Essential Business Accounting Terms You Need to Know

Business Accounting Terms

Do you own a business, but are still a little foggy on some of the financial terms? Having a firm grip on these definitions will better help you understand what your accountant is talking about, or help you manage your own accounts. Read up on these essential business accounting terms to get a good handle on the basics.

Accounts Payable

Accounts payable is the amount that a business owes in the short term. These are purchases that have been made but not yet paid for, such as office supplies or catering costs. This figure is considered a liability. When a debt is accrued, it is credited to accounts payable, and then when the debt is paid, it is debited from accounts payable. This figure tells you what you owe in the short term.

Accounts Receivable

Accounts receivable is all money owed to you for services or items you have given to customers but have not yet been paid for. This figure is considered an asset. When an item/service is given, the debt is credited to accounts receivable, and when the item/service is paid off, it is debited. This figure tells you what money you can expect to come in in the short term.

Assets

Assets are anything of value that a business has. These can be both tangible and intangible things, like real estate, a patent, or accounts receivable. There is also a factor of if an asset is “liquid” or not, which is a question of if that asset can be turned into cash if need be. Keep an eye on assets to know your company’s worth.

Cash Flow

Cash flow is the amount of money moving in and out of a business over a given time period. It’s important to know your cash flow to get a handle on what kind of expenses and debts you can handle. It is different from profit, cash flow is instead what sort of liquid cash you handle each month.

Balance Sheet

A balance sheet is a snapshot of a company’s health and net worth. It should include all assets, liabilities, and equity. Balance sheets should be generated periodically throughout the year to evaluate the state of your business.

Equity

Equity is the amount that has been invested by the owner/s of the company. This can either be the equity a small handful of owners have, in the form of stock options, or collective ownership by shareholders.

Expenses

Expenses come in a few different categories: fixed, variable, accrued, and operational. Having a handle on all of these expenses is essential to running a business efficiently. Fixed expenses are the same every month, like salaries and rent. Variable expenses are tied to the company’s sales and change constantly. Accrued expenses are expenses that need to be recorded but have not yet been paid off. Lastly, operational expenses are necessary expenditures to conduct business – like equipment, marketing, and administrative fees.

Fiscal Year

A fiscal year is the period of time you designate as a year for financial and accounting purposes. It can coincide with the calendar, or be altered to work around other important financial dates for your company. Each fiscal year, all statements and taxes must be closed out to begin a new year.

Profit and Loss Statement

A profit and loss statement, often called a “P&L,” is a report of earnings, expenses, and profits over a time period. Generating these reports regularly is essential to keeping a finger on the pulse of your company’s health and growth.

Revenue

Revenue is total amount of all income without any expenses yet deducted. It is very different from profit or net. Revenue is important to understanding what you are bringing in before expenses, and what you could be profiting with lower expenses.

Become a better business owner by being up-to-date on these business accounting terms you need to know. The world of accounting is a big one, but by starting here, you should be able to get a good start on better handling your finances.

What Does Cloud Based Solutions Mean?

cloud based solutions

One of the new, hot terms in business technology is “cloud based solutions.” It is a service that has grown out of cloud technology and can be used to describe almost any type of web based application. Many businesses choose to use cloud based solutions over traditional programs because of their convenience and lower costs to run and maintain.

First Off, What is the Cloud?

Before you can understand what “cloud based solutions” means, you must first know what the cloud is. The cloud is, basically, a term used for something that is accessed through the internet. To end users, it seems like “the cloud” lives in the internet, but the data and programs are in fact stored on off-site servers and are simply accessed through the internet. This means that your computer and smart phone, for example, don’t need to use their own memory and storage capacity for anything saved in cloud applications. The data is stored off-site, and all you need is an internet connection to access it.

What Does Cloud Based Solutions Mean?

Now that we know the cloud refers to accessing data and programs that is stored off-site through the internet, we can move onto understanding cloud based solutions. Cloud based solutions are services and software that users do not need to download or store, but can access through the internet. There is no hardware or on-site infrastructure needed. The programs and all data is stored on off-site servers by the service provider. You do not ever need to store or update the programs on your own device.

