Whether you are dealing with a small accounting issue or a minor legal question, understanding small business terms is an important first step for business owners to start valuable discussions.
They also help you gain a fuller understanding of the small business industry, and all of the moving parts of how businesses interact with the economy.
Here’s a look at some of the most useful terminology you’ll find in small business, sorted alphabetically by category:
- Accounting & Finance Glossary
- Employment Glossary
- Legal, Compliance & Regulation Glossary
- Strategy & Business Planning Glossary
- Sales & Marketing Glossary
- Operations Glossary
- Technology Glossary
- General Glossary
Accounting & Finance Glossary
Accounting profit – a profit or loss for a period prior to tax deduction.
Accounts payable – all unpaid short-term invoices (less than 12 months), bills and other liabilities. Eg. Invoices for goods or services, bills for utilities and tax bills.
Accounts receivable finance – is a type of debtor finance in which a business sells its accounts receivable to a third party at a discount. Also commonly referred to as factoring.
Accounts receivable – all expected short-term payments (less than 12 months) from clients who have already received goods / services but still have to pay. These customers are also known as debtors and are generally businesses.
Accrual accounting – an accounting system that records transactions when they occur, regardless of payment date.
Amortization – the action of writing an asset off over a period of time.
Assets – are tangible or intangible items of value owned by a business entity. Common assets include cash, property, vehicles, equipment and inventory.
Audit – a check by an auditor on an entity's financial records to verify its accuracy.
Bad debts – money owed that is unlikely to be paid in the future and therefore written off as bad debt.
Balance sheet – a table detailing a business entity’s assets, liabilities and equity in a particular time.
Balloon payment – it is a final lump sum payment due at the end of a loan. Also known as residual.
Bank reconciliation – cross reference of cash and bank statements to ensure accuracy.
Bankrupt – when an individual is declared in law as unable to pay their debts.
Bankruptcy – where an individual is bankrupt and there is an appointed trustee that manages their assets.
Benchmark – a set of business performance metrics.
Benchmarking – comparing your business to best practice within your industry.
Bookkeeping – the recording of financial transactions in a business.
Bootstrapping – when a business funds its growth from personal finances and revenue gained from the business.
Bottom line – net profit for a business. Also known as net profit.
Break-even point – is the point when total revenue equals total expenses. See break-even calculator
Budget – a list detailing planned revenue and expenses for a given period.
Capital cost – a significant once-off purchase of plant, equipment, building or land.
Capital gain – net amount gained when an asset is sold over cost of original acquisition and subsequent works.
Capital Gains Tax (CGT) – the tax applicable on any capital gains made.
Capital growth – when there is increase in the value of an asset.
Capital – capital for business comes in the form of debt and/or equity.
Cash accounting – an accounting system that records transactions when the money is actually received or paid.
Cash book – a record of all credit, cash or cheque transactions received or paid by a business.
Cash flow – the amount of money going in and out of a business.
Cash incoming – the amount of money from cash flow going into the business.
Cash outgoing – the amount of money from cash flow going out of the business.
Cash – all forms of money.
Chart of accounts – a list of all accounts made available for recording transactions in the general ledger.
Chattel mortgage – is a finance agreement in which the financier provides funds for an entity to purchase an asset which will be used as collateral during the duration of the loan.
Collateral – it is when an asset is used by a financier as backup in exchange for a loan. Also known as security.
Commercial bill – it is short term debt issued by an organization. Also known as a bill of exchange.
Contingent liability – a liability that may or may not need to be paid depending on a future event.
Cost of goods sold – total costs of producing a good or service.
Credit history – a report detailing an individual’s or business’ history with credit usually through a third party credit reporting agency.
Credit limit – the maximum amount of credit that a lender will extend to a debtor.
Credit rating – a numerical ranking that details the creditworthiness of an individual or business based on their credit history representing their ability to repay debt.
Credit – purchase of a good or service with an agreement to pay it at a later date.
Creditor – an entity that allows you to purchase a good or service with an agreement to pay it at a later date. Also any individual or business that you owe money to.
Crowdfunding – a method of financing a business idea through gathering funds from private individuals mainly online via crowdfunding websites.
