When it comes to finance, there's a lot of terminology for smaller businesses to grapple with.
To help, we've compiled a list of some of the most frequently used financial and business accounting terms.
The time frame used for financial reporting, normally months, quarters or years.
Also known as financial, company or statutory accounts.
Businesses must produce an annual set of accounts detailing business finances.
An interest rate reflecting what you'll actually pay, or earn, on your money after the effects of compounding are taken into account in order to normalize the interest rate.
The rate of interest you agree to pay on money borrowed, and a useful way to compare how much interest you would pay on loans from different providers.
The higher the APR, the more you will pay.
Items of value owned by a company.
An official inspection of a company’s accounts.
A summary of a company’s assets, liabilities and capital at a given point in time.
Set by the Bank of England, this is the country’s base rate of interest and influences the rate of interest on financial products and services.
Building a company without external investment, often relying on personal savings and running with the lowest possible operating costs
The point in time when revenues exactly match expenses.
Anything invested into a company that has a tangible value or benefit to its own, such as a machinery, patents, or financial assets like cash.
Funds used by the company to buy, maintain or improve its fixed assets such as buildings, vehicles, equipment, or land.
Paid by UK companies on their profits.
Cost-push inflation occurs when production input costs, such as wages and raw materials, rise and producers pass the increased costs on to consumers through price rises.
A person or firm that has lent your business money or to whom you owe money.
A person or firm that owes money to your business.
Occurs when demand is high, and suppliers increase prices until demand reduces.
The reduction in value of assets over time, usually due to wear and tear.
Money paid by a company from its profits to its shareholders.
A measure of how much profit a company is making for its shareholders.
The cost advantages of buying items in bulk. The price of an individual item usually decreases as the amount bought increases.
Used by analysts to determine the financial health of a company.
It also represents what would be left if all of a businesses’ assets were liquidated and the debt paid off.
Read our guide to equity finance.
Planning, analysing, monitoring, organising, reviewing, and controlling a company's finances.
Also known as a financial year, this is a set period used to calculate financial statements.
A firm's fiscal year can run over any 12-month period, although the most common year-ends are March 31 and December 31.
A cost that a company incurs regardless of its output volume.
Fixed costs usually include, for example, rent, interest, and salaries.
The total amount of money a company has earned in a period of time before deductions such as taxes.
An annual summary of both income and expenses that determines the net income/profit of a business.
A percentage figure that represents how much prices of goods and services increased over a specific period.
When a company becomes unable to pay off its creditors, or its liabilities exceed its assets.
When a business sells its invoices to a third party, which will then add their own fee to the charges and seek the money from the debtor.
An asset that can be easily converted into cash.
The ease with which a company’s assets can be converted into cash.
The amount of money a company makes, expressed as a percentage.
For example, a gross profit of £1m on sales of £10m is a 10% profit margin.
When the value of an asset is less than what you initially paid.
The amount of profit left after deductions such as tax have been made.
An interest rate that isn’t adjusted for inflation.
On-going costs for running a business, service or system that includes day-to-day expenditure.
The profit or loss a company makes, which reflects how a business is performing.
Costs that do not change regardless of the level of production and are not typically involved with the cost of production, such as rent.
An official legal document stating that a company has the sole right to make, use, or sell a particular invention.
Stands for Pay As You Earn. A method of collecting income tax on behalf of the Government by taking it directly from your employees’ wages.
Comparison of the money available to the company in the future with the value of money it currently holds, such as due to interest.
The degree to which demand for products or services changes due to changes in price.
A financial statement that shows the income and outgoings of a company over a certain period of time showing the net profit or loss for that time.
The rate of interest minus the current rate of inflation.
The earning power of an asset or activity measured as a ratio of the net income of the activity to the operational cost.
ROI lets a company know whether an activity is profitable enough to continue.
Money received by, or owed to, a company for goods or services provided.
Typically required by lenders against a loan, such as premises or plant equipment.
The total sales of a business during a specified period.
Capital invested into projects with long term growth potential but also higher risks, such as start-up businesses.
Funds a business uses in day-to-day trading. An indication of liquidity, it shows the business's ability to meet its current obligations.
Enter your postcode to find business support and case studies from businesses within your region. You'll be taken to our interactive map.
Discover more about small business finance
Small business finance management
- As a small business, keeping on top of your finances as you seek to grow is essential. Here are some important things to ...
Understand your finance options
- Are you struggling to understand your business finance options? We explain what external finance is and how it's helped ...
Other forms of finance
- Learn more about other forms of finance...
Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.
Making business finance work for you
Starting a business doesn’t come with a set of instructions.
We know that understanding the many different types of financial product in the marketplace can be difficult.
Our Making business finance work for you guide is designed to help you make an informed choice about accessing the right type of finance for you and your business.