15th July 2016
The world of finance has its own language. As business owners we need to understand these words, and I mean really understand them so that we can best manage legally compliant, powerful and profitable businesses. Here are some of the core financial words.
The income generated from sale of goods or services, or any other use of capital or assets, associated with the main operations of an organisation before any costs or expenses are deducted.
Money spent or cost incurred in an organisation’s efforts to generate revenue, representing the cost of doing business.
The flow of cash or cash equivalents received from work (wage or salary), capital (interest or profit), or land (rent). Gross income The amount by which sales revenue exceeds production costs (cost of sales)
P&L (Profit & Loss Statement)
One of the three primary financial statements used to assess a company’s performance and financial position (the two others being the balance sheet and the cash flow statement)
Chart of Accounts
A listing of the accounts available in the accounting system in which to record entries.
A condensed statement that shows the financial position of an entity on a specified date, usually the last day of an accounting period.
An estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals. One of the most important administrative tools.
The total revenue in an accounting period minus all expenses during the same period.
Trading Whilst Insolvent
Not being able to pay debts as and when they fall due.
A person or company to whom money is owing.
A person or entity that owes money.
A financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.
A broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.
BAS (Business Activity Statement)
A tax reporting requirement for businesses issued by us on either a monthly or quarterly basis.
All costs on the income statement except for direct labour, direct materials, and direct expenses.
Whilst I can’t provide financial advice I can urge you to befriend a patient accountant who specialises in small business. Ask questions until you understand, for me it took years. Work together to set up systems to get your expenses loaded into a software system such as MYOB or Xero. Meet once per month to discuss your P&L – critical for financial learning. Profit and success are so much more than what is sitting in your bank account.
What’s your financial fluency self-rating out of 5?
What more can you be doing? How profitable is you private practice?
Contact Cathy today to find out how a private practice coach can help you with all of this.
This article featured in the July Edition of Paeds Biz