Definition of turnover and how to calculate it

Understanding Turnover – Turnover is one of the important points in the world of business and business as it is known to be closely related to profit or income. Turnover is often used as a reference or measure of success achieved by a business.

If Sinaumed’s is an active person in business calculations, he must be aware that income in business can be categorized into two, namely gross income and net income.

Turnover as gross income. Income that has not been deducted by various costs and expenses in the business. In other words, pure income from the sale of products or goods.

Definition of Turnover

In simple terms, turnover is all the money obtained from the sale of goods or products in a business in a certain period. This period or period of time can be in daily, monthly, to yearly terms.

This amount of income is still gross, not yet deducted by payment of expenses or other costs in the business. Costs or expenses in business, including building rental costs, operational costs, employee salaries, electricity costs, marketing costs to cleaning fees. Therefore, turnover is better known as gross income.

Many business people are trying to continue to increase their turnover because the greater the turnover, the greater the profit. In fact, a large turnover does not guarantee that.

Sinaumed’s can have a large turnover but still book a net loss if it turns out that the cash outflow is greater than the cash inflow to your business. All records in detail will be seen through the income statement in the business accounting calculations.

Turnover is also often used by business people to measure profits or the level of success achieved, even though that’s not the concept. The method of calculating turnover cannot be used as a benchmark or reference in this matter. Because, it does not yet provide a definite picture of the net income generated.

Definition of turnover from various sources:

  1. Chaniago: turnover from sales is the total amount of income that comes from the sale of goods or services within a certain period of time.
  2. Businessdictionary: turnover is the overall income from the sale of a product of a company without any reduction in costs within a certain period. Turnover is also known as gross income.
  3. Investopedia: turnover has another term, namely revenue, which means income from normal business operations. This includes discounts and reductions on returned items.

The Benefits of Knowing the Amount of Turnover Obtained

As a business owner, of course, Sinaumed’s must know how much turnover he can generate in a certain period. There are several benefits that can be obtained by knowing the amount of turnover, namely:

1. You can understand the quality and productivity of the business you are running

If the turnover is high, it means that the quality and productivity of your business are in good numbers. Conversely, if your turnover is still low, there may be a problem with the quality and service of your business.

2. You can adjust business expenses

When turnover is high, it may still be possible to make other expenses besides costs and expenses. However, when your business turnover is low, you can choose to control expenses so that you still get profit/net income.

3. You can learn to prepare profit and loss reports well

To find out exactly how much the nominal turnover is, you need to compile and make a profit and loss report. Recording a good income statement will show accurate calculation results.

Meanwhile, the purpose of turnover is to determine the ability of a business to sell its goods or products within a certain period. By knowing this, business owners can take steps to increase turnover in the future.

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In addition, the purpose of turnover is also to assess the scale of the business. Whether the business being run is a small business or a large business, it can be seen from the total product sales figures.

Then, how do you find out the amount of turnover obtained? Of course by knowing the formula for calculating sales turnover.

The Difference between Turnover and Profit

If turnover is gross income, then profit is defined as net income. In other words, profit is turnover that has been reduced by all calculations of expenses, costs and debts that must be paid. Because the value is net, profit is also often referred to as net or net profit.

Many of them consider the two things to be the same. Even though the meaning is clearly different. Profit is something that can be used as a reference or the main benchmark for assessing a profitable business. A high profit figure can mean that the business being run is in accordance with what consumers want.

Profit also has a different purpose than turnover. The profit objectives are as follows:

  1. As a source for the company’s reserve fund to meet the company’s investment, development and emergency fund needs.
  2. As a source of funds to pay the company’s debt.
  3. As a source of funds to finance operational costs and raw materials.

Tips to Increase Turnover

The term in the business world that the higher the turnover, the higher the profit that will be obtained. However, in practice to increase the number of turnover is not easy. There are several steps that can be taken to increase business turnover, including:

1. Prioritizing quality and innovation of the products sold

Product quality is the most important thing to increase sales. By producing quality and innovative products, consumers will not hesitate to buy and use your products.

Meanwhile, innovation is necessary for the smooth running of your business, you know. An innovation in business is absolutely necessary in order to compete in the world with competitors.

Innovation is a way to produce a new product with a new method or a new design that is better than an old product that has or has never been marketed. Innovation can also be caused by market demand for new items with different functions.

By having quality and innovative products, it is certain that consumers will come by themselves. If this is accompanied by a good marketing strategy, the increased turnover value can be achieved easily.

2. Providing the best service for consumers

Giving a good impression to consumers is very important. A good impression can make consumers buy the products we have again. So it takes the nature of friendliness and approach to consumers.

Consumers buy the products offered because they are driven by a need or desire that must be fulfilled. No matter how much money they spend, no matter what products they buy, they have the right to get the best service. If they feel let down, they will not hesitate to disgrace your store and business in front of many people.

3. Holding exclusive promotions

One of the tips for increasing turnover in a business that is considered quite effective is to hold various types of promotions. Promotion that is considered quite effective in this case is to create a product package or bundle.

Buying a product package or bundle automatically makes consumers buy in large quantities. This product package aims to make consumers buy our products more than one product. For example, bundling packages, frugal packages, premium packages or packages for certain moments such as Ramadan, Christmas, or Valentine’s Day. The more products sold, the more turnover you get.