Current asset – cash or other assets that are expected to be converted into cash within 12 months.
Current liability – liabilities or payment due within the next 12 months.
Debit – an accounting entry which details an increase in an asset or expense account, or decreases a liability or equity account.
Debt consolidation – when several loans are combined with the purposes of lowering the overall interest rate and/or fees.
Debt finance – capital raised by a company by selling debt in the form of bonds, bills or notes.
Debt – any money owed to a third party.
Debtor – an individual or business that owes you or your organization money.
Debtors finance – is a type of debtor finance in which a business sells its accounts receivable to a third party at a discount. Also commonly referred to as factoring.
Default – failure to pay a debt obligation.
Depreciation – the expensing of an asset over a period of time over its useful life.
Double-entry bookkeeping – a bookkeeping method that records each transaction in two corresponding sides; debit and credit.
Drawings – money paid for from a business account to the owners.
Employee share schemes (ESS) – where a company gives its employees the opportunity to buy shares of the company.
E-procurement – the B2B procurement of supplies and services over the internet.
Equity finance – money provided in exchange for part ownership of the business.
Equity – the value of shares issued by a company.
Facility – a predetermined arrangement where the borrower has the flexibility to draw down on debt to a certain level.
Factoring – it is when a factor company buys a business’ outstanding invoices at a discount. Also known as debtors finance or accounts receivable finance.
Finance – money in the form of debt used for funds for an individual or business.
Financial statement – records that explain the business activities and the financial performance of a company.
Financial year (FY) – a 12-month period used for accounting and tax purposes.
Fixed asset – a long term physical asset used by a business to generate income.
Fixed cost – a cost that remains fixed regardless of the amount of goods or services produced or sold.
Fixed interest rate – an interest rate that remains the same for the entire term of a loan.
Float – when a private company first offers shares in the company to the public. See Initial public offering.
Fringe Benefits – non-cash benefits such as a company car, mobile phones, which are included as part of a salary package.
Goodwill – an intangible asset is defined by the value of a business’ reputation.
Gross income – money earned prior to taking out taxes and other deductions.
Gross profit – (also known as net sales) the difference between sales and the direct cost of making the sales.
Hire-purchase – a loan contract for an asset where after an initial deposit, the borrower will pay repayments before paying a residual amount at the end to own the asset. See rent to buy.
Initial public offering (IPO) – when a private company floats on a stock exchange and raises equity capital by offering shares to the public for the first time. Also known as a float.
Input tax credit – you can claim an input tax credit for any GST included in the price of goods and services used in business.
Insolvent – when a business or company cannot pay their debts.
Intangible assets – non-physical assets such as goodwill and intellectual property rights which have no definitive value.
Interest rate – the percentage at which interest is charged on top of the loan. Rates may be fixed or variable.
Interest – the cost of borrowing money on top of paying back the principal sum.
Inventory – a complete list of goods a business sells.
Investment – an asset purchased for the purpose of generating a return such as shares or property.
Invoice finance – financing based on the strength of a business’ accounts receivable. Similar to factoring.
Invoice – a document detailing a list of goods and services provided and the cost.
Liability – an amount owed due to a financial liability.
Line of credit – an agreement from a lender which allows the borrower to withdraw money from an account up to a specific limit.
Liquidate – to wind up a business or to convert assets into cash.
Liquidation – the process of liquidating a business.
Liquidity – the ease at which assets can be converted into cash.
Loan to value ratio (LVR) – the ratio of a loan relative to the market value of the asset that will be purchased.
Loan – a finance agreement where the borrower borrows money and pays it back in repayments which include the principal, fees and interest over time.
Margin call – when the value of an asset falls below a certain LVR, the lender may need funds to bring it back down to an acceptable LVR. See Loan to value ratio (LVR).
Margin – the difference between the selling price of a good or service and the cost.
Mark down – a discount applied to a product price. See also Discount.
Mark up – the amount added onto the cost price of goods to determine its selling price.
Maturity date – when a loan’s term ends and the final payment is due.
Net assets – total assets minus total liabilities. Also known as net worth, owner’s equity or shareholder’s equity.
