When you’re starting a start-up, that usually indicates that
you’re new to the business world, or at least to actually working and dealing
in it. Being new, however, is not an excuse for not being knowledgeable and for
not making every effort you can to educate yourself on common business,
investing, and accounting terms that you need to know in order to have success.
We’ll help you out by teaching you a few basic, need-to-know
terms right now, but remember, the more you educate yourself and the more you learn,
the better.
Assets:
An asset is something that has financial value that your
business owns outright. It is also something that you could lean on for
financial benefit, if needed, in the future. It might be something you could
sell off, like expensive equipment, or it could be plain cash, real estate, or
investments. Essentially anything your business has of value is an asset and
should be counted as such.
Equity
Equity is another important term you need to know. It is
basically the ownership of your business and the value of that ownership. You
use your equity and sell pieces of it off to get things you need to get the
wheels turning on your project. You might sell off equity to obtain equipment,
to rent a business space, or anything in between; equity is your value, so make
the most of it!
Gross Margin
If you aren’t familiar with “gross margin,” then you need to
be. This term refers to the percentage of your sales revenue that you earn
AFTER you have deducted costs and expenses involved in providing your service
or making your products. Obviously, the higher your gross margin, the better
because it means you’re actually making money instead of just breaking even.
Depreciation
When something depreciates, that means that it goes down in
value. And, unfortunately, many of your assets are likely depreciating with
each passing day. That brand new printer, for example, is becoming less “new”
by the minute. When assets depreciate, it is important to factor that into your
accounting and your taxes; some items can even be taken off of your assets
lists once they reach a certain level of depreciation.
Accounts Payable/Receivable
This is another important term and one that you’ll hear
referred to a LOT, so it’s smart to go ahead and familiarize yourself with it
now.
Accounts payable are accounts or money that you need to pay
out for bills, operating costs, and more. Accounts receivable are accounts that
you are waiting to receive money on, such as unpaid client or commercial
accounts.
Obviously, there are a lot of terms to keep track of, and
really, this list just begins to scratch the surface. However, the more you
work to educate yourself and to learn all you can, the faster you’ll pick up
new terms and, even more importantly, more business knowledge that will help
you to make your start-up a smashing success.
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