You may never have predicted that running a business also required that you have a dictionary close at hand. Nevertheless, it’s important to understand the terms that are frequently bandied about by entrepreneurs, investors, and even customers. Read on, and you can become a business wordsmith.
Accounts receivable.
This document shows details related to everyone who owes you money.
Accounts payable.
On a daily basis, you incur expenses related to the costs of your products and services. Accounts payable is a record of what you owe.
Assets.
These resources consist of things that a business now controls and that can be later used to make a profit. Examples include land, equipment, and product inventory.
Balance sheet.
The balance sheet is a document that specifies your business’s financial health at set periods of time, often at the end of the quarter or fiscal year. Elements of the sheet include assets, liabilities, and equity.
Business to business.
So-called B2B transactions take place when one company sells goods and services to another. This is as opposed to business to consumer (B2C) interactions that happen between a company and an individual end user.
Success in business requires great products, superlative customer service, and a solid foundation behind the scenes. As you can now see, it also helps to have a glossary close by. Stay fluent in the lingo, and you can communicate with all of the many players involved in your success.
Liabilities.
Synonymous with debts, liabilities are what a business owes to suppliers and lenders. These are usually in the form of monetary sums.
Merchant account.
Specifically established for business purposes, this bank account is a place where merchants can make and accept payments. Often, the company that furnishes your store with its merchant account also provides you with all of the software and hardware that goes into your point of sale system. It may or may not include a payment gateway to facilitate secure online transactions.
Payment gateway.
This web application is the intermediary between your ecommerce store and the payment processor. It provides a secure portal into which your customer can enter their card information and other contact data. Because it is run by a third-party vendor, having a gateway means that you, the merchant, never need to come in direct contact with sensitive details. As a result, security liability shifts from you to the gateway provider.
POS solution.
Point of sale systems, often abbreviated as POS, are hardware-software combinations designed to facilitate secure payments for businesses that accept credit and debit cards as well as other forms of payment. They consist of various elements such as software, tablets, card readers, barcode scanners, receipt printers, and cash drawers, and are also capable of streamlining numerous back-office operations.
Profit margin.
Often represented in a percentage, this is the money you make on the sale of a product or service after all expenses have been covered.
Revenue.
Revenue is the income your business generates from your sales and other activities. It is calculated by multiplying the price of a particular item by the quantity sold.
ROI.
Return on investment (ROI) is a ratio describing performance efficiency relative to how much was spent on investments. The higher the ROI, the better.
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