Small Business Finance Glossary in Plain English
This small business finance glossary defines the terms owners meet most, in plain English, and links each one to a fuller guide. Small business finance is the work of recording what a business earns and spends, checking those records, and using them to make decisions. Definitions are general, not tax or investment advice.
Record-keeping terms
Bookkeeping. Recording every transaction accurately: sales, bills, payments, payroll. It is the base layer that every other report is built on. See what a bookkeeper does and our bookkeeping service.
Reconciliation. Matching the books to the bank or card statement, line by line, so the two agree. See how to reconcile bank accounts.
Accounts payable (AP). Bills you owe to suppliers and have not yet paid. Accounts receivable (AR). Money customers owe you for work already done. See accounts payable and receivable explained.
Cash basis and accrual basis. Cash basis records income and costs when money moves. Accrual basis records them when they are earned or incurred, whether or not money has moved. See cash vs accrual accounting.
Catch-up bookkeeping. Bringing books up to date after months of missed records. See what catch-up bookkeeping is and the catch-up bookkeeping service.
Statements and reports
Profit and loss statement (P&L). Revenue minus costs over a period, ending in profit or loss. See how to read a profit and loss statement.
Balance sheet. A snapshot on one date of what the business owns, what it owes and what is left for the owners. See how to read a balance sheet.
Cash flow statement. Where cash came from and where it went over a period. See what a cash flow statement is.
Management reporting. Reports prepared for the owner or manager, rather than for a bank or tax authority, to run the business. See what management reporting is.
Gross margin. Revenue minus the direct cost of what you sold, as a share of revenue. See what gross margin is and the gross margin calculator.
KPI (key performance indicator). A measure you track to see whether the business is on course. See KPIs for small business.
Process and control terms
Month-end close. The routine of finishing one month's books: reconciling, reviewing and locking the period. See what month-end close is and the month-end close checklist.
Internal controls. Checks built into daily work to reduce errors and fraud, such as separating who approves a payment from who makes it. See internal controls for small business.
Budget vs actual. Comparing planned figures with real ones, to find where they differ. See budget vs actual.
Cash and planning terms
Cash flow. The timing of money in and out. A business can be profitable and still run short of cash. See profit vs cash flow and how to manage cash flow.
Working capital. Current assets minus current liabilities: the short-term money available to run day-to-day operations. See cash management.
Runway. How long the cash you have lasts at the current rate of spending. Try the cash runway calculator.
Break-even. The sales level at which revenue just covers costs. See the break-even calculator.
Forecast. A projection of future results based on stated assumptions. See how to build a financial forecast and the cash flow forecast template.
Scenario analysis. Running the forecast under different assumptions, such as lower sales or a new hire. See what scenario analysis is.
Roles
Bookkeeper, accountant, controller, CFO. Roughly, a bookkeeper records, an accountant prepares and checks statements and filings, a controller oversees the accounting process and reporting, and a CFO looks forward at planning and funding. Titles vary between businesses. See bookkeeper vs accountant vs controller, controller vs CFO and bookkeeper vs accountant vs CPA.
Fractional controller or CFO. A part-time arrangement where the role is filled without a full-time hire. See what a fractional CFO is, what a fractional controller is and the fractional CFO service.
Chartered accountant and CPA. Chartered accountant is a professional title used in the United Kingdom and some other countries. CPA (certified public accountant) is the United States title. The rules for each differ.
VAT and sales tax. Two different consumption taxes, charged under different rules in different countries.
Funding and exit terms
Quality of earnings. An analysis of how much reported profit is likely to repeat, done for a sale or purchase. See what quality of earnings is.
Funding readiness. Having records and projections in order before approaching a lender or investor. See how to prepare financials for a loan.
Exit planning and M&A advisory. Exit planning is preparing a business for sale. M&A advisory is support with buying or selling a business.
For how these services fit together, see what we do and pricing.
Need this done for you? See our Bookkeeping service, or pricing. English Oak Financial does not prepare tax returns, perform audits or give investment advice. This guide is general information, not tax, legal or investment advice.
Related pages
Common questions
What is small business finance?
It is everything involved in tracking, checking and planning a small business's money: bookkeeping, reporting, cash management, budgeting, forecasting and funding.
What is the difference between bookkeeping and accounting?
Bookkeeping records transactions. Accounting interprets and reports on them. The line varies between firms. Our bookkeeper vs accountant guide goes into detail.
What is the difference between profit and cash flow?
Profit is revenue minus costs over a period. Cash flow is the movement of actual money. Unpaid invoices and large purchases can make them differ.
Does this glossary give tax or investment advice?
No. These are general definitions. English Oak does not prepare tax returns, audit or give investment advice.
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