Turnover can mean either how quickly your business operates, or it can be used as a synonym for your revenue.
Turnover as revenue
Revenue is the money you earn from selling goods and services. It can also be called gross income or turnover. This meaning of turnover is most commonly used in Europe and Asia. It can also be called overall turnover.
For most businesses, turnover varies from month to month. Some companies will see relatively consistent sales numbers throughout the year, and others might experience a spike in sales during particular weeks, months, or seasons.
Revenue is what you’ve earned in a period before you deduct any costs or taxes. What you’re left with after deducting those, is profit. If your turnover in your company increases that can definitely be a good sign, but the real indicator that your business is growing is an increase in profit, in other words, in the bottom line.
In terms of operating speed
In the US, turnover is often used differently. There it means how quickly your business operates, and can be used in many different contexts. Here are some common examples:
- How quickly you’re able to replace assets, for example assets that have reached the end of their useful life
- How quickly you’re able to sell inventory. You can work out this by looking at inventory sales in relation to how much stock you have left
- How quickly you’re able to replace employees who quit or retire. It can also be used about the rate at which employees leave your company. If you have a high employee turnover rate, this can be a sign that the morale in your company is low.
- How quickly you can recoup money when you’ve made an investment
- How quickly you invoice clients once you’ve sold goods or services, and how quickly you get paid
If you look at a range of these ratios all together, you can work out how efficiently your company is being run. Which turnovers matter most to you, depends on what kind of business you run, and what your long term goals are.