There are a lot of common services you likely already use that you may not realize are cloud based solutions. A few examples of common cloud based programs are: Google Maps, Dropbox, and Salesforce. These applications are incredibly popular and easy to use for both businesses and individual users. For these three cloud based applications, all data is stored on servers at the cloud provider’s location. Not on-site storage space is needed to run them and save data in them.

What are the Benefits of Cloud Based Solutions?

The two main benefits to cloud based solutions are convenience and a low operating cost. With no on-site or on-device storage space needed, your business no longer needs an extensive network of computers and servers along with an IT staff to manage it. The more cloud based solutions your business uses, the less computing power you need on your devices. Theoretically, you could issue each employee a simple, cheap netbook alone if all of your applications were cloud based- all computing power would come from the service provider. Many businesses turn to cloud based solutions for the incredible up front and long term cost savings.

The other main reason cloud based solutions are so commonplace now is how convenient and easy they are to use and maintain. Most applications are accessed simply through a web page, so your profile and saved data is accessible from any machine. Another big convenience is that you are no longer personally responsible for the updates and IT needs that traditional networks have. If the software has an issue, you are not the one who needs to figure out how to fix it. The application provider has round-the-clock teams to address and fix any issues with their cloud based programs.

The Ultimate Cloud Based Solution

Desktop as a Service provides everything on the cloud, including the users’ desktops! This allows the user to have access to everything on their computer from anywhere in the world, anytime and from any device. This actually eliminates all hardware costs and IT support.

Have you considered switching over to cloud based solutions for your business? Most companies find it cheaper, more convenient to train new staff on, and easier to scale as they grow. Stop throwing money at your technical problems and invest in long term solutions with cloud based applications.

What Does Managed IT Services Mean?

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What Does Managed IT Services Mean

A managed service provider, often called an “MSP,” is a third-party contractor that manages services from an offsite location. IT service providers essentially take on everything that an in-house IT department would normally be responsible for. They provide server space for companies to use, run system updates, and even manage data and cyber security. For business owners, it is usually an “out of sight, out of mind” type of all-inclusive IT partner.

How Does Managed IT Services Work?

Managed IT services often work like this: the contractor (or MSP) owns the IT equipment that businesses use and manages all upkeep. This would mean that the provider would own the servers that the company uses, is responsible for running updates, network maintenance, cyber security, and so on. In today’s landscape, this often includes cloud computing services as well, but not always. Services are usually customizable to a company’s needs.

Payment is often in the form of a flat monthly fee and corresponds with what services the business uses and what sort of memory space their data takes up. This system means that the MSP is just as motivated as you are to keep things running smoothly and efficiently; they don’t profit from problems. It is usually more cost effective that hiring IT staff for companies that are smaller or are just not technology savvy.

Why Businesses Use Managed IT Services

Companies of every size use managed IT services. Many small businesses are stuck in an in-between space where they need the security and reliability of IT staff, but are not quite large enough or need enough services to warrant hiring IT staff in-house. Using a managed IT service provider is more cost effective for small businesses and offers professional cyber security and system maintenance, which many small businesses lack. The consistent monthly payment makes IT expenses predictable.

Managed IT services aren’t just for small businesses though. Many medium and even large businesses prefer to use an IT service provider for a few different reasons. One instance where an MSP makes more sense is for businesses that have many locations and/or many remote employees. If your staff is not all in one place, there is not really an advantage to having an on-location IT department. Another example is companies in industries that are just not in the business of technology. A number of companies in older industries, like construction and manufacturing just to name a few, might realize they need to step up their IT game but just aren’t familiar with it or don’t want to learn. Hiring an MSP becomes simply a more convenient option for today’s necessary data security and mobile computing.

Advantages of Managed IT Services vs. Traditional Model

With a managed IT service provider, you are locked into a predictable monthly cost. Your MSP is truly a partner, rather than a service provider that makes more money when you have technical problems or when systems break down. The MSP has the same goal as your company: to keep things running as smoothly and efficiently as possible. That is why the model of managed services is becoming increasingly popular in the IT world.

Managed IT Services

The demand for managed IT services grows as business technology needs continue to change. With each passing year there is a new trend in tech that businesses need to keep up with to stay competitive. Hiring an MSP contractor to manage your equipment, updates, back-ups, and the whole nine yards is an attractive option. It is often more cost effective, too!