Sales turnover – What is sales turnover?
Definition: Sales turnover is the company's total revenue, both the invoice, cash payments and other revenues.
Sales turnover represents the value of goods and services provided to customers during a specified time period - usually one year.
- The term is often just referred to as sales or net sales, which means revenues without VAT.
- Sales turnover is usually expressed in monetary terms but can also be in total units of stock or products sold.
- It is often described by being converted into the company's accounting currency.
Turnover minus direct costs is called gross profit. The gross profit then needs to cover all operating expenses, before any net profit may arise.
Sales doesn't always equal money received
The figure for sales turnover in the profit & loss account does not necessarily mean that the firm has received all of that amount. This is because although they may have sold that quantity and value of the product they may still be owed some of the money by their debtors.
Therefore, the figure for sales turnover in the P&L account represents the total amount of their product or service sold, not the actual amount of money they have received.