Invoicing glossary

A practical glossary of invoicing and business terms.

Ability to pay

If your business has the ability to pay, it means that you have enough cash to cover your costs. This is the sign of a healthy business.

Accountant

An accountant is someone who does accounting or bookkeeping for one or more businesses. An accountant can also help you file and pay taxes.

Accounting

Is the process of keeping detailed records of all the transactions in your business. It’s also called bookkeeping.

Accounting principles

Are a set of standards for how to do your accounting, and they’re meant to ensure reliable and comparable accounting.

Accounting software

Is used to do bookkeeping or accounting. When you run your business, it can be a practical necessity.

Accounting system

An accounting system is a digital tool used to do bookkeeping or accounting. Many people use accounting systems to make the job easier.

Advance payment

Is when you receive payment before you deliver goods or services. Sometimes it’s necessary or advisable to ask for this.

Annual report

An annual report is a set of documents that give readers information about how your business has performed in the previous fiscal year.

Assets

Are any type of valuable resources that an individual or a business owns, such as inventory, equipment, or real estate.

Audit

An audit is a control of your accounting or bookkeeping. An audit is often done by an external party, but can be internal as well.

Auditor

An auditor is someone who performs audits: the auditor checks that the accounting and financial statements of a business are correct.

Bad debt

A bad debt occurs when a company’s customers are unable to pay all or part of the amount owed, often due to factors such as bankruptcy.

Balance sheet

A balance sheet is a snapshot of how your business is doing at a particular moment. The balance sheet shows what your business owns and owes.

Bank deposit

A bank deposit is the money you have put in your business bank account. The process of doing it is called depositing money.

Bank reconciliation

Is the process of checking that the transactions in your bank account matches with your accounting.

Bankruptcy

When a business can’t pay what it owes, it has to declare bankruptcy. The business is dissolved and its assets used to pay what it owes.

Board

A board is a group of people who manage for example a business or an organization. If you run a small business or startup, you need a board.

Bookkeeping

Bookkeeping is the process of keeping track of what your business buys, sells, owes, and owns. Bookkeeping is also called accounting.

Break-even point

When your business is able to cover all its fixed costs and starts making a profit it’s called hitting the break-even point.

Budget

While accounts are used to show what has happened in a business, a budget is an attempt to predict what will happen.

Business

«Business» refers to any activity, carried out either by an individual or a group, aimed at creating products or providing services.

Business number

A business number is used to distinguish your business from other businesses. You’ll get it when you register.

Business plan

A business plan is a document that explains which products and services you’re going to sell and how you’re going to be making money.

Capital

Capital is a term used for the money and the value that individuals and businesses have, such as money in the bank and property.

Cash balance

The cash balance is the total amount of money a business has, and can include both actual cash and liquid assets.

Cash flow

Cash flow is a term used for the difference between payments and receipts in a period. Positive cash flow is the sign of a healthy business.

Cash flow budget

A cash flow budget shows how much money you expect to come into your business and go out of your business in a period.

Cash flow statement

A cash flow statement shows how much money went into your business and came out of your business in a period in the past.

CEO

A chief executive officer (CEO) is the person in charge of a company. In small businesses the CEO and the founder are usually the same person.

Chartered accountant

A chartered accountant (CA) is an accountant who has undergone specific training. This is a sign of professionalism. The accreditation is used worldwide,

Claim

When it comes to accounting, a claim is used to refer to what a client owes you for the product or service they’ve bought.

Client

A client is someone who purchases goods or services from your business. A client can be either an individual or a business.

Consumption tax

Consumption tax is the tax that you add when you invoice your clients. Other names for consumption tax are VAT or GST.

Contract

A contract is an agreement between you and another party, for example a sales contract that you and your client signs.

Contractor

A contractor is an individual who is hired by a business or an individual to provide a service. They are self-employed.

Corporate tax

Corporate tax is the tax that businesses have to pay on their income. Corporate tax rates vary by country.

Cost

In accounting, the terms expense and cost mean different things, but they both refer to goods and services you’ve purchased.

Cost price

Cost price is the amount of money it costs to produce a good or service, and what you can sell them for without making a profit.

