Glossary and Definitions

 

Accrual vs. Cash
Definition: Accrual: Expenses counted when they occur, may not yet have been paid. Income counted when earned, may not yet have been paid.
Cash: Expenses counted when actually paid. Income counted when cash is received.

Assets
Definition: What you own, tangible or intangible, that has material value

Budget
Definition: A system to estimate what you will make and what you will spend during a specific period of time.
What it
tells you:		 How to guide your business and manage your cash flow

Cash Flow
Definition: The movement of cash in and out of a business
What it
tells you:		 If you can pay your bills or not

COGS (Cost of Goods Sold)
Definition: The costs of labor and materials to make your product or service.
AKA: None
Examples:
  • Payroll
  • Payroll Taxes
  • Payroll Fees
  • Materials (inventory)
  • Contract workers

Expenses
Definition: All of the operating costs to run your business, not including the cost to make the product/service.
AKA: Costs, operating expenses, overhead
Examples:
  • Administrative Payroll
  • Bank Services Charges
  • Business Gifts/Donations
  • Copier Lease and Maintenance
  • Dues & Membership
  • Insurance, including owner Life Insurance, Liability, Property, Worker’s Comp, Health & Dental
  • Janitorial
  • LOC and CC Finance Charges
  • Maintenance
  • Marketing; including Creative Design, Media Space, Events/Tradeshows, Printing, Email Programs, Website Development, Website maintenance, Web hosting
  • Meals & Entertainment
  • Office Expenses; such as pens, highlighters, etc.
  • Phone/Internet
  • Postage
  • Professional Fees; including Accountant/Bookkeeper, Attorney Fees, IT Support
  • Property Taxes
  • Rent
  • Software
  • Storage Rental
  • Trash
  • Utilities

Gross Profit
Definition: The total income from sales, minus the costs to make the product/service.
Formula: Income – COGS= Gross Profit
What it
tells you:		 If it is costing you more to make the product than you sell it for.
AKA: Gross Margin

Income
Definition: The amount of money that you receive (or will) for the product or service
AKA: Sales, Revenue, Gross Proceeds

Net Profit
Definition: The total income from sales, minus all the costs to make the product/service and expenses to operate the company.
Formula: Gross profit – expenses = Net Profit
What it
tells you:		 If you have made, or lost, money. If you have gross profit, but not net profit, your expenses are too high.
AKA: Profit, Net Income, Net Margin

Payables
Definition: Money you owe to others for products/services
AKA: Accounts payable

Profit
Definition: The total income from sales, minus all the costs to make the product/service and expenses to operate the company.
Formula: Income – expense = profit
What it
tells you:		 If you have made, or lost, money
AKA: Net Profit, Net Income

P&L (Profit and Loss Statement)
Definition: A financial statement that shows the operating results of the company during a specific period of time
What it
tells you:		 A summary of the money you made and how you spent it
AKA: Income Statement, Earnings Statement, Operating Statement, Statement of Operations

Receivables
Definition: Money owed to you for the sale of your product/service
AKA: Accounts receivable