Business Terminology

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Below, you will find the Business Terminology you will need to know for running your small business.

Whereas these terms might be foreign to you, it is important for you to understand them in order to run a successful small business.

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Accounting	Accounting involves the systematic recording and reporting of business financial transactions.
Accounts Payable	Accounts Payable reflects how much you owe your creditors for goods or services supplied to you.
Accounts Receivable	Accounts Receivable is the amount of money your customers or clients owe your business for goods or services you supply.
Assets	Assets are the cumulative financial holdings of your business and are usually classified into either Current Assets or Fixed Assets. Current, or short-term, assets include cash or inventory. Fixed, or long-term assets, include equipment, buildings, vehicles or land.
B2B/B2C	Is the purpose of your business to supply goods or services to other business, then you operate a B2B business, standing for ‘business-to-business’. The converse of B2B businesses are B2C businesses, which supply goods or services directly to an end-user or consumer.
Balance Sheet	This is a key financial document, which provides a summary view of business assets, liabilities and owner’s equity.
Billings	The process of preparing or sending invoices.
Cash Flow	The total amount of money being transferred into and out of a business, especially as affecting liquidity.
COGS (Cost of Goods Sold)	Cost of Goods Sold (COGS) is the cost of acquiring or manufacturing the products that a company sells during a period.
Costs	An amount that has to be paid or spent to buy or obtain something.
Creditors	A person or company to whom money is owing.
Debtors	A person or organisation that owes money.
Direct Costs	Costs resulting from the production of goods or services.
Expenses	Expenditures for equipment, utilities or inventory, which are for all the money you spend to operate your business.
Gross Profit	The difference between sales and cost of sales, ie before taking off any indirect costs. So, it is calculated by subtracting the cost of goods sold (COGS) from revenue (sales).
Income	Money received, especially on a regular basis, for work or through investments.
Indirect Costs	Costs, other than Direct Costs, and more-so for the running of your business, examples of which are salaries and rental.
Intellectual Property	Intangible property that is the result of creativity (patents, trademarks, copyrights, and trade secrets).
Liabilities	The state of being legally responsible for something. A thing for which someone is responsible, especially an amount of money owed.
Net Loss	When total expenses exceed overall revenues, you have a Net Loss in your business.
Net Profit	Net Profit is also known as your Bottom Line. Net Profit represents total revenues less total expenses.
Net Worth	Your net worth is simply the difference between your assets (what you own) and liabilities (what you owe).
Owner’s Equity	Usually represented as a percentage, Owner’s Equity refers to the owner’s part of business assets.
Profit	A financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something
Profit Margin	Profit Margin measures how much profit you keep relative to your total sales. There are three types of profit margins: Gross Profit, Operating Profit, and Net Profit.
Return on Investment (ROI)	Return on Investment (ROI) shows how much you gained or lost on a business investment relative to how much you spent on it. Calculate ROI by dividing net profit by the cost of the investment.
Sales	The exchange of a commodity for money; the action of selling something.
Sales Forecast	A calculation or estimate of future sales, taking into account factors such as industry or cyclical events.