Turnover is the value of all sales of products and services in a business. It is recorded when dividends and risk of ownership are transferred from the company to the customer. In practice, this is when the goods are shipped or delivered. This is also when the company issues the invoice.
It is not necessary for a customer to have paid for the product or service. Because a sale is often on credit, payment is delayed. When sold on credit, the amount is also recorded in the balance sheet below Receivables.
Decision Beacon calculates Turnover as the sum of sales accounts in the general ledger. In most cases, this corresponds to an invoiced amount. Sales accounts are identified below Mapping of financial concepts.
Turnover used to monitor the success of the company in the market. Selling products and services are the initiating success criteria for a business and where it all starts.
Some of the most common ways to assess Turnover is
Some reasons for stagnant or declining sales can be:
First, there may be fewer customers buying from the company. Secondly, it may be because each customer buys less, and thirdly because they are buying at a lower price. The lower price may be due to discounts. Customers could also choose cheaper versions of the products or services.
It can also be a good idea to look at whether the proportion of credit notes, rejections and complaints is increasing.
The effort required depends entirely on the cause.
If there are fewer sales, it will typically require you to dive into the underlying cause. Maybe more leads are needed, or sales activity needs to be increased. It may also be that salespeople need to be trained and educated or motivated.
Maybe there are enough sales, but each sale is smaller. Then an option might be to work with additional sales to increase customer orders. Discounts and increased attention / bonus for additional sales can be useful tools.
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