Glossary
Financial Glossary
Your Essential Guide to Financial & Tax Terms: A simplified, go-to reference for understanding the key terms, concepts, and compliance language used in accounting, VAT, tax consultancy, and business regulations. This glossary is designed to help entrepreneurs, business owners, and professionals navigate financial conversations with clarity and confidence.
Outsourced Controller
An outsourced controller is a professional who provides financial management and accounting services to a business on a contract basis. The role of an outsourced controller is similar to that of an in-house controller, but the outsourced controller typically works remotely and is only engaged on a part-time or as-needed basis. This can be a cost-effective solution for businesses that do not have the need or resources to hire a full-time controller. An outsourced controller can help a business with tasks such as financial reporting, budgeting, cash flow management, and compliance with tax and regulatory requirements.
Payback Period
The payback period is a measure of the time it will take for an investment to recover its initial cost. It is commonly used to evaluate the feasibility of a proposed project or investment. The payback period is calculated by dividing the initial cost of the investment by the expected annual cash flow or savings that the investment will generate.
For example, if an investment costs $100,000 and is expected to generate $20,000 in annual savings, the payback period would be 5 years ($100,000 / $20,000 = 5).
Payroll
Payroll refers to the process of paying employees for the work that they have performed. It involves calculating the amount of pay that each employee is entitled to, withholding the appropriate taxes and other deductions, and issuing payment to the employees. Payroll is an important function for a business because it ensures that employees are paid accurately and on time. It is also a compliance-heavy process, as companies are required to comply with various federal, state, and local laws and regulations regarding payroll, such as withholding taxes and providing pay stubs to employees.
Payroll records
Payroll records are documents that a company maintains to track the payroll information of its employees. They include details such as the employee’s name, pay rate, hours worked, and any taxes or deductions that have been withheld from the employee’s pay. Payroll records are important for a company because they provide a record of the pay that has been issued to employees and the taxes and deductions that have been withheld. They are used to prepare a company’s payroll tax returns and to provide employees with pay stubs and other documents.
Payslip
A payslip is a document that is provided to an employee along with their pay. It provides details of the pay that the employee has received, including the gross pay, any deductions that have been made, and the net pay that the employee has received. A payslip typically includes the following information:
Employee name and employee number
Pay period (e.g. the dates of the pay period)
Gross pay (the total amount of pay before any deductions are made)
Deductions (e.g. taxes, health insurance, 401(k) contributions)
Net pay (the amount of pay that the employee receives after deductions have been made)
Year-to-date totals for gross pay, deductions, and net pay
Personal services income
Personal services income (PSI) is income that is derived from personal services that an individual provides. It is income that is earned from the individual’s personal skills, knowledge, and expertise, rather than from a business or investment. Personal services income is subject to special rules in some countries, including Australia and Canada. In these countries, personal services income is taxed differently from other forms of income, such as business income or investment income.
Pitch Deck
A pitch deck is a presentation that is used to communicate the key aspects of a business or project to potential investors. It typically includes slides that cover the problem the business is solving, the company’s product or solution, the target market, the competitive landscape, the business model and revenue streams, the management team, and the financial projections and funding requirements. The goal of a pitch deck is to persuade investors to provide the necessary funding to support the growth of the business.
Post-Money Valuation
Post-money valuation is a term used in venture capital and startup financing to refer to the valuation of a company after an investment is made. It is calculated by adding the amount of the investment to the company’s pre-money valuation.
For example, if a company has a pre-money valuation of $10 million and receives a $2 million investment, the post-money valuation would be $12 million.
Pre-Money Valuation
Pre-money valuation is a term used in venture capital and startup financing to refer to the valuation of a company before an investment is made. It is calculated by determining the total value of the company’s outstanding shares, minus any debt or other liabilities. The pre-money valuation is then used to determine the value of the equity that will be given to the investors in exchange for their investment.
For example, if a company has a pre-money valuation of $10 million and receives a $2 million investment, the investors will receive equity equivalent to 20% of the company.
Pro Rata
Pro rata is a Latin term that means “in proportion.” In the context of finance and business, it refers to the allocation of something, such as assets or liabilities, in proportion to each individual’s share or stake in the company.
For example, if a company has $1,000 in assets and three shareholders with stakes of 30%, 40%, and 30%, respectively, the pro rata allocation of the assets would be $300 for the first shareholder, $400 for the second, and $300 for the third.
Product Velocity
Product velocity is a term used in the context of product development and management. It refers to the rate at which a company is able to bring new products to market. A company with a high product velocity is able to develop and launch new products quickly and efficiently, while a company with a low product velocity may struggle to keep up with competitors and market trends.
Profit
Profit is the excess of revenue over expenses. It is the amount of money that a business or organization makes after all of its costs have been paid.Profit is an important measure of a business’s financial performance because it indicates how well the business is generating revenue and managing its costs. It is the goal of most businesses to maximize their profit, as this is what allows the business to grow and succeed.
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