Glossary

Business money terms, in plain English

196 definitions, each linked to the lesson that explains it.

A B C D E F G H I K L M N O P Q R S T U V W Y

A

ABC test: A stricter state test that presumes a worker is an employee unless three conditions are met. Learn more →
Accounts receivable: Money customers owe you for work or goods you have already delivered. Learn more →
ACH: The US electronic network for bank-to-bank transfers, often cheaper than card payments. Learn more →
ADAS calibration: Aligning driver-assistance cameras and sensors to manufacturer specifications after repairs. Learn more →
Additional insured: Another party, like a GC, added to your liability policy for claims arising from your work. Learn more →
Advance rate: The share of an invoice the factor pays you up front. Learn more →
Advance-fee scam: A fraud that demands payment up front for a loan or prize that never arrives. Learn more →
Aging report: A list of unpaid invoices grouped by how long they have been outstanding. Learn more →
Amortization: Paying down a loan in installments that cover interest plus part of the principal. Learn more →
APR: The yearly cost of financing, including most fees, expressed as a percentage. Learn more →
Authorized signer: A person the bank allows to write checks and make transactions on an account. Learn more →
Auto-IRA: A state-run program that automatically enrolls workers whose employers have no retirement plan. Learn more →
Average daily balance: The average amount in your account across all days in a period. Learn more →
Average order value: Total revenue divided by number of orders. Learn more →
Average ticket: Total sales divided by the number of client visits. Learn more →

B

Bonus depreciation: A tax rule allowing a large first-year depreciation deduction, not limited by business income. Learn more →
Booth rent: An arrangement where a stylist pays the shop a fixed fee and runs their own business from a chair. Learn more →
BOP: A business owner's policy that bundles general liability and property coverage. Learn more →
Bottleneck: The single step, person, or resource that limits how much the whole business can produce. Learn more →
Break-even point: The sales level at which revenue exactly covers costs. Learn more →
Business email compromise (BEC): A scam where criminals hack or imitate business email to redirect payments. Learn more →
Business plan: A written summary of what a business does, for whom, and how it will reach its goals. Learn more →
Buy-sell agreement: A contract among owners that sets how ownership changes hands after death, disability, or departure. Learn more →

C

Cash balance plan: A defined benefit plan that credits each participant with a growing hypothetical account balance. Learn more →
Cash buffer days: How many days your current cash could cover your typical outflows if no money came in. Learn more →
Cash conversion cycle: The days between paying for inputs and collecting cash from customers. Learn more →
Cash flow: The actual money moving into and out of your business accounts over a period. Learn more →
Cash reserve: Money set aside for emergencies and slow periods, kept separate from daily operating funds. Learn more →
Catch-up contribution: Extra amount savers age 50 and older can contribute on top of normal limits. Learn more →
Certificate of insurance: A one-page document proving you carry specific coverage and limits. Learn more →
Chart of accounts: The list of categories used to sort every business transaction. Learn more →
COGS: Beginning inventory plus purchases minus ending inventory for a period. Learn more →
Cohort: A group of customers who started at the same time or through the same channel, tracked together. Learn more →
Collateral: An asset a lender can claim if you do not repay. Learn more →
Comeback: A vehicle that returns for the same repair, usually at the shop's expense. Learn more →
Commingling: Mixing personal and business money in the same accounts. Learn more →
Commission: Pay based on a percentage of the services an employee performs. Learn more →
Common-law test: The IRS approach that weighs behavioral, financial, and relationship factors to decide worker status. Learn more →
Conditional lien waiver: A waiver that takes effect only once the stated payment is actually received. Learn more →
Constraint: The limited resource, such as crew hours or trucks, that caps how much work you can do. Learn more →
Contribution margin: Price minus variable cost for one sale, the amount that sale contributes to fixed costs and profit. Learn more →
Cost code: A category for tracking job costs consistently, like demolition or rough electrical. Learn more →
Cost per mile (CPM): Your total annual costs, including your own pay, divided by every mile you drive. Learn more →
Customer acquisition cost (CAC): Total spend on a marketing channel divided by the new customers it brought in. Learn more →
Customer lifetime value: The total gross profit you expect from a customer over the relationship. Learn more →

