Source: www.TurfMagazine.com
If you’re just starting your landscape business, you will need to know some basic financial terms to help get you through. They will make it easier when communicating with your accountant and customers. We’ve compiled a list of some of the basic terms you should know.
1. Undercapitalization
Entrepreneur magazine says that undercapitalization is the a main reason that new businesses fail. It happens when a company doesn’t have enough cash to pay creditors. Whenstarting a company, make sure that you do all the proper planning and research regarding your costs beforehand.
2. Profit and Loss Statement
This is a report that will list your earnings, expenses and net profits. An accountant can help you put together a P&L for a certain period of time. It is important to keep track of your numbers in order to understand how well your company is doing. Owners who aren’t paying attention to their numbers won’t know how their business is doing, which can affect their own salary.
Read more: It’s Time to Write Yourself a Check
3. Equity
As an owner, the money you have invested in your own company is equity. If there are multiple owners of a company, it will be referred to as owner’s equity. If you’re taking out a loan from the bank, that particular bank will have equity in your company until the loan is paid in full.
Read more: 4 Ways Business Loans Can Affect Personal Credit Scores
4. Accounts Receivable
This is the amount of money owed to your company by clients. Any unpaid invoices from clients could be impacting your business. An account receivable is created when a client makes a purchase but does not immediately pay for it, according to Quickbooks.
Check out our accounts receivable guide.
5. Break-Even Analysis
Track your company’s cash flow with this analysis. According to Entreprenuer magazine’s Small Business Encyclopedia, the three things you need to know for a break-even analysis are: gross profit margin, operating expenses and annual debt service.
What words did you wish you knew when starting your business? Let us know in the comments.