Net income – the net amount earned by a business after tax and deductions.
Net profit – is the total gross profit minus all expenses. Also known as bottom line.
Net worth – total assets minus total liabilities. See Net assets.
Overdraft facility – where a lender allows an entity to overdraw an account.
Overdrawn account – an account that has exceeded its maximum limit.
Overheads – fixed costs that are to do with operating a business.
Owner’s equity – total assets minus total liabilities. See Net assets.
Payroll tax – a local tax calculated on the amount of wages paid.
Petty cash – cash for small miscellaneous purchases.
Plant and equipment – fixed assets that are used in the operation of a business.
Principal – the original amount borrowed.
Profit and loss statement – a financial statement detailing sales and expenses and is used to determine gross and net profit. Also known as an income statement.
Profit margin – see margin.
Projection – see forecast.
Rates – property taxes charged by the local government on properties in their municipal area.
Receipt – a document customers receive to confirm payment.
Record keeping – the process of storing information that explain certain business transactions for tax purposes.
Refinance – to finance a new loan over a former loan.
Repossess – the process of a lender taking back ownership of an asset from the borrower due to default.
Research and development (R&D) – research and development to conduct so that businesses can innovate, create new products and develop new solutions.
Retail lease – a legal contract between a business and a landlord which sets the terms of which the business can occupy a landlord’s premise.
Return on assets (ROA) – a calculation that uses a business’ net profit relative to the price of the asset.
Return on investment (ROI) – a calculation that uses a business’ net profit to work out the return of a business in the form of a percentage.
Revenue – the cash flow generated through sales before expenses or deductions. Also known as turnover.
Security – assets that a lender can take ownership of when loan default occurs. Also known as collateral.
Shareholder’s equity – assets less liabilities. See net assets.
Single-entry bookkeeping – a bookkeeping method used that relies on a one sided accounting entry to maintain records.
Stamp duty – a state and territory government tax paid by the buyer on the purchase price of an asset.
Stock at valuation (SAV) – a stock at valuation sale means that the asking price is exclusive of inventory or stock.
Stock – goods, materials or product on hand.
Stocktaking – process involving a physical count of goods held by a business used to verify records.
Tariff – tax levied by the government on imported goods or services.
Tax invoice – an invoice for the pricing and terms for the supply of goods or services.
Turnover (financial) – the cash flow generated through sales before expenses or deductions. Also known as revenue.
Variable cost – a cost dependent on the quantity of goods produced and may increase or decrease.
Variable interest rate – when the interest rate for a loan changes depending on its duration and market conditions.
Venture capital – investment in a new venture or start-up business.
Withholding tax – the tax that an employer withholds from employees’ wages to pay directly to the government.
Working capital – the cash available for a business’ day-to-day expenses.
Year end – the end of either the financial year or calendar year.
Year To Date (YTD) – from the beginning of the financial year or calendar year to a specified date.
Award – the minimum terms and conditions of employment, such as wages/salary, through an industry agreement between employers and employees.
Certified Agreement (CA) – a written collective employment agreement that sets out wages and working conditions for a set group of employees.
Collective bargaining – negotiation of wages and employment terms and conditions by an organized body of employees or union.
Contractor – someone who has been paid to provide a service.
Independent contractor – a self-employed individual hired to do work for a business but is not an direct employee of that business.
Paid Parental Leave – a scheme that provides new parents some paid time off work.
Turnover (staff) – the rate at which staff leave an organization.
Legal, Compliance & Regulation Terminology
Acquiree – the business that an acquirer takes over after an acquisition.
Acquirer – the entity that takes over the acquiree.
Bill of sale – a legal document for transfers ownership of goods from one entity to another.
Codes of practice – specific mandatory or voluntary standards of conduct set for an industry.
Compliance – conforming to rules, laws and regulations set out by regulatory bodies.
Contract – agreement made in writing or verbally between two or more parties that is legally enforceable.
Copyright – a law protecting original works from others being copied or misused.
Disbursements – payment that a business makes or in legal terms
Encumbered – the asset used as security or collateral for a loan restricts the sale of that asset.