In addition, it can also provide offers that can increase consumer satisfaction, such as in a customer loyalty program. Consumers can also feel Sinaumed’s’ efforts to appreciate their loyalty.

4. Expanding the market

Expanding the market can be done in several ways. First, you can open a new outlet or branch elsewhere. With the new outlets, it is hoped that sales figures will also increase which will automatically help increase sales turnover.

Second, by exploring the world of business digitalization. Many business people are starting to switch to digital business by leveraging the power of social media and marketplaces which will gain many benefits. Not only that, by marketing merchandise online, the market reach will be wider, the products you offer can be seen by more and more consumers in different places.

By entering the world of business digitization, you can also get other conveniences as a form of benefit from marketplace integration.

5. Develop a comprehensive sales strategy

Most companies do not have a sales strategy that defines their competitive advantage and differentiation plan. So the way is done by preparing and developing a comprehensive sales strategy. As well as increasing turnover, it can also address competitive threats and lay out the path to maximizing profitability.

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6. Placing resources on jobs that will generate the highest returns

By aligning teams to maximize their productivity they can generate significant sales gains.

7. Improving lead quality

This is done to accelerate the acquisition rate of new customers. Steps that can be taken is to provide high quality leads to sales representatives.

8. Institute an effective sales training program

This way by holding an effective training program. It is critical to invest in improving the quality and skills of the sales force including ensuring they understand the product knowledge to meet changing demands. Without adequate training, potential sales performance will be left behind and will not be able to maximize sales revenue growth.

9. Identify the most effective sales and spread them throughout the sales team

By sharing tips on the most effective sales process that can be carried out by the entire sales team. Find out what the top performers in your company and competitors are doing behind their success, then share these tactics and habits with the entire sales team.

10. Apply more effective sales techniques

Apart from learning from the experience of a successful sales process, it is also necessary to know the specific problems or obstacles faced by the sales team. By knowing the solution to every problem or obstacle in sales, your team can apply more effective sales techniques and can ultimately drive an increase in sales turnover.

11. Collaborate

Collaborating can help us reach the market, reduce risk and make the company’s product offerings more relevant. Consider the gamut from partnerships, vendors, strategic to sales consulting firms that can expand market reach.

12. Integrate multichannel sales efforts

Finally, the way to increase turnover is to realign sales resources to increase efficiency. Multichannel sales offer products through several platforms, not just one, for example through marketplaces, social media, websites and so on.

The formula for calculating turnover

Turnover is a nominal income that has not been deducted by fees and expenses that must be paid. Therefore, it can be concluded that the formula for calculating turnover by only calculating the total products sold multiplied by the selling price.

Turnover = Number of Products x Selling Price

An example of how to calculate turnover in a simple way is:

Toko Aneka Jaya, which sells leather handicraft products, was able to sell 100 pairs of leather shoes within one month in January 2022. The selling price for a pair of shoes is Rp. 300,000.

So, how to calculate the sales turnover of Toko Aneka Jaya is:

Number of products x selling price
100 x 300,000 = 30,000,000

So, the turnover of Toko Aneka Jaya in January 2022 is Rp. 30,000,000.

How to calculate sales turnover using the general formula for calculating monthly turnover. Business people will calculate how much gross income they generate with this formula.

How to Calculate Turnover Percentage

How to calculate the turnover percentage is usually used by business people to compare the amount of their gross income from one period to another.

Example of how to calculate turnover percentage:

The Alya Frozen Food store is able to sell 150 packs of chicken nuggets in November 2021. In December 2021, the number of sales of nugget products has increased to 200 packs. The price for nuggets is Rp. 25,000 per pack.

If you want to see it in the form of a percentage case, then the way to calculate the turnover percentage is:

Percentage = (End – Beginning) / Beginning x 100%
Beginning = November sales 150
End = December sales 200
= (200 – 150)/ 150 x 100%
= 50/ 100 x 100%
= 0.5 x 100%
= 50%

So, the difference in the increase in Alyan Frozen Store’s turnover is 50%.

How to Calculate Annual Sales Turnover

Because turnover as gross income has not been deducted by many other costs. So the method of calculating annual sales turnover is quite easy, although it does not fully give an overview of the profits.

How to calculate sales turnover per year, can be formulated like this:

Turnover = Number of Products x Jaul Price x 12 months

For example :

An MSMEs engaged in selling souvenirs are able to sell 250 key chain products in one month. Each key chain is priced at Rp. 10,000.

Turnover earned in a year:

Turnover = 250 x 10,000 x 12
= 250,000 x 12
= IDR 30,000,000

So, by calculating the sales turnover per year, the MSMEs are expected to get a turnover of Rp. 30,000,000 in a one-year sales period.

It can be said that how to calculate turnover per month can be done first before Sinaumed’s calculates your product sales turnover in a year.

This is an explanation about turnover and how to calculate it. If Sinaumed’s still needs references regarding turnover, then you can visit the sinaumedia book collection at sinaumedia always provides the best and most complete information for Sinaumed’s because you have #MoreWithReading information.