Difference Between a Statement and an Invoice

As a business owner, it’s vital for you to understand the nuances between various documents in order to keep operations running smoothly. Two documents that often get mixed up are statements and invoices. While you may see the terms “invoice” and “statement” and think they are repetitive, they actually serve different purposes and are used […]

What Is an Invoice Number?

An invoice is a crucial business document for payment tracking and record-keeping. But if you’re dealing with hundreds of invoices per month, which the average business owner is, there needs to be a way to easily track and manage one invoice to the next. To achieve this, look no further than invoice numbers. You’ve probably […]

What Causes Changes In Working Capital?

An important measurement of your business’s financial health and liquidity, working capital shows whether you are able to cover all of your expenses in the near future. Because of this, any decrease or increase in working capital is worth paying close attention to. What’s even more important is understanding the root cause of these working […]

Pro Forma Invoice vs. Commercial Invoice – What’s the Difference?

You’re all set, finally gearing up to sell your products or services after successfully launching your own business. But wait! The lingo’s tripping you up. Pro forma invoices, commercial invoices — it’s like deciphering a foreign language. The confusion is real and not isolated to you; every business owner has a learning curve with accounting-related […]

Working Capital vs. Cash Flow: How Are They Different and How Are They Related?

When it comes to keeping your business financially healthy, two of the most important terms to understand are working capital and cash flow. However, new business owners might not understand the differences between them. While working capital does influence cash flow and vice versa, they are each their own distinct measurement, so it’s pivotal to […]

What Are Net 90 Payment Terms and How Do They Work?

Few invoice payment terms have more significant ramifications than net 90. Reason being, net 90 are some of the longest payment terms you will come across as a business owner, meaning working on these terms can greatly affect business cash flow for both the buyer and seller. Because of this, it’s important to analyze net […]

Net 45 Payment Terms: What Are They and How Do They Work?

Payment terms are the foundation that allows for seamless transactions between buyers and sellers. Common payment terms include “net D” terms, which specify the amount of time a business or consumer has to complete a payment, in which “D” stands for “days”. One of the most common net D terms that you’ll likely come across […]

Cash Flow vs. Revenue

Navigating the complexities of business finances can be daunting, especially for small business owners who wear multiple hats. Understanding cash flow and how it differs from revenue is critical for the financial health of your company. While the two terms may sound similar, they have different meanings, and to ensure the financial success of your […]

What Is Net 60 And How Does It Work?

In the world of business transactions, payment terms are the linchpins upon which the entire system is constructed. They play a crucial role in managing cash flow and maintaining healthy financial relationships, and for any business owner, understanding payment terms is vital prior to creating an invoice. A relatively common payment term is net 60. […]

What Is Cash Against Documents and How Does It Work?

So you’ve struck a lucrative deal overseas. The contract is signed; now comes the stressful part. Will you get paid? Will the products arrive? Dive into the world of Cash Against Documents (CAD), the international payment method that can be beneficial for both buyers and sellers. Not only does Cash Against Documents help bridge the […]

What Is An Invoice Payment?

Paying invoices is a facet of running a company that first-time business owners might be unfamiliar with. Sure, you probably have a good general understanding of what an invoice is, but it’s important to understand that making an invoice payment is more than just signing your name at the bottom of the document. So, what […]

What Is Cash Turnover Ratio And How Does It Work?

For business owners, efficiency is everything, particularly in today’s economy. But how is the efficiency of a business’s financial processes accurately measured? One of the best ways to do so is by calculating your cash turnover ratio. The cash turnover ratio highlights a company’s efficiency and can even provide a glimpse into overall profitability. To […]

What Is Invoice Verification And How Does It Work?

In the complex web of business transactions, invoice verification is an essential process, often underemphasized yet hugely consequential. Incorrect invoices contribute to 61% of late payments—a compelling testament to the significance of efficient invoice verification. The dangers of invoice fraud loom large, as even savvy business moguls are not immune, including ‘Shark Tank’ investor Barbara […]

Early Payment Discounts: What Are They?

By offering early payment discounts, one of the biggest challenges for small and medium-sized business owners can potentially be alleviated: late invoice payments. One Quickbooks study showed that the average medium-sized business is owed more than $300,000 annually due to customers not paying on-time. These delayed payments are especially impactful for smaller businesses operating on […]

What Is 2/10 Net 30 On An Invoice?

While you may already have a good understanding of standard invoice payment terms, this doesn’t necessarily mean your cash flow problems will go away. Even when clients and customers agree on payment terms, many clients still don’t pay on time. Delayed payments can create a serious cash flow crunch for your business. Fortunately, by getting […]

What Is 1/10 Net 30 On An Invoice?