Franchise agreement – a legal contract detailing the terms and conditions of a franchise business between the franchisor and franchisee.
Franchise – a business model where a franchisee purchases the right to trade in goods or services using the branding, processes and goodwill of the franchisor.
Franchisee – the entity that purchases the right to operate a franchise outlet from the franchisor.
Franchisor – the entity that owns a franchise and agrees to sell the rights via a franchise agreement to a franchisee.
Free Trade Agreement (FTA) – international agreements which reduce barriers of trade and investment between countries.
Freedom of Information (FOI) – laws that allow access to publicly available information or data held by the government.
Guarantor – a person who is legally responsible for the debt if the borrower cannot pay it.
Intellectual Property (IP) – valuable intangible property that is derived from research, creativity which can be protected through the use of patents, copyrights and trademarks.
Legal name – an entity that appears on all official paperwork.
License – a legal document that allows an individual or business with official permission to conduct a specific activity.
Memorandum of association – a formal document prepared in the formation and registration process of a company to define its relationship with shareholders.
Memorandum of understanding (MoU) – a formal agreement between two or more parties.
Partnership – where there are two or more individuals who have a formal arrangement to manage and operate a business and share its profits.
Patent – an exclusive right granted to an owner to sell their particular good or service that is new or innovative.
Permit – the granting of permission by an authority to carry out a pre-specified activity.
Product disclosure statement (PDS) – the terms and conditions of a financial or insurance related product.
Product liability insurance – insurance that covers for damage or injury caused due to failure of a product sold by that business.
Professional indemnity insurance – insurance that covers a business when their client suffers a loss as a result of their advice.
Public liability insurance – insurance that covers against claims for property damage and bodily injury.
Quarantine – controls imposed on items brought to or from foreign countries.
Registrations of Interest (ROI) – getting interested parties to register their interest to conduct business or public works.
Retention of title – a clause in contracts where a buyer may receive property, but not full ownership until the full price is paid.
Sole trader – a business structure where the business shares the same legal entity as its owner.
Succession – is the process for finding new leaders who can replace the old leader once they leave.
Successor – the people who have taken over or succeeded from another.
Third party – party which is not one involved in an agreement or legal case.
Trade mark – the registration of a recognisable sign, design, or expression which provides the owner the legal right to license, use or sell it within a jurisdiction.
Trading name – the name which an entity is known as by its suppliers or customers.
Trust – trust is a fiduciary relationship in which the trustor, gives the trustee the right to hold title to assets for the benefit of the beneficiary.
Walk in walk out (WIWO) – a walk in walk out sale is when the buyer takes over the business with few conditions attached.
Worker’s compensation – form of payment to employees due to being injured or sick due to their work
Strategy & Business Planning Terminology
Contingency plan – a plan to mitigate the potential risk of a future event.
Contingency – a future event that cannot be predicted with certainty.
Forecast – future prediction of business activity.
Market position – the position an organization is in relative to the competition usually based on sales.
Milestone – a goal with a target date.
Mission statement – a statement outlining why an organization exists, its purpose and overall goals.
Mitigation – taking steps to eliminate or reduce possible risks on a business.
Off-the-shelf – a complete product that is readily available.
Predatory pricing – when a business sets an unrealistically low price to drive a competition out of the market.
Rent to buy – a loan contract for an asset where after an initial deposit, the borrower will pay repayments before paying a residual amount at the end to own the asset. See hire-purchase.
Vision statement – a statement that expresses an organization’s main goals or vision.
Sales & Marketing Terminology
Channel – a path in which a product, service or advertisement can reach its end user.
Content marketing – form of marketing by creating online materials such as blogs, social media posts or videos, tools to promote a product of service.
Content Syndication – method of republishing content on other websites to garner more reach.
Demographics – a segment of the population.
Discount – a reduction to a price or service. Also known as Mark down.
Drip pricing – is when one price is presented at the start with incremental increases to the overall price depending on options selected.
E-business – online business conducted over the internet.
E-commerce – the selling of products or service over the internet
E-marketplace – an online marketplace allows buyers and sellers to carry out transactions via a platform over the internet.
