It is easy for the Small Business Owner to feel completely overwhelmed in the strive to manage the finances of the business.

This should not be. It is possible to learn the need-to-know fundamentals of accounting, enough to make the Small Business Owner feel prepared for the task of successfully take charge of a commercial enterprise. Here is a glossary of terms and a quick primer on the basics of business accounting.

As the Small Business Owner grapples with the challenge of financial management, which must be embraced, there is the inevitable encounter with the buzzwords that have become tools of the trade. The Small Business Owner must come terms with the meanings of these words, otherwise reading the finances of the business will be like trying to read a foreign language that has not been learnt.

Presuming that the Small Business Owner has never taken an accounting class, the journey to financial literacy must begin with an understanding of some basic and key accounting terms that must be learn by heart:

1) Gross Revenue: Gross revenue is the total amount of sales made by the business within a reporting period.

Sometimes referred to as total revenue, it is the sum of all monies that the business received from customers in exchange for its products and services, as recorded before any such deductions or expenses as rent, cost of goods sold, taxes, etc.

While the gross revenue of the business expresses its capacity to sell goods and services, it does not guarantee its ability to generate profit.

2) Expenses: In its simplest term, expenses are made up of monies spent or costs incurred as the business engages in activities that aim to create revenue.
Expenses represent the cost of doing business and include anything that prevents the gross revenue of the business from going straight into its bottom line. They consist of items like salaries and wages, rent, utilities, costs of inputs for goods sold, taxes, interest on debt, and sundry operating costs. Click here to continue reading