Bookkeeping terms, in plain English.
24 terms an owner actually runs into, defined without the jargon that usually comes with them.
- Accruals
- Recording revenue when it is earned and cost when it is incurred. It is what makes a month reflect what actually happened in it.
- Aging report
- A list of receivables or payables grouped by how overdue they are. Useful only if someone works it.
- Balance sheet integrity
- Every balance-sheet account agreeing with independent support, a statement, a schedule, a count. Without it the profit and loss cannot be trusted either.
- Budget versus actual
- A comparison of what you planned against what happened. The variance is the useful part; the numbers alone are not.
- Catch-up bookkeeping
- Rebuilding months or years of records that were never kept. Distinct from cleanup, which corrects work that was done wrong.
- Chart of accounts
- The structure the general ledger is organized into. It decides which questions your reports can answer, which is why restructuring it is often the first real piece of work.
- Cleanup
- Correcting historical records that were maintained but maintained incorrectly, unreconciled accounts, miscoded transactions, opening balances nobody can source.
- Close
- The monthly process of reconciling, adjusting, reviewing, and locking a period so the numbers stop changing and can be compared.
- Contribution margin
- Revenue less the direct cost of producing it. Tells you whether a product, service, or location is worth having at all, before overhead is allocated.
- The cost of what you sell
- The direct cost of delivering what you sell. Costs that scale with volume belong here, not in operating expense, the most common categorization error we correct.
- Deferred revenue
- Money collected for work not yet delivered. It is a liability. A business that counts it as income can show a profit and still run out of cash.
- Direct cost
- Cost traceable to a single job, product, or contract. On government contracts, keeping direct and indirect costs segregated in the ledger is a compliance requirement.
- Driver-based forecast
- A forecast built from the things that actually move the business, headcount, units, price, utilization.
- Fixed asset
- Something owned and used over multiple years, capitalised on the balance sheet and depreciated.
- Fractional controller
- The controller function delivered part-time by an outside team. Used interchangeably with outsourced controller.
- GAAP
- Generally Accepted Accounting Principles. The standard lenders, buyers, and auditors expect financial statements to follow.
- General ledger
- The complete record of every transaction, organized by account. Everything else, statements, reports, tax returns, is derived from it.
- What is left after direct costs
- Revenue less the cost of what you sell, as a percentage. Blended across a whole business it hides more than it shows; by line it is one of the most useful numbers you have.
- Indirect Rates
- The rate at which pooled overhead is allocated across work. On government contracts, the pool and the base are structural decisions made in the general ledger.
- Prepaid expense
- Something paid for in advance and used over time. Recorded as an asset and expensed across the periods that benefit from it.
- Reconciliation
- Agreeing an account in the books to an independent record, usually a statement. An account that has never reconciled is an account nobody can rely on.
- Runway
- How many months of operating cost current cash covers. Meaningful only when deferred revenue and committed obligations have been taken out first.
- Undeposited funds
- A holding account for payments received but not yet deposited. Left uncleared it is one of the most common sources of overstated cash.
- Jobs started and not finished (WIP)
- The value of work performed but not yet billed. Without a WIP schedule, project businesses cannot tell a profitable month from a well-timed deposit.
The monthly close page explains what closing the books on a set date each month involves.
Where to next
Want the books off your plate?
Book a short call, and we'll give you an expert view of your situation.
Free Consult →If you want this done for you
What happens next
Reading about it and having it done are different things. Here is exactly what happens if you want the second one.
- The call takes thirty minutesYou describe the business and where the numbers are letting you down. We give you an expert view of your situation, and what we would start with. There is no pitch deck.
- We look at the fileYou give us read access to the books as they are. We come back with what is wrong, what it will take to fix, and whether the answer is bookkeeping, controller work, or something else.
- We send a written scope and a priceIt lists what we do each month, what you get, the date it lands and the fee. We agree it before anything starts, and it does not change unless you agree.
- We take over the books and close the first monthWe set up access and systems and enter the opening balances. The first close lands on the date in the scope, and every one after it does too.