Turnover is counted VAT-exclusive. VAT charged to the customer is not revenue: the business merely collects it for the state before remitting it. Confusing it with turnover overstates business activity by 20% (standard rate).
Take a sales invoice:
The turnover generated by this invoice is €1,000 VAT-exclusive, not €1,200. The €200 VAT passes through account 44571 “VAT collected” and will be remitted to the Treasury (after deducting VAT paid on purchases).
Basic formula:
VAT-exclusive turnover = Σ (quantity sold × unit sale price VAT-exclusive)
Example: a craftsman sells 40 services at €250 VAT-exclusive in a month → monthly turnover = 40 × 250 = €10,000 VAT-exclusive.
Turnover measures business volume, not financial health. A business can show a sharply rising turnover and still lose money if its expenses grow faster than its sales.
To properly assess performance, look further down the income statement:
| Indicator | Calculation | What it measures |
|---|---|---|
| Turnover | VAT-exclusive sales | Business volume |
| Gross margin | Turnover − cost of sales | Sales profitability |
| Gross operating surplus | After operating expenses | Operational performance |
| Net profit | After all expenses and taxes | Final profit |
Two businesses with the same turnover can have opposite net results. This is why turnover should always be read alongside margin and profit. Under accrual accounting, turnover is recognised upon invoice issuance (delivery of goods or service completion), not upon receipt—so high turnover does not guarantee available cash.
The turnover amount triggers changes in tax regime. Here are the reference thresholds (current scale, reviewed periodically):
Since these thresholds are regularly updated by the authorities, it is best to track cumulative turnover in real time rather than discovering it at year-end. [Orizen accounting software](/wedges/logiciel-comptabilite) automatically consolidates net turnover from issued invoices and allows tracking the cumulative amount against thresholds, to anticipate a regime change without surprises at year-end.
Discover the Orizen answer: Orizen accounting software, modular and built for French SMEs.
Essai gratuit 14 jours What the Orizen accounting software module costsTurnover is always calculated net of VAT (ex-VAT). The VAT charged to the customer does not belong to the business: it is collected on behalf of the state and then remitted. Calculating turnover gross of VAT overstates it by the VAT amount (20% at the standard rate) and distorts all management ratios. The gross amount is only used to determine what the customer actually has to pay.
Turnover is the total net sales; profit (net income) is what remains after deducting all expenses — purchases, salaries, rent, taxes. A business can have high turnover and zero or negative profit if its costs are too high. Turnover measures activity, profit measures profitability: these are two distinct concepts that should never be confused.
Under accrual accounting (the standard regime), turnover is recognised when the invoice is issued, i.e. at the delivery of goods or completion of the service — not at payment. An invoice issued in December but paid in February is attributed to December’s turnover. This is why high turnover does not necessarily mean comfortable cash flow: the gap between invoicing and payment creates a working capital requirement.