D

D-U-N-S number: A unique nine-digit identifier Dun & Bradstreet assigns to a business. Learn more →
Days sales outstanding: The average number of days it takes customers to pay their invoices. Learn more →
Dead stock: Inventory that has not sold within a set period, such as 6 to 12 months. Learn more →
Deadhead: Miles driven without a paying load, such as the trip to a pickup or back home. Learn more →
Debt service: The total payments required on your debts over a period. Learn more →
Deductible: The part of a covered loss you pay before insurance starts paying. Learn more →
Deferral: An agreement to pause or postpone payments for a period. Learn more →
Deferred work: Recommended repairs a customer declined for now, saved for follow-up. Learn more →
Depreciation recapture: Tax owed on the gain when you sell an asset you already deducted. Learn more →
Digital vehicle inspection: An inspection recorded with photos and notes and shared with the customer electronically. Learn more →
Dimensional weight: Carrier pricing based on box size as well as actual weight. Learn more →
Discount rate: The yearly rate used to shrink future cash flows to today's value, often set at or above your cost of money. Learn more →
Distribution: Profit paid out to an owner that is not wages. Learn more →
DSCR: Cash earnings divided by debt payments; above 1.0 means earnings cover payments. Learn more →
Durable power of attorney: A legal document letting someone act for you, which stays valid if you become incapacitated. Learn more →

E

Earned wage access: A service that lets employees receive part of their earned pay before the regular payday. Learn more →
EBITDA: Earnings before interest, taxes, depreciation, and amortization, a common measure of operating profit. Learn more →
Economic nexus: Nexus created by sales volume into a state, without physical presence. Learn more →
Effective labor rate: Total labor sales divided by total labor hours billed. Learn more →
EIN: A free nine-digit federal tax ID number for a business. Learn more →
Elective deferral: The part of their paycheck an employee chooses to put into a retirement plan. Learn more →
Equity: The owners' stake in the business: assets minus liabilities. Learn more →
ESOP: An employee stock ownership plan that lets a trust buy company shares for employees. Learn more →
Estimated payments: Quarterly tax payments made by people without enough withholding. Learn more →
Estimated tax: Tax paid during the year on income that has no withholding. Learn more →

F

Factor rate: A multiplier applied to the amount funded to set the total amount repaid. Learn more →
Factoring: Selling unpaid invoices to a third party for an immediate advance, minus a fee. Learn more →
FDIC insurance: Federal protection for deposits at insured banks if the bank fails, up to legal limits. Learn more →
FICA: Federal Social Security and Medicare taxes, paid by both employer and employee. Learn more →
Financial wellness: A state of having enough stability and knowledge to handle money with less stress. Learn more →
Fixed cost: An expense that stays the same whether the truck runs or sits, like insurance or a truck payment. Learn more →
Fleet account: An ongoing service arrangement with a business that operates multiple vehicles. Learn more →
FLSA tip credit: A federal wage rule letting employers count some tips toward minimum wage. Learn more →
Food cost percentage: Plate cost divided by menu price. Learn more →
Form 1099-K: An information form payment platforms send when your payments pass a reporting threshold. Learn more →
Form 1099-NEC: The form used to report payments of $2,000 or more (for 2026) to nonemployee service providers. Learn more →
Form I-9: A federal form that verifies an employee's identity and authorization to work in the US. Learn more →
Form W-9: A form a contractor gives you with their legal name and taxpayer ID. Learn more →
Full-time equivalent (FTE): A way of counting part-time hours as a fraction of a full-time employee. Learn more →
Fully loaded cost: The total yearly cost of an employee, including wages, taxes, benefits, and overhead. Learn more →
FUTA: The federal unemployment tax, paid only by employers on the first $7,000 of each worker's wages. Learn more →
Future receivables: Sales revenue a business expects to collect in the future. Learn more →

G

Google Business Profile: A free Google listing that shows your business details, photos, and reviews in Search and Maps. Learn more →
Grandfathering: Letting existing customers keep an old price for a set period after prices rise for new customers. Learn more →
Gross margin: Revenue minus direct costs, as a percentage of revenue. Learn more →
Gross profit: Revenue minus the direct cost of delivering the product or service. Learn more →

H

Holdback: The percentage of sales or deposits remitted to the provider until the agreed total is paid. Learn more →
HVUT: The federal heavy highway vehicle use tax on trucks of 55,000 pounds or more, paid with Form 2290. Learn more →

I

ICHRA: A health reimbursement plan with no cap that employers of any size can offer by employee class. Learn more →
IFTA: An agreement that lets interstate carriers file one quarterly fuel tax return with their base state. Learn more →
Indemnity agreement: Your promise to repay the surety for any losses it pays on your bonds. Learn more →
Inland marine: Insurance for tools, equipment, and materials that move between locations. Learn more →
Inventory turnover: Cost of goods sold divided by average inventory at cost. Learn more →

