Basic Business Terms Tips
Read these 21 Basic Business Terms Tips tips to make your life smarter, better, faster and wiser. Each tip is approved by our Editors and created by expert writers so great we call them Gurus. LifeTips is the place to go when you need to know about Small Businesses tips and hundreds of other topics.
What Is A Patent?
A patent is a protective right given by a government organization to the first creator of a unique and brand new invention, usually covering a twenty-year span of exclusivity. Inventors must apply for a patent, which can be a lengthy and costly process, and each patent must be applied for in different countries should the inventor choose to protect the idea in more than one country.
Business Term Definition - Business Opportunity
A business opportunity is defined as being an investment made into a potentially profitable venture that is billed as an all-inclusive package. Many states regulate business opportunities, with each state listing different requirements for a legitimate business opportunity to meet, such as:
- A business opportunity enables a buyer to start a business by selling or leasing them a product, service or equipment;
- The fee paid to begin the business opportunity must exceed $500;
- The seller guarantees a higher selling price for the product or service than the buyer paid, so as to ensure demand; and
- The seller will buy back any unused product from the buyer if there is no opportunity to sell the product to the end consumer.
Current Assets
Current Assets are cash or other assets that are readily converted into cash. This often includes cash on hand (or in bank accounts), inventory, and accounts receivable.
Fixed Expenses
Fixed Expenses are those expenses that do not change with different levels of production or sales, for example: rent expense.
Accountant
An Accountant prepares and maintains the financial records of a business. With more training than a bookkeeper, an accountant has a larger responsibility, including preparing financial statements using the data recorded by the bookkeeper.
Strategic Alliance
A Strategic Alliance is an alliance between two people or businesses that benefits both parties.
COBRA
If you have 20 or more employees, you are subject to a law known as the Consolidated Omnibus Budget Reconciliation Act of 1985, better known as COBRA. COBRA requires employers to offer individuals who would otherwise lose benefit protection the option of continuing to have group health care plan coverage. (From the CCH Business Owner's Toolkit)
Variable Expenses
Variable Expenses change with the different levels of production or sales, for example: cost of goods sold and maybe even utilities or payroll.
Accounts Receivable
Accounts Receivable are amounts owed to a company by its customers, such as for services rendered not yet paid for or for goods delivered not yet paid for.
Balance Sheet
The Balance Sheet is a statement of a company's assets, liabilities, and capital at a specific period of time. Assets = Liabilities + Capital. The Balance Sheet is a "snapshot" of a company's financial standing at one point in time. It is used to determine the financial status of a company, what the company's present value is.
Cost of Goods Sold
The Cost of Goods Sold is the direct cost of all items sold during an accounting period. In a retail type environment, this is usually calculated by taking the inventory held at the beginning of the period, adding inventory purchases, and subtracting the inventory held at the end of the period. In a manufacturing environment, these costs may include all of the supplies used to build the items sold as well as the amount paid to employees who built the items.
Bookkeeper
A Bookkeeper records and keeps all the financial transactions or "books" of a business.
Accounts Payable
Accounts Payable are the amounts owed by a company to outside suppliers of goods and services. These may include inventory received that is not yet paid for, utility bills due, and other debts owed.
Current Liabilities
Current Liabilities are all obligations due and payable within one year. These obligations might be cash debts owed, or services paid for but not yet rendered, or goods received but not yet paid for.
Accounting System
An Accounting System refers to the entire process of keeping track of all a business´ financial transactions and financial controls. Some basic elements of an accounting system include the Payables and Receivables systems, Inventory Tracking, Payroll, and Sales.
Income Statement
The Income Statement, also known as the Profit & Loss Statement (P&L) is the statement of net profit or loss in a specific accounting period. Often run monthly, quarterly, and annually to show net profit or loss for a particular month, quarter, or year. Often compared to prior months, quarters, or years to gauge progress or decline of business. Also used as a guide for budgeting future months, quarters, and years.
Bonding
Bonding is the process by which an employer can be indemnified for the loss of money or property sustained through dishonest acts of a "bonded" employee. This can cover many types of unlawful acts including embezzlement, forgery, larceny, theft, misappropriation, or other dishonest acts committed by an employee, alone or in collusion with others.
Benefits
Benefits comprise the second half of the compensation equation (the first half is pay). Most benefits are optional and include such items as medical and life insurance, reimbursement accounts, retirement plans, access to health clubs, profit-sharing programs, and even use of a company vehicle.
Accounting Controls
Accounting Controls allow a manager or business owner to keep track of and control a company's assets. A major control is the Inventory Control System which essentially tracks inventory levels, increases, and decreases so that a manager can determine what may need to be re-ordered or what is or is not selling well.
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