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Sales Turnover
Sales turnover, also referred as sales revenue turnover which is the amount of products or services sold within an accounting year. It is the value of total sales provided to the customers during an accounting year.
What is sales turnover?
Sales turnover is the total sales generated by a business with a specific period of time (mainly a financial year). These financial metrics measure the amount of revenue generated from the services with a time frame.
The sales turnover figure is reported on the income statement of profit or loss statement of the businesses financial statements.
hat does the sales turnover ratio mean?
The sales turnover ratio, also referred to as inventory turnover ratio, measures effectiveness of a business that manages its inventory by calculating and analyzing the number of times inventory is sold and replaced.
How to calculate sales turnover?
The steps to calculate sales turnover is as follows:
- Identify the sales period: To calculate the indicator, sales period is required to be identified from where the information can be gathered. Choose a complete sales period as getting accurate sales turnover rate during active sales period is difficult.
- Calculate cost of goods sold: Next step is to identify the cost of items. The total sum of initial and additional inventory expenses. After this, subtract the total number of ending inventory from it. The final figure will be COGS.
COGS = (Starting inventory cost + extra inventory expenses) - ending inventory
- Identify average inventory: Determining average inventory is the next step, add the amount of starting and ending inventory together, then divide by 2 (Starting inventory + Ending Inventory) / 2 = Average inventory
- Analyze sales turnover ratio: To complete the calculations, divide the COGS by the number of average inventory which will lead to the value of sales turnover rate.
The formula is:
Sales turnover rate = COGS / Average inventory
Is sales turnover the same as revenue?
Sales turnover and revenue are related but not identical.
- Sales turnover refers to the total value of net sales over a specific time period.
- Revenue includes income from all sources, including non-sales activities.
Sales turnover is a subset of revenue and focuses on core sales performance.
How to increase sales turnover?
Improving your sales turnover can enhance profitability and growth.
- Offer time-bound discounts or promotions to drive quick sales.
- Optimize pricing strategies based on market demand and competition.
- Improve product availability and inventory management.
- Enhance customer service to encourage repeat purchases.
- Focus on high-performing sales channels and customer segments.
How to calculate sales turnover rate?
The sales turnover rate shows how quickly you sell and replenish inventory.
- Formula:
Sales Turnover Rate = Cost of Goods Sold / Average Inventory
- Reflects inventory efficiency and cash flow cycles.
- High turnover rates typically indicate strong product demand.
How to calculate annual sales turnover?
Annual sales turnover gives a yearly snapshot of sales activity.
- Formula:
Annual Sales Turnover = Total Net Sales for the Year
- Useful for benchmarking annual growth and strategic planning.
- Allows comparison across fiscal years or with competitors.
Employee pulse surveys:
These are short surveys that can be sent frequently to check what your employees think about an issue quickly. The survey comprises fewer questions (not more than 10) to get the information quickly. These can be administered at regular intervals (monthly/weekly/quarterly).
One-on-one meetings:
Having periodic, hour-long meetings for an informal chat with every team member is an excellent way to get a true sense of what’s happening with them. Since it is a safe and private conversation, it helps you get better details about an issue.
eNPS:
eNPS (employee Net Promoter score) is one of the simplest yet effective ways to assess your employee's opinion of your company. It includes one intriguing question that gauges loyalty. An example of eNPS questions include: How likely are you to recommend our company to others? Employees respond to the eNPS survey on a scale of 1-10, where 10 denotes they are ‘highly likely’ to recommend the company and 1 signifies they are ‘highly unlikely’ to recommend it.
Based on the responses, employees can be placed in three different categories:
- Promoters
Employees who have responded positively or agreed. - Detractors
Employees who have reacted negatively or disagreed. - Passives
Employees who have stayed neutral with their responses.
