Turnover

Turnover is the top-line figure on a profit and loss statement: the total value of goods sold or services invoiced during a set period, before any costs are deducted. In UK accounting, turnover is calculated excluding VAT - the VAT you collect on behalf of HMRC belongs to HMRC, not to your business. Most contractors, distributors, and trade businesses measure it over a financial year, though monthly or rolling 12-month views are common for cash flow planning and VAT threshold monitoring. Turnover is also referred to as revenue or sales income; in most UK small business contexts, the terms are interchangeable.

What Turnover Includes - and What It Does Not

Turnover covers the value of goods sold, fees charged for services, and income from completed contracts or projects within the period. It also includes costs you recharge to customers - delivery charges, billable materials, or expenses passed on under a contract.

What turnover excludes is equally important. Do not count VAT collected on sales, income from selling business assets such as equipment or vehicles, refunds or returns (these reduce your gross total), grants and investment income, or bank interest and dividends. These are recorded elsewhere in your accounts and do not form part of trading turnover.

A point that catches many project-based businesses: turnover is recorded when work is completed or goods are delivered, not when payment is received. A contractor who finishes a job in March but is paid in May records the turnover in March. This is standard accruals accounting, and it means your turnover figure can diverge significantly from the cash actually sitting in your account.

Turnover vs Profit: Why the Distinction Matters

Turnover tells you how much came in. Profit tells you how much you kept. The gap between them is costs - and for many trade businesses, that gap is where financial problems hide.

Gross profit sits between the two: turnover minus the direct costs of delivering your goods or services, such as materials, bought-in goods, sub-contractors, or decorator costs. Net profit then deducts all remaining overheads - premises, staff salaries, software subscriptions, insurance - to arrive at what the business actually earned.

A business can have strong turnover and weak profit if its cost base grows alongside revenue. This pattern is common in businesses that win more work but price it thinly, or that absorb supplier cost increases without adjusting their own rates. Tracking turnover in isolation, without reference to gross margin and net profit margin, gives an incomplete picture of financial health.

Turnover also matters for practical reasons beyond your internal reporting. Lenders assessing a business loan or overdraft typically request turnover data alongside profit figures. HMRC requires sole traders to declare turnover in Self Assessment; limited companies report it in accounts filed at Companies House. And for anyone selling the business, turnover is one of the first numbers a buyer will ask for.

Zigaflow's invoicing tools record every completed sale against the relevant job or order, giving you a running view of invoiced turnover without manual collation at period end.