When organising insurance for your business, the coverage and premium may be based on the turnover of your business.
What is turnover?
Turnover is the amount of money that your business earns during a financial year. The funds may have been raised by selling products or labour, time, expertise or any other type of service. Turnover also includes the amount you invoice a client for your sub-contractors.
If you need to supply materials to complete a job and you include the cost of those materials as part of the invoice, then it also makes up part of your turnover. But if you use your client’s money to purchase supplies for a job, it’s not included in your turnover.
How do I calculate turnover?
Simply total all of the invoices you charged clients during the year to find out your turnover. Knowing last year’s turnover will help you estimate what your turnover will be for the year in advance.
Why does an insurer need to know my turnover?
Many business policy premiums are based in part on turnover. Public liability, for example, is based on turnover and staff numbers so the higher the revenue and staff count, the higher the cost of your public liability cover.
Business interruption insurance is an obvious insurance type that needs to know your estimated turnover. Fire, flood, severe weather or closure of a major supplier may result in loss of revenue which can be replaced by insurance. The insurance payout is calculated on what you would have earned during the period of interruption.
It's not always possible to accurately estimate turnover. If you estimate your turnover for the next 12 months and find you underestimated due to unforeseen work, you should let your broker know. The policy can then be amended to ensure you are fully covered.
If you have any questions about your turnover’s impact on insurance, contact one of the experienced brokers at Knightcorp on 1300 656 001 or send us a message.