turnover and profit

Turnover and Profit: How Do They Differ?

05/07/2021Accountants , Business , Limited Company

Whether you are struggling to attract new investors, need a loan, plan for the future or intend to sell your business, knowing how well your business is performing in a specific period is imperative for multiple reasons. Turnover and profit are two key indicators to analyze how well your business is performing. Despite having a similar purpose, they are not the same at all.

If someone asks you: is turnover profit? Read on this blog till the end to provide him with a solid answer. Let’s kick off with what are these terms and how they are different.

 

Looking for a qualified accountant, bookkeeper or tax expert? Get in touch with us right now!

 

Difference between Turnover and Profit

You might be confused about the terms turnover and profit that seem quite similar, but they are not the same. Turnover is the total income a business generates within a specific period like in a quarter, half-year or a year. On the other hand, profit is the earnings you get after deducting all the costs/expenses. You can measure the profit in two ways: gross profit and net profit. Gross profit is the amount you get after deducting the cost of goods and services. Whereas, net profit is the profit that you get after subtracting all the expenses and taxes.

turnover and profit

 

Turnover

Turnover is more related to the total sales of a company. Whether your business has a single stream of revenue or revenue from multiple sources by various products or services, it’d be considered a turnover. Furthermore, it also reflects the high demand for the company’s products or services in the market. So, high turnover means there is a high demand for the company’s products sold in the market. In this way, a company can charge high prices for their products and services.

Still confused! Reach out to our experts for help!

 

Profit

The profit indicates the health of your business. It tells you how much amount you’re left with after spending the cost of doing business. It is worked out after deducting all the expenses from the turnover of the company. Consequently, it provides information on different nature of expenses like direct labour cost, material cost, indirect expenses like financial cost etc.

In this way, the profit indicates the residual earnings of the company after deducting all the expenses. This further helps companies to increase the prices of their products or services to earn more residual earning to provide more shares to the shareholders of the company.

 

Quick Sum Up

One of the two most important parameters to examine business performance are turnover and profit.  The easiest way to find out the difference between them is to look at the income statement. As turnover (net sales) are the sales figure that you list on the top of the income statement. It comes at the beginning of the financial statement. Whereas profit (net profit) is placed in the bottom line of the statement. For this reason, we call net profit the bottom line of the business.

Though high turnover or high profit seems lucrative but they don’t guarantee the long term success of the company. Therefore, we can’t consider them the absolute factors for the long-term success of a business.

 

Toiling to boost your turnover and revenue? CruseBurke has a team of experts for your help, Contact us anytime, we’ll get back to you in the shortest time possible!

For a customized package, Get an instant quote right away!

 

Disclaimer: This blog provides general information on turnover and profit.


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Turnover vs Revenue
Turnover vs Revenue – Top 8 Differences

13/09/2021Business , Finance , Limited Company

In some contexts, “turnover “ and “revenue” are used interchangeably and often mean the same thing. Revenue is generated when assets turn over and bring in income by selling items and services. Contrarily, a turnover such as employee turnover refers to the business activities that do not necessarily generate sales. When a company brings in revenue through sales, the terms turnover and revenue mean the same thing. However, a business can have turnover without generating revenue, and it can bring in revenue without having a turnover. In this blog, you will come to know about the top differences between turnover vs revenue.   Contact our professionals at CruseBurke to grow your business revenue & turnover! Reduce your business burden and stress by letting us handle your financial worries!   Turnover vs Revenue – Top Differences Turnover is defined by the Companies Act 2006 as the amount received by a business from the sale of items and services as a general business practice after deducting trade discounts, VAT, and other taxes. On the other hand, revenue is the amount of money a business receives by selling a number of items or services. Although this term appears to be related to turnover, it is not. Revenue is not always obtained from the sale of items and services. Companies in the financial sector, for example, may produce revenue from investment capital that HM Revenue & Customs does not define as turnover. As a result, financial services businesses do not treat revenue and turnover in the same way. The top differences between the turnover vs revenue are as follows: 1) Definition The money a company earns by selling items and services is revenue. On the other hand, turnover means that how many times a company earns by selling assets. 2) Meaning The sum value of the sold items and services of a business is revenue. On the other hand, an income that is generated by trading items and services is known as turnover. 3) Types Operating revenue and non-operating revenue are the two types of revenue, while cash, labor, and inventory are the three types of turnover. 4) Effect The company’s earnings are influenced by revenue, while turnover has an impact on a company’s efficiency. 5) Importance Revenue is one of the critical factors that determine the progress (growth) of a company. Therefore, it is vital to understand. On the other hand, turnover is essential to understand for making sure that no inventory is left idle for a long time and for managing production levels. 6) Formula Revenue is the total amount of monitors sold multiplied by the cost (price). Revenue = Total Sales – Returns While on the contrary, turnover implies the total number of monitors sold (total sales) in a year. Following are some of the turnover formulas: Total asset turnover – Net Sales divided by Average Total Assets Cash turnover – Net Sales divided by Cash Fixed Asset turnover – Fixed Assets divided by Net Fixed Assets   Unable to calculate revenue and turnover? Let us handle this!   7) Ratios Revenue is used to work out profitability ratios, such as operating profit margin, net profit, and gross profit. On the other hand, the widely used turnover ratios are accounts receivable, accounts payable ratios, asset turnover ratios, sales turnover, and inventory turnover ratios. 8) Reporting Revenue appears on the top of the Income Statement, and it is necessary to report while the turnover is not required to be reported but computed to help you better understand the financial statements.   Final Thoughts We would conclude our blog by saying that while differentiating turnover vs revenue, many complexities arise. But for effectively running your business, these complexities are essential to understand. Although there is a difference between turnover and revenue, both terms are important to the business. For example, comparing revenue yearly helps businesses to know their financial position. On the other hand, a business can earn more if it turns over its inventory frequently at a fast pace.   Are you looking for an accountant to boost your revenue stream? Then, contact us right now! We are a team of chartered accountants in Croydon that will increase your revenue stream by keeping track of your finances! Reach us today for customized packages!   Disclaimer: This blog provides general information on the differences between revenue and turnover.

