What is turnover for a self-employed business?
Whether you’re creating a business plan, speaking to an accountant for the first time, or looking for funding to grow your business, it’s important to understand turnover, revenue, and profit. But what is turnover, if you’ve never dealt with financial matters before, and how do you calculate it?
Calculating turnover versus gross and net profits
To work out your turnover, you simply need to add up all income from sales within a set amount of time, subtracting any trade discounts, product returns and VAT (if applicable).
You can then subtract the cost of those sales to produce your gross profit, and all other expenses for your net profit.
Turnover is usually requested and calculated over the annual financial year, or on a quarterly basis. And various invoicing and accounting tools for freelancers and the self-employed will help you track your turnover and profits, assuming you’re recording everything in a timely fashion.
For example:
- Total turnover: £75,000
- Cost of goods and services sold: £15,000
- Gross profit = £60,000
- Operating expenses: £10,000
- Net Profit = £50,000
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