Credit

Credit can mean three things: an agreement to borrow money, someone’s credit history, or a way of bookkeeping.

Credit note

To cancel an invoice, you have to create what’s called a credit note. The credit note is a negative invoice.

Credited invoice

A credited invoice is an invoice that you’ve cancelled out. Usually because it contains some sort of error.

Creditor

A creditor is someone who is owed money by a business or an individual. The business or individual is called a debtor.

CRM

Customer relationship management (CRM) refers to methods and tools that you use to ensure good customer relationships.

CSV file

CSV stands for comma-separated values and a CSV file is a type of document designed to transfer large amounts of data.

Currency

Currency is a type of monetary unit. Some countries have their own currency, while others use a shared one.

Current assets

Are short-term resources that serve your immediate business needs, such as inventory or cash.

Current liabilities

A liability is something your business has to pay, like a loan, bill, or wages. Current liabilities are due within a year.

Customer

A customer is an individual or business that buys a product or services from your business. Customers can also be called clients.

Customer list

A customer list is a list of the clients your business has, as well as useful information about them. It’s also called a customer database.

Dead stock

Dead stock is used for goods in your inventory that you’re unable to sell. There’s several reasons why inventory becomes dead stock.

Deadline

A deadline is a date by which something has to be done or paid or filed. Let’s look at some examples of deadlines.

Debit

When it comes to accounting, debit and credit is used when bookkeeping transactions. This is called double-entry bookeeping.

Debt

Debt is money that you’ve borrowed from someone and that you have to repay. It can be borrowed from an individual, a business, or a bank.

Debt collection

Debt collection is a step you can take when a client hasn’t paid their invoice and you’ve tried to collect payment yourself.

Debtor

A debtor is someone who owes money to a business or an individual. The business or individual is called a creditor.

Delivery note

A delivery note is a document that you can include when you ship goods. It identifies the seller and buyer and what’s in the package.

Depreciation

Depreciation is an accounting term that describes an asset’s loss of value over time. It’s used for valuable assets with a long lifespan.

Deviation

A deviation refers to a discrepancy between your bookkeeping and the actual financial situation of your business. When deviations happen it’s

Discount

A discount is when you give a client a price that’s lower than the normal price of the product or service.

Documentation

Documentation is any type of paperwork that proves transactions in your bookkeeping, such as invoices and receipts.

Double-entry bookkeeping

Double-entry bookkeeping is a standard accounting practice, where transactions are recorded in at least two places in your accounts.

Due date

A due date is the date by which something has to be paid, for example an invoice you’ve sent to your client.

E-invoicing

E-invoicing is a way to send and receive invoices digitally. This makes invoicing much quicker and means you can get paid faster.

Electronic archive

An electronic archive is a place where you can safely store your documents online. There are many benefits to keeping your documents online.

Electronic signing

Electronic signing is the process of signing documents online, using a reliable provider. There are many benefits to electronic signing.

Expense

An expense is something you have to pay, such as an invoice from your supplier, or consumption tax you owe to the tax authorities.

Factoring

Factoring is when a business buys your outstanding invoices and pays you the money immediately, for a small fee.

Fee

A fee is a price that you charge for a specific service. It’s what you earn when you work as a freelancer, consultant, or contractor.

Financial accounting

Financial accounting is the process of bookkeeping and reporting your business transactions via financial statements.

Financial capital

Financial capital is a term for assets that can be converted into cash quickly, and that are used to cover the operating cost of a business.

Financial statement

A financial statement is a collection of reports that limited liability companies have to submit once a year as part of their annual report.

Fiscal year

A fiscal year is a 12-month period that makes up the financial year of a business. It can also be called a tax year or financial year.

Fixed assets

Are assets that you intend to own or use for a long time, such as buildings, cars, and heavy machinery.

Fixed cost

A fixed cost is a cost that doesn’t vary depending on how many goods and services you sell. The opposite of fixed cost is a variable cost.

Fraud

Fraud is a financial crime where you’re tricked into giving away information or doing something that leads to you loosing money.

Freelancer

A freelancer is an independent professional who is paid for individual tasks or projects. Freelancers have a lot of autonomy.

GAAP

GAAP or the Generally Accepted Accounting Principles, are accounting principles large businesses have to use in the United States.