Rewarding customers who pay invoices on time is worthy of your time and effort, especially given the fact that a staggering 49% of B2B invoices become overdue. One of the common ways that sellers reward and encourage on-time payments is by offering early payment discounts, such as 1/10 net 30. Both parties in a transaction […]

Revenue vs. Income – What’s The Difference?

When it comes to managing your business’s cash flow, few things are more important to understand than the difference between revenue vs. income. By understanding how to correctly identify revenue vs. income in accounting, you can streamline your business accounting and have the confidence needed to take on essential tasks like auditing your cash flow […]

What Is Cash Flow To Sales Ratio And What Does It Measure?

There are few, if any, more important business metrics than cash flow. While profit and revenue are good indicators of success, cash flow is perhaps the best indicator of overall business sustainability. Businesses with strong cash flow have cash inflows that outweigh outflows, setting them up for operational success and long-term growth. If you’re looking […]

Fixed Assets vs. Current Assets – What’s The Difference?

For business owners, CEOs, investors, and really any business stakeholder, staying on top of assets is pivotal in order to obtain a holistic understanding of a company’s finances. A business’s assets are considered anything that can be converted into cash (or cash equivalents). Assets are, however, a bit more complex than this definition might sound, […]

What Is Business Accounting And What Are Typical Accounting Tasks?

Whether you’re a new entrepreneur getting your first business off the ground or an experienced business owner, navigating company finances can be tough. Without proper organization and insights pertaining to accounting-related tasks, your business’ finances are in jeopardy of being mismanaged. This comprehensive business accounting guide will explore the basics of accounting in business and […]

How To Charge Late Fees On Invoices

All too often, businesses struggle with slow-paying customers. When a client doesn’t submit payment by their invoice due date, it can create serious cash flow problems for your business. If you find your business in this situation, you don’t want to waste too much time chasing down clients for payment. To prevent having to do […]

How Does Automated Invoice Processing Work?

Processing invoices is no simple task. Most businesses handle at least 500 invoices per month, and 66% of businesses say that processing invoices takes five days of work per month. Whether the invoice is received by mail, email, or e-invoicing software, if the average business isn’t utilizing invoice automation, it’s going to require a lot […]

What Is A Quote In Business?

For customers, knowing the cost of a service before committing to buying and paying for the service can be extremely helpful when budgeting and balancing opportunity costs. Thankfully, there’s a document that helps both the buyer and seller get a better idea of price estimation: a business quote. What Is A Quote In Business? A […]

What Is a Pro Forma Invoice?

Before arranging a transaction with a buyer, your prospective customers will likely want to negotiate the critical terms of the arrangement, such as any potential discounts, delivery timelines, and price. When this stage of the negotiation is complete, it’s typically considered good practice for your business to send an initial draft of the invoice to […]

What Are The Different Types of Invoices?

Studies have shown that 61% of late invoice payments are due to incorrect invoicing. These incorrect invoices can significantly stunt cash flow for small businesses, which is why understanding the different types of invoices is so important. By knowing which types of transactions or situations call for which types of invoices, you can prevent your […]

Net 15 Payment Terms: What Are They?

Before it comes time to get paid, you’ll first have to create an invoice, and perhaps the most important element of an invoice is the payment terms. Your invoice payment terms tell the customer how soon they need to pay you for the items listed on the invoice, and choosing the right terms can significantly […]

What Does It Mean To Be Paid In Arrears?

It’s no secret that being paid late is one of the most common challenges business owners face, especially small business owners operating on tight budgets. Yet sometimes payments are intentionally made after a service or good has already been provided. There is a term for this kind of prearranged late payment: “paid in arrears.” Most […]

What Is Invoice Reconciliation And Why Is It Important?

Verifying financial records is critical for businesses of all sizes. On average, about 1 in 10 invoices contain an error, whether that be an accounting error, failing to include all necessary product details, or listing inaccurate payment terms. Regardless, just that one inaccurate invoice could prove costly. An important process to help maintain the integrity […]

Payor vs. Payee – What’s The Difference?

Mastering the art of accounting is one of the most frequent challenges small business owners struggle with tackling. But overcoming the accounting hurdle is pivotal, and knowing how to reference and define terms correctly will prevent bookkeeping errors that could otherwise put a business in jeopardy. Two accounting terms you will hear in business that […]

Invoice vs. Bill – What’s The Difference?

