Company turnover
A company's turnover, also called turnover or gross income, is the amount of funds that the company received after selling its product.
A company's turnover, also called turnover or gross income, is the amount of funds that the company received after selling its product. Not a single accounting report is complete without determining turnover or sales revenue. Economists call turnover one of the main indicators of a company’s success, because it is directly related to the efficiency of the enterprise. Turnover is calculated per year, month or season. In this material we will talk about the types of turnover and the features of its calculation.
Types of turnover
Company turnover is not an unambiguous term, since it includes many subparagraphs. It can be carried out in one form or another of monetary settlements, calculated for the company as a whole or for a separate area of work. The period for which the data is analyzed also matters. Most often, economists are interested in the company’s annual turnover; a twelve-month distance is considered optimal for assessing the state of things in the business structure.
The types of annual turnover made in cash and non-cash form have a huge impact on modern accounting and reporting in general.
Total turnover in cash
This should include all cash payments, such as financial payments made by companies to their employees. In addition to wages, the form includes the transfer of scholarships, pensions, cash assistance, subsidies, and income from financial systems. Cash payments are widely used for the purchase and sale of goods and services.
How is cash issued? The system provides for the transfer of funds from the organization's current account using checks, the amount and purpose are indicated on them. The total turnover can be calculated even for one day if the funds entering the organization’s cash system are transferred every day to the bank servicing the enterprise. Surely, you have come across situations where organizations leave cash in their cash registers.
Such actions are permitted, but only within the limit established by the bank. This limit is set depending on the turnover and specifics of the company’s work - the question should be answered: how much money must be left in the cash register to ensure uninterrupted functioning, service to clients and users?
Non-cash turnover of a business company
The company's turnover is not only cash, these days, it is rather predominantly non-cash payments. Such transfers go directly from one account to another and have a number of advantages over the cash payments through cash desks described above. Companies do not need to take additional measures to implement the regulatory function of supervisory government bodies; they reduce public costs.
It is known that improving the economic condition of a certain company means accelerating overall turnover, which is achieved mainly through non-cash form. How should non-cash payments be organized? It is important to carry them out in a timely manner, to ensure that the company’s non-cash turnover is under the constant control of responsible persons, and to prevent unauthorized movement of funds.
How to calculate the annual turnover of a company?
What does turnover mean, we figured it out, now it’s time to answer the question, how can you calculate financial turnover? This work falls on the enterprise’s accountant analysts; the amount of credit turnover and accounts is used. It allows you to effectively estimate the volume of cash flows in operations, investments and commercial activities.
As mentioned above, the financial turnover of a company is called the totality of cash flows, all monetary transactions, both cash and non-cash. However, it is recommended to carry out calculations separately for each model described above; even an initial analysis will allow you to understand how effective non-cash or cash turnover turned out to be.
It is necessary to find out the turnover in order to assess the financial changes in the enterprise; it is compared with the indicators recorded at the beginning of the reporting period and analyzed. The movement of cash turnover allows you to see the difference between the amount of cash flow last year and the funds received during the year. Annual turnover is a global parameter; it is used to conduct strategic analytical research.
How to calculate turnover?
The analysis is carried out in two ways, direct and indirect.
- Direct method. Based on revenue, the economist focuses on how much money was poured into the company’s turnover, and also analyzes expenses (payment of supplier bills, loan repayments). Money movements are not taken into account.
- Indirect method. Allows you to focus specifically on operations that were associated with the movement of money. Profits are calculated as they are received.
Company funds
The assets of the company are formed at the time of creation of the organization. According to the degree of work of material resources, they are divided
active - money in continuous circulation. They are located directly in the company’s accounts and are used to pay bills and purchase materials.
Inactive – part of the funds that is not used directly for financial transactions, but is on the company’s balance sheet. In case of bankruptcy, it can be used to pay off debt.
Interestingly, a younger organization has fewer passive assets compared to those that have a good track record in the market.
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Company turnover
Please tell me what the company’s turnover is - I understand it very roughly - either all expenses per year, or revenue, or only profit. How to understand the exact wording?
Typically, turnover refers to the total amount for a period. Usually they count income.
Modern economic dictionary
TURNOVER – 1) a closed cycle in a cyclical, repeating process; 2) movement of goods, money in the process of production, distribution, exchange and consumption.
A company’s turnover is gross revenue (revenue from the sale of goods, works, services) for any period (1 month, quarter, year.)
I know that turnover is often understood as the turnover of funds (that is, the receipt of money, or cash receipts).
