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Small Business Terms: A Glossary of Useful Terminology

This up-to-date glossary defines useful small business terms to help business owners interpret commonly experienced business issues.
Small Business Terms: A Glossary of Useful Terminology

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
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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.

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Employment Terminology

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.

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.

Operations Terminology

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.

Technology Terminology

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.

General Terminology

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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