General ledger

A general ledger is a record of all the financial transactions in your business. It shows what your business owes, owns, buys and sells.

General meeting

A general meeting is a gathering of the shareholders of a company to review the company’s performance and make decisions about the future.

Goodwill

Goodwill is something that adds significant value to your company, but that can’t really be given a price tag.

Gross and net

Gross is a total amount, net is an amount after deductions have been made. This applies to salary, profit and the sale of goods and services.

Gross profit

Gross profit is the company’s profit from the sale of goods and services, minus the cost of producing the goods and services.

GST

Goods and services tax (GST) is a consumption tax used in Australia, Canada, India, Jersey, Malaysia, New Zealand, Samoam and Singapore.

Holding company

A holding company is a business that’s set up only to own and manage other companies. A holding company can also be called a mother company.

IFRS

IFRS or the international financial reporting standards are accounting principles that large businesses use worldwide.

Income

When you run a business or work as a freelancer or sole trader, income is the term for what you earn from selling your products and services.

Income statement

The income statement has to be included in the annual report. It shows profit and loss for the past fiscal year.

Income tax

Income tax is a tax that individuals, freelancers, contractors and self-employed individuals pay on their income.

Incoming invoice

An incoming invoice is an invoice you receive from your suppliers when you buy goods or services from them.

Intangible assets

Are non-physical assets that still provide value to your business, such as a good reputation or a strong brand presence.

Interest

Interest is a percentage of the total amount that’s added to the sum. One example is interest on invoices that are paid late.

Inventory

Inventory are goods that you have available for sale in your business, as well as the raw materials used to create these goods.

Inventory management

Inventory management is the process of tracking the inventory in your company. Usually, you do this in an inventory management system.

Inventory management system

An inventory management system helps you keep track of your inventory. This is important for budgeting, and filing and paying taxes.

Investment company

An investment company is a company that invests in other companies, projects, properties, or stocks and bonds.

Investor

An investor is an individual or a company who provides money with the expectation that they’ll earn something on their investment.

Invoice

An invoice is a document that shows which goods and services were sold and requests payment from the buyer.

Invoice number

All your invoices must be marked with a unique invoice number in ascending order. This is for validation and tracking purposes.

Invoice sales

If you don’t want the uncertainty of waiting for payment, you can sell invoices to another company. This is called invoice sales.

Invoice scanning

Invoice scanning is the process of converting paper invoices into electronic invoices by scanning or photographing them.

Invoice template

An invoice template is a layout that you can use to create invoices in programs such as Word or Excel. It’s one way to make invoices.

Invoicing

Invoicing is the process of sending invoices to clients to ask for payments for goods and services that you’ve delivered.

Invoicing software

Lets you easily create professional invoices. It’s a must-have for serious businesses, freelancers, and contractors.

Just in time (JIT)

Just in time (JIT) is a way of organising your inventory so that you order raw-material from suppliers only when you need to produce goods.

Key performance indicator (KPI)

A key performance indicator (KPI) is a metric that shows how your business is progressing towards its business goals.

Labor costs

, also called personnel costs or cost of labor, are all the expenses you have related to your employees

Late fee

A late fee can be a fee you charge clients if they pay late, or a fee that you have to pay the tax authorities if you don’t make a deadline.

Legal entity

A legal entity is a term used to refer to a legal subject that’s not a physical person, such as a business.

Liability

A liability is something that an individual or a legal entity owes, for example a payment for goods and services.

Liquid assets

Are resources your company owns that can be quickly converted into cash. One example is bank deposits.

Liquidity

Liquidity is the ability your business has to pay bills from suppliers and cover fixed costs, as well as unforeseen expenses.

Means of payment

Is ways to pay for goods and services, for example paying a supplier in cash, or receiving a bank transfer from a client.

Net income

Net income is how much money your business is left with after you deduct costs and tax. It shows whether your business is profitable or not.

Net profit margin

The net profit margin is a percentage that indicates how much revenue you’re left with after covering your expenses. The net profit margin is essentially

Non-current assets

Are things your business owns that you’re not going to turn to cash within a year. Examples include property and goodwill.

Non-current liabilities

Liabilities are things your business owes, for example a payment to a supplier. Non-current liabilities are not due for at least a year.

Non-disclosure agreement (NDA)

An NDA is a legal agreement that states that the signees won’t disclose any confidential information that they receive.

Non-operating assets

Are assets that aren’t used to produce goods or services, such as an empty building or unused equipment.

Objectives and key results (OKR)

The OKR method is used to set and measure goals in your business. This is just one of many managing strategies you can adopt.

Opening balance

Opening balance is what your business owns and owes when you first register it or what’s in the general ledger at the start of a period.

Operating accounting

Operating accounting is your company’s internal way of accounting. This is usually similar to financial accounting.

Operating assets

Are tools and resources that your business owns and that you use to produce goods or deliver services.

Operating costs

Are costs that your business has in the course of daily operation, such as transportation, raw material and wage costs.

Operating profit

Operating profit is the revenue that a business makes from its sales minus operating costs. It indicates if a company is profitable or not.

Outgoing invoice

An outgoing invoice is an invoice that you send to a client in order to get paid when you’ve sold them a product or service.

Outsourcing

Outsourcing means to hand over internal work to external workers. Businesses can both take on outsourced work or outsource work.

Outstanding invoice

An outstanding invoice is an invoice that your client hasn’t paid yet. There are many things you can do to speed up the payment process.

Overdraft

An overdraft is a form of bank credit that helps businesses cover unforeseen expenses by borrowing money from the bank.

Overdue invoice

An overdue invoice is an invoice that your client hasn’t paid by the due date. There are many things you can do to handle an overdue invoice.

Overtime

Overtime is work that an employee does outside the regular or normal hours that are specified in the employment contract.

Packing slip

A packing slip is a document that’s included in packages that are delivered to customers. The document contains information about the sale.

Parent company

A parent company is a company that owns shares in one or more companies. These other companies are called subsidiaries.

Payment methods

Refer to the ways that clients can pay your invoices. It can be anything from bank account transfer to payment via PayPal.

Payment reminder

A payment reminder is an email or a letter you send to your client when they haven’t paid an invoice by the due date.

Payment terms

Are information about payment when you sell goods or services to a client or buy goods or services from a supplier.

Payroll software

Payroll software is software where you can run payroll for your employees. It makes paying your employees easier.

Point of sale system (POS)

A point of sale system (POS) is a machine that you can use to register and accept card or cash payments from your customers.

Profit

Profit is all the money your business is left with after you subtract costs and tax. If you’re making a profit, your business is profitable.

Profit and loss budget

A profit and loss budget—also called an operating budget—is an attempt to estimate your expenses and income over a period of time.

Profit and loss statement

A profit and loss statement shows your business’ profit and loss for the past fiscal year. It can also be called an income statement.

Profit margin

The profit margin is a percentage that shows how much you’re earning in your business overall or per sale.

Proforma invoice

A proforma invoice is a preliminary invoice that you can send to prospective clients or to existing clients who want to confirm the sale.

Project accounting

Project accounting is the process of dividing your accounting up into projects to get a better overview of what you’re spending and earning.

Purchase cost

The purchase cost is the total cost associated with buying a product or service, including shipping, customs, and other costs.

Purchase order

A purchase order is used to request goods or services from a supplier. The supplier can approve or deny the purchase order.

Quality of earnings

Quality of earnings refers to the ability of previous earnings—the net income from previous years—to predict the business’ future cash flow.

Quote

A quote is an offer that you send to prospective clients and which includes the price and details of the job, product, or project.

Quoting software

Helps you create quotes to send to potential clients, outlining the details of the product or service you’re selling.

Real assets

Are physical assets that you own, for example property, cars or machinery. It’s different from financial assets like cash.

Receipt

A receipt is a document that shows that something was sold. If your client pays at the point of sale, you have to issue a receipt.

Receipt scanning

Receipt scanning is the process of converting paper receipts into electronic receipts by scanning or photographing them.

Reconciliation

Reconciliation is the process of comparing your bank statements with your accounting. This is also called bank reconciliation.

Reputation

Your reputation is the general opinion people have about your business. A good reputation is a valuable asset.