K

Key performance indicator (KPI): A number you track regularly to judge how the business is doing. Learn more →
Key person insurance: A policy owned by the business that pays out if a critical person dies or becomes disabled. Learn more →

L

Labor burden: Costs on top of wages, such as payroll taxes, workers' comp, benefits, and paid time off. Learn more →
Lifetime value (LTV): The gross profit a typical customer generates over the whole time they buy from you. Learn more →
Limited liability: Legal protection that generally keeps business debts and lawsuits from reaching your personal assets. Learn more →
Line of credit: A revolving credit limit you can draw on, repay, and draw again, paying interest only on what you use. Learn more →
Local search: Searches for products or services near a location, such as "pizza near me". Learn more →

M

Margin: Profit expressed as a percentage of the selling price. Learn more →
Margin of safety: The cushion between your expected result and the point where a plan stops paying off. Learn more →
Marketplace facilitator: A platform required to collect and remit sales tax on sales it processes for third-party sellers. Learn more →
Markup: Profit expressed as a percentage of cost. Learn more →
Mechanics' lien: A legal claim against improved property that secures payment for labor or materials. Learn more →
MFA: Multi-factor authentication: a second proof of identity beyond your password. Learn more →
Misclassification: Treating a worker as independent when the law considers them an employee. Learn more →
Monthly close: A routine of reviewing, reconciling, and finalizing a month's records before moving on. Learn more →

N

Net 30: Payment terms requiring the full invoice amount within 30 days. Learn more →
Net income: What remains from revenue after all expenses, interest, and taxes for a period. Learn more →
Net present value (NPV): The value today of an investment's future cash flows, discounted for time and risk, minus its cost. Learn more →
Nexus: A connection with a state that allows it to require you to collect its sales tax. Learn more →
Notice of assignment: A letter telling the broker to pay the factor instead of you. Learn more →
NSF: Non-sufficient funds: a payment returned because the account lacked the money to cover it. Learn more →

O

Open-to-buy: The amount of inventory you can purchase in a period without overshooting your plan. Learn more →
Operating expenses: The ongoing costs of running the business, such as rent, payroll, and insurance. Learn more →
Origination fee: An upfront charge for setting up financing, often deducted from the funds you receive. Learn more →
Overbilling: Billing ahead of the work completed, which creates a liability for work still owed. Learn more →
Overhead: Ongoing costs of running the business that are not tied to a single sale. Learn more →
Owner draw: Money an owner takes out of a pass-through business for personal use; it is not a business expense. Learn more →
Owner's draw: Money a sole proprietor or LLC owner takes out of the business for personal use. Learn more →

P

Parts matrix: A pricing table that applies different markups to parts at different cost levels. Learn more →
Pay benchmarking: Comparing your wages to what similar roles pay in your local market. Learn more →
Payback period: How many months of a customer's gross profit it takes to recover what you spent to win them. Learn more →
PCI DSS: Security standards for any business that accepts payment cards. Learn more →
Per diem: A fixed daily IRS rate for meals and incidentals you can deduct instead of tracking each receipt. Learn more →
Personal guarantee: A promise by the owner to repay business debt personally if the business does not. Learn more →
Phishing: Fake messages that impersonate trusted senders to steal logins or money. Learn more →
Plate cost: The total ingredient cost of one serving as it leaves the kitchen. Learn more →
Positive pay: A bank service that matches presented checks against the list you issued and flags mismatches. Learn more →
Premium: The amount you pay for an insurance policy, usually monthly or yearly. Learn more →
Price elasticity: How strongly customer demand responds to a change in price. Learn more →
Price tiers: Two or more versions of a product or service at different prices and levels of value. Learn more →
Prime cost: Food and beverage cost of goods sold plus total labor cost. Learn more →
Profit motive: A genuine intention to make money from an activity, which the IRS requires for business treatment. Learn more →

Q

QBI deduction: A deduction of up to 20% of qualified business income for many pass-through owners. Learn more →
QSEHRA: A capped, tax-free health reimbursement plan for employers with fewer than 50 FTEs. Learn more →
Qualified tips: Voluntary tips in a customarily tipped job that a worker can deduct for 2025 through 2028. Learn more →

