It’s a new world filled with jargon. And when it comes to jargon, no one does it like the banking industry. Is it any wonder people’s eyes roll back with phrases like, ‘Circle back with action items that we can take offline.’ It can be a language unto itself (or an assault on the King’s English).
But when it comes to business finance for your small business, there are some terms you need to be familiar with. Because the more you understand the terminology, the better equipped you’ll be when choosing the finance that’s right for you.
Here’s a list of popular terms you’re likely to hear in the world of business finance.
Accounts payable
A record of all unpaid short-term liabilities.
Accounts receivable
A record of all short-term accounts from customers who are yet to pay.
Asset
Anything your business owns that has value.
Balance sheet
A balance sheet reports on a company's assets, liabilities and shareholder ownership.
Balloon payment
A lump sum payment that’s due at the end of the loan term. A balloon payment can reduce ongoing monthly repayments but can increase total interest paid over the life of the loan.
Business Activity Statement (BAS)
A BAS is a form business owners regularly lodge with the Australian Tax Office (ATO) outlining their tax obligations.
Business banking
Financial services provided by banks specifically tailored to meet the needs of businesses.
Business expenses
Costs incurred by a business in its day-to-day operations such as rent, utilities, salaries and marketing expenses.
Capital
Total value of a business’s finances calculated by adding up the value of all assets and subtracting the value of all liabilities.
Capital cost
Fixed, one-time expense of physical items, such as property, land or equipment.
Capital gain
The amount gained when an asset sells above its original purchase price.
Capital growth
An increase in the value of an asset.
Cashflow
The movement of money into and out of a business, including income, expenses, and investments. Managing cash flow effectively is a core aspect (and challenge) of running a small business.
Cashflow finance
Borrowing funds against a business’s account receivable to generate cash quickly. Also known as invoice finance.
Collateral
An asset that a borrower uses to secure a loan from a lender. Also known as security.
Debt finance
Borrowing funds that’s paid back with interest within agreed timeframes.
Depreciation
The allocation of the cost of an asset over its useful life. It's an accounting concept used to reflect the decreasing value of assets over time.
Equity finance
Investing your own or other stakeholders' funds into your business in exchange for partial ownership.
Gross profit
The profit generated from sales minus the cost of goods sold over a period of time.
Gross profit margin
The percentage of sales that is gross profit.
Interest
Payment for use of money over time, usually a percentage of the amount borrowed.
Invoice finance
Borrowing funds against a business’s account receivable to generate cash quickly. Also known as cashflow finance.
Liability
Anything you owe to other individuals or businesses.
Loans
Money borrowed from financial institutions. Great Southern Bank offers secured and unsecured business loans to help your business needs.
Negative cashflow
Occurs when there is more cash leaving than entering the business.
Net profit
Net profit is the amount of money left after expenses and tax obligations are paid.
Operating expenses
The cost of production or materials, rent and wages of employees.
Owner’s capital
The money you or partners invest in the business with aim of making profit.
Profit and Loss statement (P&L)
A P&L statement is an overarching view of a business’s performance. It outlines a business's revenue, cost of goods and services sold, expenses, interest, taxes, net income among others.
Security
An asset that a borrower uses to secure a loan from a lender.
Yes, there’s a lot to know when it comes to business finance. The good news is you’re not alone. Great Southern Bank can help you with heaps of resources that make running your business easier. Check out our Business Hub and see what catches your eye.
