When it comes to business finances, there’s a lot of jargon floating around.
Like the word “turnover”. It turns out, it’s not just a popular apple-based dessert – it’s also a business accounting term that you may need to know about as a sole trader.
Less fun than dessert, but still important. Here we go!
What is turnover?
Turnover, also known as sales revenue, is the money you receive in any given period for selling goods and/or services.
Basically, if you sell a single apple pie for $50 in January, that’s your turnover, or revenue, for the month.
It’s important to note that turnover does not take into account any money spent in order to produce your goods/services – eg. business expenses. If you spent $40 on flour, eggs, sugar, cider, and apples in order to make that one pie, your turnover would still be $50, even if your profit is only $10.
What is annual turnover?
Annual turnover is pretty much exactly what it says on the tin: your turnover, measured annually.
Say you sell one $50 apple pie (well worth the price, they’re gourmet) every month for a year. Your annual turnover would be $50 x 12 – so in this case, $600. A successful, tasty year!
What is GST turnover?
You may have heard the term “GST turnover” floating around, and wondered what that was all about. Basically, once you’re projected to earn a certain amount of turnover in the next 12 months, the ATO requires you to register for and start charging GST.
The level of turnover at which you’re required to register for GST in Australia is $75k. Note that this is different from $75k in profit – if you spend $40k on apple pie ingredients, and earn $75k in revenue, you’re still required to register for GST, even though your take-home pay is only $35k.
(Presuming you take it all home, of course. You’re well within your rights to invest it back into your apple pie business. You could use the money to branch out a little – maybe start making chocolate lava cakes. They’re always a crowd favourite!)
What isn’t turnover?
Turnover specifically refers to income made through selling goods or services. This means the term doesn’t include things like:
- Interest on savings
- Rental income (unless you own a rental property business)
- Loans and money from investors
- Selling off used assets
How to calculate turnover
The exact formula for calculating turnover is:
Number of sales during period x Price of sales = Turnover.
Bear in mind though that if different items/services cost different amounts, you’ll have to do this calculation per item, then add the totals together.
For instance, if you sell 10 apple pies for $50, 20 chocolate lava cakes for $10 each, and 40 cake pops for $5 a pop, your calculations would look something like this:
10 pies x $50 = $500 20 lava cakes x $10 = $200 40 cake pops x $5 = $200
$500 + $200 + $200 = $900 in turnover.
Tada!
Don’t forget your taxes
Turnover is all well and good, but it’s only one piece of the financial pie. To calculate actual take home pay, you’ll need to factor in things like overheads, expenses, and (of course) taxes.
That last one is where Hnry can help. Hnry is an award-winning accounting service specifically designed for sole traders. For just 1% +GST of your sole trader income, capped at $1,500 +GST, we will automatically calculate, deduct, and pay your:
We also lodge your tax return every year, all as part of the service. Oh, and we chase-up late paying clients on your behalf. And we review and claim your expenses for you, so you get all the tax-savings you’re entitled to in real time.
Basically, we make it so that you never have to think about taxes again.
Save time, save money, join Hnry today.
Share on: