving the quality of the products you sell, you also need to do good marketing to attract customers.

One way to improve and expand marketing is, for example, through promotions on social media, advertising products, and participating in bazaars. Your turnover will also be greater.

3. Providing the Best Service for Customers

Not only in terms of products, service quality also needs to be considered if you want your turnover to increase.

The service in question is when you serve consumers or when packaging products.

The comfort and security that you offer when consumers make transactions also have the potential to increase sales.

Not only during sales, you also need to pay attention to your service after consumers make a transaction so that they are interested in making repeat purchases.

Conclusion

Turnover is an important calculation for a business.

For those of you who have just started a business, hopefully this article can help you understand what turnover is, along with how to calculate and increase it.

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