R

Ransomware: Malicious software that locks your files and demands payment to unlock them. Learn more →
Reasonable compensation: The market-rate salary the IRS expects working S corp owners to pay themselves. Learn more →
Rebooking rate: The percentage of clients who schedule their next visit before leaving. Learn more →
Reconciliation: Matching your books to a bank or card statement so balances agree. Learn more →
Recourse: Your obligation to buy back an invoice the customer does not pay. Learn more →
Referral fee: A marketplace's percentage commission on each sale. Learn more →
Refinancing: Replacing existing debt with new financing, ideally on better terms. Learn more →
Reorder point: The on-hand quantity that triggers a new order, based on sales rate, lead time, and safety stock. Learn more →
Resale certificate: A document a buyer gives you showing goods are for resale, so no sales tax is charged. Learn more →
Reserve: The part of the invoice held back until the customer pays, then released minus fees. Learn more →
Residual value: The expected value of equipment at the end of a lease. Learn more →
Retail attach rate: The percentage of visits that include a product sale. Learn more →
Retainage: A percentage of each payment held back until the job is substantially complete. Learn more →
Retained earnings: Cumulative profits kept in the business rather than paid out to owners. Learn more →
Return on investment (ROI): The profit a use of money produces compared with what it cost. Learn more →
Review link: A direct web address that opens your review form so customers can leave a review in one tap. Learn more →

S

S corp election: A tax choice, made on Form 2553, that lets profit pass through to owners while working owners take a salary. Learn more →
Safe harbor: A payment level that protects you from underpayment penalties. Learn more →
Safe harbor 401(k): A 401(k) that skips most nondiscrimination testing in exchange for a required employer contribution. Learn more →
SBA 7(a): The Small Business Administration's main loan program, in which the SBA guarantees part of a lender's loan. Learn more →
Schedule C: The tax form sole proprietors use to report business income and expenses. Learn more →
Schedule of values: A contract broken into line items with dollar values, used to bill progress each period. Learn more →
SDE: Seller's discretionary earnings: profit plus the owner's pay and personal or one-time expenses. Learn more →
Seasonality: A predictable pattern of busy and slow periods that repeats each year. Learn more →
Section 179: A tax rule that lets businesses deduct qualifying equipment costs in the year it goes into service. Learn more →
Section 45B credit: A tax credit for employer Social Security and Medicare tax paid on certain tips. Learn more →
Segregation of duties: Splitting money tasks so no single person controls a payment from start to finish. Learn more →
Self-employment tax: Social Security and Medicare tax that self-employed people pay on their net earnings. Learn more →
SEP IRA: An employer-funded IRA that is easy to set up and allows up to 25% of compensation. Learn more →
Service charge: A mandatory fee added to a bill, treated as wages rather than tips. Learn more →
SHOP: The Small Business Health Options Program marketplace for small-group coverage. Learn more →
Solo 401(k): A 401(k) for owners with no employees besides a spouse, allowing both employee and employer contributions. Learn more →
Split direct deposit: Sending one paycheck to more than one bank account automatically. Learn more →
Stacking: Taking additional advances or loans while earlier ones are still being repaid. Learn more →
Stay interview: A conversation with a current employee about what keeps them and what might make them leave. Learn more →
Step cost: A cost that stays flat until volume reaches a certain level, then jumps up. Learn more →
Surety: The company that guarantees to the project owner that you will perform and pay as promised. Learn more →
SUTA: State unemployment tax; rates vary by state and by an employer's claims history. Learn more →

T

Technician efficiency: Hours billed divided by hours actually worked on repair orders. Learn more →
Term: The length of time you have to repay the financing. Learn more →
TRAC lease: A vehicle lease with a preset residual value, where you settle any difference between that value and the sale price. Learn more →
Trade line: A credit account with a supplier, such as net-30 payment terms, that can be reported to bureaus. Learn more →
Trough: The low point in your revenue cycle, when cash is tightest. Learn more →
Trust fund taxes: Taxes withheld from employee pay that an employer holds and must deposit with the government. Learn more →
Turnover: The rate at which employees leave and must be replaced. Learn more →

U

Unit economics: Measuring revenue, variable cost, and margin for one repeatable unit of what a business sells. Learn more →
Use of funds: A clear description of what financing will pay for and how it helps the business. Learn more →

V

Variable cost: An expense that rises with miles driven, like fuel, tires, and maintenance. Learn more →
Vesting: The schedule by which employees gain full ownership of employer contributions. Learn more →

W

WIP schedule: A report that compares earned revenue to billed revenue on every open job. Learn more →
Workers' compensation: Insurance that covers medical costs and lost wages for job-related injuries. Learn more →
Working capital: Current assets minus current liabilities; the cushion for day-to-day operations. Learn more →

Y

Yield: The usable share of an ingredient after trimming and cooking. Learn more →