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A Beginner’s Guide to a Profit & Loss Statement

29/06/2021Accountants , Business

If you want to figure out how well your business is performing, one of the most important tools of your annual financial accounts is the profit and loss statement (P&L).  A profit and loss statement summarises a company’s sales and expenses typically within a financial year. You can easily prepare a profit and loss statement using accounting software, but if you are preparing it manually, it can be a bit difficult. For ease, you can get plenty of templates online for preparing a P&L statement. In this blog, we’re going to discuss: What is a Profit and Loss Statement? What is included in the P&L statement? How to prepare a P&L statement? Advantages and Disadvantages   Be worry-free about your business finances by getting in touch with CruseBurke!   What is Profit-Loss Statment? A profit and loss statement is also known as an income statement or the statement of operations. It provides summarised information about the revenue and expenses of your business. Based on your business operation, this statement can be prepared on a weekly, monthly, quarterly or annual basis. With this statement, you can get a deep insight into the financial health of your business by figuring out the profit or loss your business has made in a certain period. Besides, this statement allows you to compare your business performance in various accounting periods. In addition, you need this statement to work out various financial metrics like gross profit margin and net profit margin.   What is included in a Profit and Loss Statement? This document includes crucial pieces of accounting data that include: Revenue/Sales Cost of Goods Sold Gross Profit/ Profit Margin Operating Expense Depreciation and Amortisation Earnings before interest and tax (EBIT) Net Profit   How to Prepare a Profit and Loss Statement? You can prepare a P&L statement yourself, although many business owners prefer to choose an accountant for proper sequencing and accuracy.  The P&L statement needs to provide a clear picture of all the sources of income and expenditures of your business. Here is the basic guide for preparing a P&L statement: Choose a timeframe of your statement to get a meaningful date List down your business revenue within this period Calculate your expenses like COGS, OPEX Work out your gross profit by subtracting direct cost from your total revenue Figure out whether you’re making money by subtracting your total expenses from the gross profit If you have all the relevant data, you can prepare it without any hassle.   Steps to Prepare Your Profit and Loss Statement You can not perform all the calculations by yourself, as some appear to be simple, but they require professional help. However, if you do more work, then your accountant will take less time to finish off. The steps you need to follow are as follows: Create a top row for total sales if you are running a trading business or total income if you are running a service business. Create it by utilising your financial management software or a spreadsheet. Every column should show a different month, generally beginning from the start of your tax year or from the month in which your company incorporated. Some rows below create another row for other business revenue. This can include other revenue like, interests on business investments or savings. For “total turnover”, create a third row. It contains the sum of the first two rows (total income, total sales, and other business revenue are added together). Insert another row named COGs (cost of goods sold), which includes the total expenses or cost of stock of that month. Now add a row for the total cost of sales. In it, you will put the total of your stock purchases or your expenses. And, finally, add a row underneath titled “gross profit”. 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