Return on investment (ROI)

Return on investment (ROI) is a measure of the profitability of an investment. Knowing the ROI will let you make sound business decisions.

Revenue

Revenue is the money your business earns from selling goods and services. Revenue can also be called gross income.

Salary

A salary is the financial compensation your employee receives in exchange for their work. It can also be called income or pay.

Sales document

A sales document is any kind of document that proves that a sale took place, such as an invoice or a receipt.

Scrap value

Scrap value is the remaining worth of a machine, building or similar asset when it reaches the end of its useful life.

Self-employed

A self-employed individual is a person who provides goods and services without being employed. They’re also called freelancers or contractors.

Selling price

The selling price is the price you take for your goods and services. Setting a selling price can be challenging.

Shareholder

A shareholder is a business or an individual that owns shares in a company. All companies have shareholders.

Shareholder register

A shareholder register contains information about all the shareholders in a company. All companies must have a shareholder register.

Sole proprietorship

A sole proprietorship is a simple form of business with only one owner. The owner and the business count as one legal entity.

Sole trader

A sole trader is a person who runs a sole proprietorship, a type of business with one owner. There are pros and cons to being a sole trader.

Solvency

Solvency refers to your company’s ability to meet its long-term debts. This is important for the success of your company.

Source document

A source document is a document that you attach when you do your accounting. The source document verifies the transactions you record.

Stakeholder

A stakeholder is someone who has a vested interest in a business, usually a financial interest. They’re affected by how the business is doing.

Startup

A startup is a new business with high ambitions. Startups intend to get investors on board to scale and grow.

Stocks

Are shares in the ownership of a limited liability company. Stocks can also be called shares. The owner is called a shareholder.

Supplier

A supplier is an individual or a company that you buy goods and services from. A supplier can also be called a vendor.

Supplier list

A supplier list is a list of the suppliers your business has, as well as useful information. It’s also called a supplier directory.

SWIFT

SWIFT, or SWIFT code, is a number that’s used to identify banks. It’s used when you make payments across borders.

Tax

Tax is money that individuals and businesses pay to fund public services like education, healthcare and public transportation.

Tax advisor

A tax advisor helps you file and pay the right amount of taxes. They can also help you with tax deductions.

Tax deductions

Are business expenses you can subtract from your income before you pay taxes, for example equipment you’ve bought.

Tax return

Is a form that individuals and organizations submit to the tax authorities at the end of the fiscal year.

Time tracking

Time tracking involves systematically recording the hours you spend on different projects, often using online tools or specialised software.

Timesheet

A timesheet is a document used to track the time you spend on a project, a task or working for a particular client.

Transaction

A transaction is the transfer of money, either digitally or in cash, in exchange for goods and services. Both businesses and individuals are

Travel expenses

Are all the payments in your business that are related to travelling, for example hotel accommodations or flights.

Turnover

Turnover can mean either how quickly your business operates, or it can be used as a synonym for your revenue.

Unforeseen expenses

Are expenses that occur suddenly and without warning. Your business should be prepared for unexpected expenses.

Variable costs

Are costs that vary depending on how many goods you’re producing or how many services you’re delivering.

VAT

Value-added tax (VAT) is a type of consumption tax that’s added to sales in most of the world, usually expressed as a percentage.

Warranty

.When products or services are sold, it’s common to have a warranty in place. It’s a guarantee to replace or fix a faulty product.

What is an FTE | Full-time-equivalent

FTE is a way to measure how many full-time employees you have in your business. This is useful for budgeting and planning.

Working capital

Working capital is the difference between your current liabilities and your current assets. It’s important to have enough working capital.

Written off

A written off invoice is an invoice that you’re sure won’t get paid. The invoice amount is considered bad debt.

X-axis

A graph can tell you a lot about your business. In a graph the X-axis is the horizontal scale while the Y-axis is the vertical scale.

Year-end

In a business context, year-end is used about the end of the fiscal year. The fiscal year is not always aligned with the calendar year.

Yield

In the context of running a business, yield is a measure of how profitable your company is. It’s usually expressed as a percentage.

Zero-rated

Zero-rated is used for goods and services that you don’t add VAT or GST to when you sell them to clients. They can also be called tax exempt.