So, after all, is it revenue or the totality of capital movements in one direction or the other?
Is gross revenue different from gross profit?
Revenue minus cost equals Gross profit
I have a boom on my hands. balance sheet and income statement. Based on these data (I don’t need even exact data) how can I look at the company’s turnover for the year? The figures from the income statement Gross profit will be enough for me.
I have the same problem. They asked me to provide a certificate of the company’s turnover (a transaction for a large amount, so I’m afraid of messing up), but I don’t quite understand which ones should be indicated! Annual Income or Gross Profit?
You can indicate the company's turnover both with and without VAT.
It’s strange that you were asked to provide a certificate only about this. Are they not interested in all other reporting?
See for yourself what you need. Company turnover, including VAT = so much. Company turnover, excluding VAT = revenue according to Form 2 Gross (=marginal) profit = revenue minus cost
Thank you! They didn't really explain what exactly they needed to provide
The director only said about the company’s turnover certificate. So I’m wondering what’s the best way to show it? Either reporting is needed, or a certificate is needed, but then in what form. Ufff, I'm completely confused
look at PBU 12 (information on segments) - for inspiration. It depends on what they need – that’s how you can present the information.
What is the company's annual turnover?
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Are revenue and turnover the same thing? We understand the financial indicators of the company
Head of the small business department at Raiffise.
Confused about the definition of terms such as revenue, profit, income and turnover? Denis Skokov, head of the small business department at Raiffeisenbank, explains as briefly as possible what the difference is between them.
We recently conducted a study and found that more than 50% of our clients in small and micro businesses do their own accounting. The advantages are obvious - savings. There may be no downsides if the entrepreneur understands financial and accounting. Sometimes this is critical.
Here is a case from real practice that well illustrates the importance of financial literacy for an entrepreneur. Once, when filling out a balance sheet, a business owner indicated the balance of funds in the account, the cost of goods, the amount of receivables and payables, and wrote in fixed assets the words: “Nissan.”
Do you think the entrepreneur’s assets and liabilities matched, and what would the tax authorities say to this?
Confusion in terms can lead to overpayments or underpayments, which could result in tax penalties. Everyone should understand well and be able to distinguish from each other the main indicators of financial activity: revenue, profit, income, turnover and turnover.
Revenue, income and gross profit
Revenue is the amount of money received from the sale of goods, work, and services. It can be determined by the “by shipment” method, that is, at the time of actual shipment of the goods or delivery method, that is, at the time of receipt of payment. In addition to funds received directly from the sale of goods and services, it may also include proceeds from the sale of valuable assets and other income.
In accordance with the accounting regulations, “ income is recognized as an increase in economic benefits as a result of the receipt of assets (cash, other property) and (or) repayment of liabilities, leading to an increase in the capital of this organization, with the exception of contributions from participants (owners of property).”
Revenue is an indicator of financial well-being and the starting point for calculating the profit of an enterprise. It can be zero or positive, but never negative.
The concepts of “revenue” and “turnover” are generally identical. At the same time, “turnover” can often be used to refer to a company’s non-cash turnover, that is, the receipt of funds to the current account for goods, works and services sold.
In any case, revenue, income, and turnover are “gross” characteristics that do not take into account the costs (expenses) of the company.
Gross profit is equal to the difference between revenue and expenses (costs) for the main activity (cost of goods or services sold). The financial result, which takes into account expenses in all areas of the company's activities, is called net profit (positive financial result) or net loss (negative).
Company turnover, trade turnover and revenue
Confusion often arises in the concepts of “turnover” and “turnover”. We have already found out that turnover is the money that an enterprise has; this term refers to economics. Trade turnover is a concept from the field of accounting; it denotes the amount of funds received from the sale of goods or services.
Trade turnover should be distinguished from revenue - in addition to direct income from trade, it may include other types of income and income from the sale of property. Thus, revenue can be either greater than turnover or equal to it.
It also matters whether you calculate revenue on an accrual or cash basis. As mentioned earlier, in the first case, income or expenses are taken into account in the period to which they relate, in the second - when they are directly paid. If the sale is made in installments or deferred payment, then, in the case of cash settlement, revenue and turnover may also differ.
The difference between profit and turnover
If there is nothing wrong with calling revenue turnover, then distinguishing profit from turnover is very important, for example, so as not to overpay income tax.
The difference is very simple. To calculate profit, you need to subtract from revenue (turnover) all possible costs and expenses of the organization, including taxes, salaries, rent, and so on.
Thus, the concept of “turnover” characterizes how much funds the company has in principle, and profit is how much money the company can invest in its own development.
