Gross turnover can apply to people, services, or money, but it always represents the total amount that is “turned over,” utilized, or gained and lost during a given period of time. It’s important to make a distinction about the use of the term gross turnover in accounting. Turnover can also mean how many times an asset, such as cash, is turned over, or how many times its value is returned to a business during a time period. The term “gross turnover” usually does not reflect this statistic, but instead refers to the total income for the business or party throughout the year, before certain factors that are used to calculate “net turnover.”
Although it sounds complicated, the accounting use of the term is fairly simple. The accountant simply calculates the total income for the year. The usual meaning of the term “gross,” which means before certain mitigating factors, applies to this kind of turnover assessment.
In other business uses of the term, someone can be referring to the amount of services or inventory that are “turned over” during a certain period of time. This calculation can be a way to assess whether inventory is being well handled. This can also reflect on whether production matches inventory.
Another business use of the term “turnover” refers to the gain or loss of employees. Here, gross turnover would be the total number of employees lost during a given time frame. Turnover of employees generates significant costs to business, related to training, employee resources like badges and workstation equipment, and other costs. Assessing turnover is a way for a business to look at efficiency and strategies that may affect the bottom line of operations.
It’s important for a professional accountant know what constitutes gross turnover, and what factors may apply to that number in order to turn it into net turnover. Net turnover takes into account different tax situations, discounts, or mitigating value statements for the values that are used to determine gross turnover numbers. It often takes an experienced bookkeeper to guide business leaders through the process of deciphering gross and net turnover to accurately value the assets and operations of a business. With these numbers solidly in hand, the top brass for a company or business can more accurately make the big decisions that will influence future profits.