Often, you’ll hear the terms “invoice” and “bill” used interchangeably, and you won’t think twice. But depending on who you ask, you may get slightly different definitions of an invoice vs. a bill, potentially leading to even the most experienced accountants dealing with confusion when balancing the books. On their own, terms such as invoice, […]

Net 30: What Is It and How Does It Work?

As a first-time business owner or someone new to handling accounting procedures, you’re going to come across a plethora of new terminology, such as “payment terms” and “Net 30,” both of which pertain to the invoicing process. Since properly managing your accounts payable (AP) and accounts receivable (AR) processes is necessary to achieve long-term success […]

How to Write an Invoice

You have probably heard of an invoice but have never been faced with the challenge of writing an one yourself. While a common business document, it can be intimidating to create an invoice, leaving many to wonder where to start. In this article, we will cover what an invoice is, how to format one, what […]

What Is E-Invoicing and How Does It Work?

When it comes to getting paid for the work you do for your clients, few things are more important than having a solid invoicing system in place. An itemized invoice serves as a valuable record of money owed, while also helping set a deadline for payments. Businesses historically sent their invoices through the mail; however, […]

Invoice vs. Receipt – How Are They Different?

Managing your paperwork is one of the less exciting aspects of running a small business — but it is also one of the most important. An efficient invoicing process can make all the difference for your cash flow and can help you achieve your growth goals. However, many small business owners find themselves confused about […]

Purchase Order vs. Invoice – How Are They Different?

It’s not uncommon for people outside of the procurement realm to confuse purchase orders with invoices. Even seasoned business teams mix up the terms from time to time. However, purchase orders (or POs) and invoices are two distinct and essential financial documents, so failing to understand their differences can negatively impact company expenses, documentation, and […]

What Is an Invoice and What Does It Mean in Business?

An invoice is an essential component of any transaction between two parties. In fact, invoices are one of the earliest expressions of written records, being traced back to 2900 BCE when merchants would carve details of transactions on stone tablets. While the layout of a modern-day invoice looks quite different from 5000 years ago, its […]

How to Send an Invoice

Learning how to send an invoice may not be the most glamorous aspect of running a business. However, the efficiency of a business’ invoicing process can significantly alter cash flow and be a determining factor into whether important growth goals are met. One survey showed that 49% of B2B invoices become overdue, while a separate […]

Gross Profit vs. Gross Margin – What’s the Difference?

As a business owner, knowing your finances like the back of your hand is crucial during important decision-making processes. Among the most important financial metrics that help business owners analyze their trajectory are gross profit and gross margin. Often, these two terms are used interchangeably and sometimes get confused with terms such as net profit […]

Net Working Capital and Working Capital Ratio Calculator

Working capital is the money that a company has available to manage its day-to-day operations. Used to pay a business’s short-term expenses, working capital is an important metric in determining the financial health and operational efficiency of a company. To help you better understand what your net working capital and working capital ratio are, we […]

What is a Lockbox Payment?

Business owners who are considering invoice factoring to improve A/R cash flow may wonder what the payment process looks like between their customer and the factor. For most factoring companies, lockboxes play a vital role in this process. They provide a source for both parties – the debtor and the factor – to transfer and […]

What Is the Average Collection Period Ratio?

Every business owner should work to ensure customers are paying invoices in a timely manner. Slow-paying customers can cause serious cash flow problems for any business, so it’s crucial to analyze how customer payment habits are affecting your company’s growth. To do this, you can turn to the Average Collection Period ratio. The Average Collection […]

How to Calculate Accounts Receivable Turnover Ratio

There are many calculations and metrics that can provide valuable insight into your business operations and financials. One metric, the Accounts Receivable Turnover ratio, it’s useful to track how efficiently you collect debts from customers to whom you have extended credit. Too many late or delinquent payments negatively impact cash flow. Here’s what business owners […]

The Times Interest Earned Ratio and What It Measures

A company’s financial health is calculated using several different metrics. One is the Times Interest Earned (TIE) ratio, also called the Interest Coverage Ratio. Most companies need to borrow money occasionally to maintain or expand their business. However, if a company can’t meet its debt obligations, it could go bankrupt. The TIE ratio is a […]

What Is the Weighted Average Cost of Capital (WACC)?

Running a business requires a solid understanding of basic financial terms and equations. You can use this financial knowledge to understand better how your company operates and ensure you track your finances correctly. This short article defines and details the formula for the weighted average cost of capital (WACC). This formula may seem confusing at […]

What Is Net Profit Margin?

Net profit margin is one of many ways to measure the success and growth of your business over time. Your business’s net profit margin can inform decisions related to the profitability of your business, but it can’t tell you everything. Read on to learn more about net profit margin, calculating it, and how it can […]

What Is Return on Equity Ratio (ROE)?

