Hey there, business owners! Ever felt like financial jargon is like a foreign language? You’re not alone. I’ve met loads of business owners who get tangled up in money talk. So, let’s break it down and make it as easy as pie.
- Sales = Revenue: Think of this as the ‘top line’. It’s the cash you get from your awesome customers. Whether you call it sales or revenue, it’s the same thing.
- Profits = Earnings = Income: This is the ‘bottom line’. Imagine you’ve got a cake (that’s your revenue). After everyone’s had a slice (those are your costs and expenses), whatever’s left is your profit. Yum!
- Costs vs. Expenses: Costs are like the ingredients for a burger – the meat, lettuce, and buns. Expenses? They’re everything else – the rent for your burger joint, the ads you put out, and the salary for your cool staff.
- Expenditures: This is when you actually hand over cash to someone. Bought some burger buns? That’s an expenditure.
- Orders vs. Shipments = Sales: Orders are like promises from customers. They want something, but you haven’t given it to them yet. Once you ship out the goods, that’s when it becomes a sale. So, shipments and sales? Same thing.
- Solvency vs. Profitability: Solvency is having enough cash in your pocket to pay off your bills. Profitability? It’s making sure you earn more than you spend. Here’s a curveball: You can be making a profit but still be short on cash to pay your bills. Crazy, right?
There you have it! A quick crash course on financial terms. Hope this clears things up and makes money talk a tad bit easier for you. Remember, it’s all about understanding the game to play it better!
Marek Niedzwiedz, CEO @ aeXea Capital; Turnaround-Shogun™