FAQ – frequently asked questions.
High-end – high quality or expensive products or services.
Request For Quote (RFQ) – when the government reaches out to obtain quotes for goods or services.
Request For Tender (RFT) – when the government reaches out to obtain tender for goods or services.
Tender – the process which government agencies and companies follow to seek quotes for goods or services.
Accessibility – the inclusive practice of making websites accessible to individuals regardless of their skills or disabilities.
Certification – verification that a business has been inspected by a third party and that their products, processes, systems or services are compliant.
Eco-efficiency – products and services produced with less waste, pollution and environmental cost.
Emergency management – coordinated effort to help manage risks to a business.
Environment management – managing the business impact on the environment.
Environmental Management System (EMS) – a business system used to manage current and future environmental impact.
Procurement – the purchase of goods and services to use for production, sales or distribution activities.
Risk management – process of making an honest evaluation of the true risks to a business.
ADSL – a technology for providing internet and voice to homes over copper telephone wire.
Apps – apps or applications are the programs used on mobile phones or tablets operating systems.
Authentication – verification of identity to garner access to a system generally by providing some form of password.
Automatic Data Capture (ADC) – data input without typing usually by using technologies such as RFID, magnetic strip reads, bar code readers or speech recognition.
Cache – stored memory for faster loading to applications and websites.
Cloud Computing – is when a network of servers is used to remotely store, manage and process data and information instead of using a PC. Also known as the Cloud.
Cookie – a file sent by a website to record and track visitors.
Digital signature certificate – a document issued by a certificate authority which contains the public key for a digital signature used as credentials.
Digital signature – an electronic signature that is used to authenticate the identity of the sender/signer of an electronic document.
Domain name – It is the name of a website such as, www.(domain).com.
Download – the transfer of data from a web server.
Encryption – the scrambling of information in a file so that it can only be read by those who have the decoding key.
Firewall – internet security to protect a network against hackers.
Gateway – hardware or software that acts as a bridge between two applications or networks.
Hacker – someone who can make unauthorized access to networks, systems and websites.
Information & Communication Technology (ICT/IT) – broad term covering telecommunications, computers, hardware, software, and audio-visual systems.
Internet Service Provider (ISP) – a telecommunications company that connects its customers to the internet.
Internet – the global computer network connected using standardized protocols.
IP address – unique numerical address assigned to every computer connected to the internet.
LAN (Local Area Network) – a group of PC’s linked together in a localized network with the aim to share data.
Malware/Spyware – software designed to steal your internet usage data and sensitive information.
META – the special HTML tag are snippets of text that describe a page’s content.
Network – a way of connecting computers to share data.
PDF (Portable Document Format) – a file format for presenting documents.
Phishing – Spam emails designed to appear trustworthy in an attempt to trick the reader into handing over personal information.
Portal – a gateway for users that offers a range of services.
Protocol – established communications protocol over the internet.
RAM (Random Access Memory) – used by programs to perform tasks while a computer is on.
Scam – a deception designed to obtain money or information from targeted victims.
Search Engine Optimisation (SEO) – it is the process of improving a website’s search ranking online.
Search engine – an online portal which helps users to find specific websites or information on the internet.
Session cookie – a cookie that exists during a session until the browser is closed.
Social Media – online networks such as Twitter, Facebook, Instagram and LinkedIn.
Software as a services (SaaS) – method of delivery of software where it is provided online through a subscription.
Spam – an unwelcome email message usually sent en masse.
Spider – an automated program which crawls the internet for information.
Streaming media – continuous broadcast of music and video over the internet.
Virus – a malicious piece of code which makes unauthorized changes to a computer or server.
Agency – an organization providing a service on behalf of another entity.
Agent – a person authorized to act on your behalf of a business.
B2B – business to business.
B2C – business to consumer
B2G – business to government
Company – a legal entity owned by shareholders and run by its directors.
Information economy – an economy where their productivity and competitiveness is based on the exchange of knowledge, information and services.
SME (Small to Medium Enterprise) – a small to medium enterprise is an organization that has less than 200 employees.
Sustainability – the ability for an activity to be maintained at a certain rate.
Before You Go
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