A return on equity (ROE) ratio measures the probability of a business. To calculate the return on equity, business owners must divide the net income by the shareholder’s equity. Shareholder’s equity is a business’ gross assets minus liabilities. ROE is an essential metric for business owners because it allows you to gauge your profit levels. […]

What Is an Opportunity Cost? How to Calculate

Opportunity costs are expenses you pay when you choose one alternative option over all others. These costs may be financial but are not limited to and are necessary to consider for all business owners. This article will give an in-depth analysis of what opportunity costs are, their applications in the real world, and how you […]

Invoice Factoring for QuickBooks Guide

You want to grow your business, but you’re finding it difficult to get the cash flow that you need. You’ve tried asking for a loan or getting an additional credit card, but the banks say you don’t have enough collateral or enough credit history. What do you do? Invoice factoring can be a solution to […]

How to Calculate Your Free Cash Flow

When you’re running a business, there are many things to keep records of. There are expenses, taxes, and payroll, to name a few. One essential thing to track is your free cash flow, or FCF. It may seem daunting, but this article will detail what free cash flow is and how to calculate it. What […]

How to Make a Profit and Loss Statement

Making a profit and loss statement (P&L) is one of the most important things you can do for your business. This document tells you how much money your company has made and lost over a specific time. It can also provide insights into your business’s financial health and help you make better decisions about where […]

Calculating Discounted Cash Flows in Payback Period

Business owners and project managers use tools like discounted cash flows in the payback period to make fiscally responsible investment decisions. You can determine whether a proposed project is viable with this formula since this formula compares the initial costs involved with the financial returns you can expect to receive. In this article, you will […]

Net Cash Flow and How It’s Used

If you’re a first-time small business owner, you’re probably getting hit with financial terms like “net cash flow” that would make the average person want to run for the hills. However, it is important to stay informed to help your business remain afloat. Understanding bankruptcy, profit and loss and everything in between – financial literacy […]

How to Make a Business Balance Sheet

A balance sheet is critical for any business, and you must establish one from the get-go. They are considered one of the basic financial instruments of a business. Keep reading to find out what exactly a balance sheet is, how to correctly build one, and ways you will use it in your business operations. What […]

Year-End Accounting Checklist for Your Small Business

It’s the end of the year, which means it’s time to dust off your year-end accounting checklist and get to ticking off the boxes. If you’re a new business owner and you don’t have a background in bookkeeping, you may think of this as standard, monotonous housekeeping, but it’s a crucial process for business owners […]

Email Templates You Can Use to Politely Ask for Payment Professionally

Running your own business presents a lot of upside. It provides flexibility and full control to make every important business decision. However, that’s not to say owning your own business or working as a contractor is all roses. Whereas being an employee makes your paycheck a sure thing, business owners get paid when their clients […]

How to Collect Unpaid Invoices

You’ve been working hard for months, maybe even years, to build your business. You take care of your customers, and they love you for it. But a few of them are still not paying their invoices on time, and now you’re feeling the pressure to act professionally yet again. You may be wondering how to […]

Invoice Payment Terms: What Are They and Which Should You Work On?

As a new business owner, learning different invoice payment terms before setting up your invoicing system is crucial. You don’t want to send an invoice without knowing all of your options regarding payment terms, because you might be missing out an option that’s more suitable for both your business and your customer. Before discussing some […]

How to Audit Your Cash Flow and Accounts Receivables

Creating accurate reports on your company’s cash flow is an essential part of running a successful business. A cash flow statement can show how your accounts receivables, inventory, and accounts payable line up yearly. By analyzing these trends, you’ll be better prepared to help your business grow. Falling behind on auditing your cash flow and […]

How To Do a Budget Analysis for Your Business

Like it or not, budgeting is one of the most crucial aspects of running a successful business of any size. Your monthly budget—and the in-depth analysis it entails—gives you all the information you need about the money your business brings in and where it’s going. Tracking your cash flow is especially important if you have […]

How to Calculate Accounts Receivable Turnover Ratio: What’s a Good Ratio?

