Owning a small business is no easy feat! Trust me, as the owner of a bookkeeping firm for the last eight years, I know business owners not only have to hustle to make the sale, but we have to be chief marketing officer, company spokesperson and accountant. For me, the accounting part is a breeze, but so many small business owners have no idea how much work it takes to keep the books up-to-date; even worse, they don’t know how to get paid.
The Brigade Bookkeeping team is here to help small to medium sized business owners and even some corporations keep their accounts in order. We can be here for you too. While you’re thinking about that, this week I wanted to pass along some important bookkeeping and accounting language. Here are some important business finance terms you will need to operate your small business and accurately keep track of your company’s finances:
- ACCOUNTS PAYABLE/ACCOUNTS RECEIVABLE – There’s a big difference between these two terms. Accounts payable are liabilities or amounts a company owes after buying a good or service from a vendor or supplier. Accounts receivable are assets or an amount that a company can collect after selling a product or service to a customer.
- INVOICING – When you have accounts receivable due, you should send your clients an invoice or bill for your services. If you don’t invoice, then you can’t expect to get paid. We handle this service for many of our clients, but there are also a number of software programs and apps you can use for assistance.
- AGING REPORTS – Aging reports give a business owner a way to tell when invoices are due for payment or overdue. They are often set up in 30-day increments. Most business owners expect a client to pay immediately. But if they don’t, aging reports can help you keep track of accounts receivable and should match your accounts payable balance in your bookkeeping records.
- OPERATIONAL COSTS – Every business has operating costs, which are the expenses incurred when running a business. Some of these include fixed costs like your monthly rent or vehicle payment. Others are variable and increase or decrease depending on your output of services. These can include items such as credit card processing, electric bill, and phone or cellphone bills.
- PROFIT/LOSS STATEMENT – A profit and loss or P & L statement is a financial statement that summarizes a company’s revenues, costs and expenses during a specific period of time, usually a fiscal quarter or year. These records provide information about a company’s ability or inability to generate profit by increasing revenue, reducing costs or both. If you’re a business owner, your bookkeeper or accountant should be sending you a P&L Statement, at minimum, quarterly. If not, ask him or her to start.
There are a lot of terms to know when it comes to running a small business and calculating your own finances. If you’re having trouble with accounts receivable or invoicing, then consider hiring a professional to help you. Feel free to email me with any questions or anyone on my team; Brigade Bookkeeping is here to help. We are here for you and your small business. Don’t do it alone!
Have a wonderful week everyone!