- How do I calculate turnover for my existing business?
- How do I calculate turnover for my new business?
Turnover is a key indicator of your business’s performance. Calculating turnover helps you value your company and see how healthy your business is. It’s also an essential part of opening a Holvi account.
At Holvi, we need to get a clear picture of your turnover so we can understand the nature and extent of your business activities and its financial standing. This helps keep you and your money safe – and it helps us comply with the EU Anti-Money Laundering Directive.
As you use Holvi, we’ll occasionally ask you to update your estimated turnover as your business grows. This keeps us compliant, but it’s also a good activity for you to perform annually.
Holvi gives you an accurate picture of your sales, so you can easily work out what your turnover is and make future predictions
What is turnover?
In accounting terms, turnover is the total amount of money your business receives as a result of the sales from your goods and/or services over a certain period of time. The calculation does not deduct things like VAT or discounts, which is why it’s also referred to as ‘gross revenue’ or ‘income’ – as opposed to ‘net revenue’ or ‘profit’.
At Holvi, we ask you to provide your estimated turnover for a period of one financial year.
Are there other kinds of turnover?
In the business world, turnover can also refer to the turnover of staff, which is the number of employees that leave the business, or the turnover of inventory or assets, which means that they’re either sold, thrown away or outlive their usable life. At Holvi, we only care about the accounts receivable meaning.
What’s the difference between turnover and profit?
If turnover is referred to as gross revenue, then profit is referred to as net revenue. This is because your income is all of your sales, but your earnings will have deductions.
These deductions might be a number of things – such as sales minus the cost of the goods or services sold (gross profit) or sales minus expenses, such as tax and administration (net profit).
If you’ve been in business for at least one financial year, you can calculate turnover as long as you’ve kept a record of your sales. In the future, you can also use insights from your Holvi account to get a clear understanding of annual turnover.
If you sell products: Your turnover will be the total number of sales from the products sold.
If you sell services: Your turnover will be the total that you have charged for these services.
If you’re just starting out, you can provide an estimate of your turnover. Here’s how to calculate your estimated turnover in four simple steps.
- Estimate your maximum number of sales. Start by looking at maximum sales you can expect. For example, if you sell products, estimate the total number of products you can produce and sell. If you provide a service, estimate your sales based on the maximum number of billable hours.
- Estimate how much demand there is for your product or service and adjust your estimated sales. If the demand is higher than your capacity, then you don't need to make any changes.
- Estimate the price for your product or service. Ask yourself what customers are willing to pay and look at how much your competitors are charging.
- Multiply the price of your product or service by the expected sales. If you have multiple products, perform this calculation for each one and add up the total. You can also refer to your business plan – what does it predict or forecast?
Remember, we’re only asking for an estimate. This is the same figure you’ll submit to the tax authorities as a basis for calculating your income tax prepayments. Turnovers are usually measured in tens of thousands, so don’t stress over a couple hundred or thousand euros.