Sales Turnover Audit in Singapore: How It Affects Mall Rental Costs

Introduction

In Singapore, shopping malls often charge tenants rent based on a percentage of their gross turnover (GTO) rather than a fixed amount. This turnover-based rental model is common in retail and food & beverage (F&B) businesses, where rental costs fluctuate based on sales performance.

To ensure accurate rental payments, landlords require businesses to submit verified sales reports, often through a Sales Turnover Audit. This audit helps confirm that reported revenue figures match actual transactions, preventing underreporting and financial disputes.

In this article, we will explore how Sales Turnover Audits impact mall rental costs, why businesses need them, and how they can prepare for a smooth audit process.

1. What is a Sales Turnover Audit?

A Sales Turnover Audit is an independent financial review conducted by a Certified Public Accountant (CPA) firm to verify a business’s actual revenue. This audit ensures that:

✔️ Businesses report accurate gross sales figures to landlords.
✔️ Landlords charge fair and correct rental fees.
✔️ Financial disputes between mall tenants and landlords are avoided.
✔️ Businesses remain compliant with their lease agreements.

A Sales Turnover Audit is not a statutory requirement under Singapore law but is typically a contractual obligation under lease agreements with shopping malls.

2. How Does Sales Turnover Affect Mall Rental Costs?

A. Gross Turnover Rent (GTO Rent) Model

Many shopping malls in Singapore charge rent based on a percentage of a tenant’s monthly sales. This system, known as Gross Turnover Rent (GTO Rent), allows landlords to align rental fees with business performance.

📌 Example: If a retail store in a mall pays 5% of its monthly gross turnover as rent, then:

$100,000 in monthly sales → Rent = $5,000
$150,000 in monthly sales → Rent = $7,500

B. Minimum Base Rent vs. GTO Rent

Some lease agreements include a Minimum Base Rent (MBR) alongside the GTO Rent. This means that businesses pay:
1️⃣ A fixed minimum rent, regardless of sales performance.
2️⃣ An additional percentage-based rent, if sales exceed a certain threshold.

📌 Example:

Minimum Base Rent = $3,000/month
5% GTO Rent applies if sales exceed $60,000
If sales = $80,000 → Rent = $3,000 (base) + $1,000 (GTO Rent) = $4,000

This structure ensures that landlords receive a stable rental income, while businesses contribute more when they generate higher sales.

C. Impact of Sales Turnover Audits on Rental Fees

A Sales Turnover Audit ensures that rental fees are correctly calculated by verifying that:
✔️ Reported sales match actual revenue recorded in sales systems.
✔️ Landlords receive the correct rental payments based on audited turnover.
✔️ Businesses do not underreport sales to pay lower rent.

3. Why Do Mall Stores in Singapore Need a Sales Turnover Audit?

A. To Prevent Revenue Underreporting & Fraud

Some businesses may manipulate sales figures to reduce their rental obligations. Examples include:
❌ Not recording cash transactions.
❌ Altering POS (Point of Sale) system data.
❌ Providing misleading financial reports to landlords.

A Sales Turnover Audit helps identify and prevent such fraudulent practices, ensuring transparency and fairness.

B. To Comply with Lease Agreements

Most Singapore malls, such as VivoCity, ION Orchard, and Suntec City, require tenants to submit audited revenue reports as proof of compliance. Non-compliance may result in:
❌ Penalties or back payments.
❌ Lease termination for breach of contract.
❌ Legal disputes between tenants and landlords.

C. To Maintain a Good Relationship with Landlords

A transparent and properly audited turnover report builds trust and credibility with landlords. This helps businesses:
✔️ Negotiate better lease terms in the future.
✔️ Avoid rental disputes and unnecessary legal complications.
✔️ Secure long-term tenancy agreements.

D. To Improve Business Financial Planning

A Sales Turnover Audit also helps businesses understand their revenue trends, enabling them to:
📊 Plan for seasonal changes in rental costs (e.g., higher sales in festive months).
📊 Identify areas for sales improvement and business growth.
📊 Ensure internal financial records are accurate and well-maintained.

4. How is a Sales Turnover Audit Conducted?

Step 1: Engagement of an Audit Firm

Businesses must hire a Certified Public Accountant (CPA) firm to conduct the audit.
The audit firm reviews the lease agreement’s turnover reporting requirements.

Step 2: Financial Data Collection & Review

The auditor verifies the business’s financial data, including:
📌 POS System Reports – Confirms recorded transactions match actual sales.
📌 Daily & Monthly Sales Reports – Ensures consistent revenue tracking.
📌 Bank Statements & Credit Card Transactions – Cross-checks sales deposits.
📌 Invoices & Receipts – Validates revenue documentation.

Step 3: Identifying Discrepancies

The auditor checks for differences between reported sales and actual revenue.
If discrepancies are found, the business must provide explanations or supporting documents.

Step 4: Issuing the Audit Report

Once verified, the auditor issues a Sales Turnover Audit Report.
The business submits the audited sales turnover report to the landlord.

5. Consequences of Not Conducting a Sales Turnover Audit

❌ Lease Termination – Mall management may terminate tenancy agreements for non-compliance.
❌ Legal Action – Businesses that underreport sales may face legal penalties.
❌ Financial Penalties & Back Payments – Tenants may have to pay additional rent if underreporting is discovered.
❌ Loss of Business Credibility – Future landlords and financial institutions may refuse lease renewals or funding.

6. How to Prepare for a Sales Turnover Audit

✔️ Keep Accurate Sales Records – Use cloud-based POS systems and accounting software.
✔️ Reconcile Bank Deposits & Sales Reports – Ensure all revenue is accounted for.
✔️ Organize Financial Documents in Advance – Maintain a clear paper trail of invoices, receipts, and reports.
✔️ Engage a Trusted Audit Firm – Work with a CPA firm experienced in retail audits.

7. Choosing the Right Audit Firm for a Sales Turnover Audit

🔹 Accreditation – Ensure the firm is a Certified Public Accountant (CPA) firm in Singapore.
🔹 Experience in Retail & F&B Audits – Choose an audit firm with expertise in turnover audits.
🔹 Transparent Reporting – A professional firm should provide detailed audit reports.
🔹 Client Testimonials & Reputation – Look for audit firms with strong track records in turnover audits.

8. Conclusion

A Sales Turnover Audit is crucial for mall tenants in Singapore, as it directly affects rental costs and lease compliance. By ensuring accurate revenue reporting, preventing disputes, and maintaining financial transparency, businesses can avoid penalties and build strong relationships with landlords.

To ensure a smooth audit process, businesses should keep accurate financial records, reconcile revenue with bank deposits, and engage a professional CPA firm.

If your retail or F&B business requires a Sales Turnover Audit in Singapore, consult a licensed audit firm today for financial compliance and peace of mind. ✅