The difference between an expense and a loss
Expenses are all the money a company spends to produce and sell its product. These include material costs, salaries and other payments to employees, expenses for repairs of equipment and premises, rent, and taxes.
When expenses exceed a company's income, a loss occurs.
Features of the concepts of “turnover” and “revenue”: a list of fundamental differences
Opening a business is not an easy task. It requires not only financing, obtaining administrative permits + registration of business activities, but also basic economic knowledge.
The success of market relations is made up of related definitions of words: revenue, turnover (turnover).
This article will discuss the features of such concepts as “turnover” and “revenue”, as well as how they differ from each other.
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The meaning of the concept “revenue”
Revenue is an indicator of financial well- being obtained through the sale of services and products over a certain period of time. Its purpose: reimbursement of financial costs that were spent on the production of products or the operation of a number of services (transportation, storage, delivery, rental of premises).
The purpose of the definition of “revenue” in the field of small, medium and large businesses:
- payment of additional expenses (fuel, utility bills, purchase of spare structures);
- supplier services;
- issuing wages to employees of a company or firm.
Reference! The efficiency of business activity depends on the volume of revenue. This means that if a company does not receive a significant amount of funds from the commodity circulation chain, then the enterprise can be regarded as unprofitable or bankrupt.
We talk about the reasons why revenue volumes may be low and what to do in such cases here.
The source of revenue financing depends on several components:
- sale of goods or provision of services;
- financial result from the sale of valuable assets;
- monetary contribution to the development and sale of the product.
It is possible to calculate revenue using one of the accounting calculations:
- Cash method . It involves calculating revenue from funds received into the company’s account in order to pay for products.
- Accrual method . Used in the presence of consumer obligations to pay for the services and products of the enterprise.
A more detailed definition of the term “revenue” can be found here.
Definition of the word "turnover"
The definition of the word “turnover” in the field of entrepreneurial activity means the circular movement of funds in cash and non-cash methods for services provided by an enterprise (sale of goods and services). Cash turnover is a transaction of funds between legal and physical representatives.
Purpose of cash turnover:
- payment of pensions, scholarships, salaries;
- financial support for persons liable for military service.
Non-cash turnover of financial assets is the transfer of funds from the payer’s account to the recipient’s account. For non-cash transactions, business owners open current accounts in the banking system for the purpose of independently distributing funds.
Important! The funds are paid by the banking system by decision of the Russian government within the agreed time frame specified in the loan agreement.
The current account gives the owner the rights:
- receive incoming funds from the payer;
- withdraw funds upon request.
Successful financial turnover of entrepreneurial activity consists of two fundamental components:
- commodity settlement for the sale of a product between companies;
- payment transactions not related to the product: payment of wages, interest on taxes.
Turnover is the amount of funds collected during the period of sale or operation of services. The final volume of gross funds can be determined by subtracting the difference between the amounts invested in purchases + the volume of goods sold.
What is “trade turnover”?
Trade turnover is the process of movement of products according to the algorithm. He can be:
- wholesale – purchase of products for the purpose of developing retail trade;
- retail – delivery of goods directly to the customer without overpayments.
The successful implementation of a company’s turnover depends on a number of factors:
- distribution of products and high quality of services provided;
- volume and availability of products sold;
- preliminary demand analysis.
Trade turnover is often carried out according to the “Fifo” principle. Its essence lies in the fact that the goods received from the enterprise to wholesale buyers go through a processing stage - the establishment of their own pricing policy, in other words, mark-up, caused by a feeling of distrust or stinginess towards the product on the part of the consumer. This position is caused by the following factors:
- low pricing policy = catch;
- inflated prices = hole in wallet.
It is possible to measure the performance of the “turnover” parameter by analyzing supplies:
- low level: limited product, not in demand;
- high level: fast sales and delivery of goods; purchase of products in advance by consumers.
Is one concept different from another in some way or not?
So what is the difference between all these definitions? Below is a comparative table of differences, an entrepreneurial chain of related concepts for successfully running a business:
| Revenue | Turnover | Trade turnover |
|
|
|
Revenue is a central concept when running small, medium and large businesses. Its goal is the same everywhere:
- control of all enterprise income;
- analysis of demand for the products or services provided;
- formation of a holistic picture of the stability of the enterprise.
Based on it, the manufacturer indicates the pricing policy and the volume of goods produced. Its main difference in comparison with turnover and turnover is that not a single component is subtracted from the taken revenue indicator. It is designed for business development and correct operation without supply disruptions.
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