If your company operates in the retail industry or provides a product or service, you’ll need to know how effective your collections efforts are during the year. There is a method for determining this information: your accounts receivable turnover ratio. It may sound complicated, but calculating this ratio is pretty simple. This is something every […]

Accounts Payable Management and Profitability Impact

Accounts Payable (AP) is a staple of accounting, as managing your payable properly goes a long way to ensuring overall bookkeeping organization. AP management refers to the process of recording liability amounts in a record book, verifying expenses owed to a specific party, processing payment for those expenses, and documenting all payments. AP is a […]

How to Fill Out an Accounts Receivable Aging Schedule

Proper account receivables management is among the key secrets to a thriving business. It helps the management identify and fix potential cash flow problems, conversely facilitating smooth-sailing operations. An excellent way to stay on top of account receivables is through an aging schedule. From what it is to why it’s of the essence, below is […]

Cash Budget vs. Statement of Cash Flows

As a business owner, managing cash is a tedious but necessary part of the job. Keeping a hold of your cash flow is critical for a thriving, successful business, but it’s not always the simplest task or the easiest to understand. Two terms often thrown around in the realm of business management are ‘cash budget’ […]

How to Choose the Right AR Management Solution

Behind every thriving company is an efficient accounts receivable game plan. It’s easy to get lost in the pile when it comes to tracking invoices and remembering how much money your customers owe you after providing them with a product or service. If you don’t keep a close eye on this aspect of your business […]

How to Calculate the Cash Conversion Cycle

When you’re running a small business, you must know several formulas to keep expenses low and maintain high-profit margins. Other formulas present business owners opportunities to know how fast their inventory is selling and tracking cash flow, called the cash conversion cycle (CCC). It’s also known as the net operating cycle. Read on to find […]

Cash Flow Analysis Techniques and Tips

Running a small business is no easy feat, but running a successful small business takes even more time and skill. Performing a cash flow analysis and looking at your expenses can be the difference between your business floating or sinking. Knowing the financial health of your company helps you identify what you’re doing right and […]

The Importance of Small Business Cash Flow Management: Tips & Strategies

Proper cash flow management is the key to success for many small business owners. Unfortunately, small businesses that do not practice effective cash flow management strategies tend to fail quickly. It’s not uncommon for young businesses to suffer from cash flow problems; in fact, it’s the norm. However, business owners need to focus on minimizing […]

How to Record Invoice Factoring Transactions

In business factoring, companies sell their unpaid invoice to a factoring company in exchange for a cash advance. This type of financial transaction helps a business reduce its credit risk and receive immediate cash. When businesses factor their invoices, they usually sell them at a discounted price. Because the process involves several steps, recording invoice […]

What Is the Cash Ratio and How Is It Used?

The cash ratio, also known as the cash asset ratio, is a liquidity measurement used by financial analysts. Its purpose is to evaluate a company’s capability to pay off any short-term debts. This capability is determined by calculating the ratio of the short-term assets against a company’s short-term liabilities. There are two other common ratios: […]

What Is Net Working Capital? How to Calculate and NWC Formula?

Net working capital (NWC) is an organization’s total short-term assets minus its short-term liabilities. An organization’s net working capital paints a picture of its overall financial health and ensures it’s being run efficiently. There are a number of ways to calculate net working capital depending on what the person analyzing the data is looking for. […]

How To Create A Business Cash Flow Statement

Every business owner needs to have a good understanding of the three essential financial documents: profit and loss statement, balance sheet, and cash flow statement. A profit and loss statement details income and expenses over a certain period, and a balance sheet details your assets and liabilities, but what exactly is a cash flow statement? […]

How to Complete a Break-Even Analysis

Your business is running; you’re making sales; inventory is turning over, but are you making a profit? There are many costs involved in running a business, from salaries to rent to insurance to payroll, and even more so in the early days of a new company when the investments typically surpass the initial sales. It […]

What Is the Current Ratio?

The current ratio is an essential metric that small business owners, in particular, should keep a close eye on for their own company. It is also necessary for an investor to understand the current ratio in multiple companies when purchasing stock. What Is the Current Ratio? The current ratio is a commonly used metric in […]

Debt-to-Equity Ratio: Calculation and Measurement

When it comes to figuring your ability to secure funding for your business, you need to have a clear idea of your financial situation. There are many ways to do this. You must start by gathering all your financial data. You can then use several formulas to assess your current standings. One of those formulas […]

What is Cash on Delivery (COD)?

When you start a new business, one of the first tasks you have to learn is sales invoicing, and, in particular, transaction types. Choosing the right transaction for your business helps you get paid on time and avoid delays in cash flow. One example of a commonly used transaction is COD or cash on delivery. […]

Best Accounting Software for Small Businesses

As a small business owner, keeping up with finances can be a challenge, especially as your business grows and accounting gets increasingly complicated. But the importance of business accounting means you can’t just find a makeshift solution. Instead, the best business owners master the art of accounting. And for many, it’s mastered with the help […]