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13 Key Financial Terms Every Business Owner Should Know

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13 Key Financial Terms Every Business Owner Should Know


In the business world, there are lots of terms, acronyms and jargon that get thrown around on a daily basis. In particular, there are lots of financial phrases that you probably hear a lot.

But no matter how big or small your business and no matter your key role within the business, it is always important to have a good understanding of these basic financial terms.

Despite this, plenty of professionals hear and even use lots of financial terms without really knowing what they mean, and this can be detrimental to financial planning and the overall success of your business.

That’s where this guide comes in.

Below, we’ve pulled together a list of 13 key financial terms that every business owner should know. Although some of these might seem obvious at first, you’d be surprised how often these key terms are misused or misunderstood.

Read on to find out more.

1. Revenue

A very common term we hear used a lot in business is revenue. Revenue refers to any money coming into the business as a result of sales of your goods or services. This is typically used to describe the amount made without taking into account expenses. This should not be confused with income.

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2. Income

Although income and revenue both speak to the financial position of your business, they should not be used interchangeably. The income of your business is the total revenue minus the cost of expenses such as materials, taxes, etc.

3. Turnover

A very popular word in the business lexicon is turnover. In a nutshell, this means the total value of sales you have made, typically in a year but it can be over a different period (say quarterly). It is essentially another way of saying revenue.

4. Net profit  

The net profit of a business, sometimes used in place of the term income, refers to your turnover/revenue once you have deducted expenses.

5. Expenses/expenditures

Expenses, sometimes referred to as expenditures are the costs incurred by a business. When talking about expenses, this might include rent, payroll, insurance, supplies, technology, travel, subscriptions, maintenance fees, etc., any money that you are paying out for business purposes.

6. Return on investment

Return on investment, often abbreviated to ROI, is used across a number of business functions. However, in terms of finances, ROI means the financial rewards your business gains from the things it invests in.

For example, if you invest in advertising, your return on investment is the number of sales and therefore money that you generate as a result of these advertising campaigns.

7. Balance Sheet

In the introduction, we mentioned the importance of key terms for financial planning, and when it comes to preparing your business for the coming months, you’re going to need to understand the term balance sheet.

This is a financial statement that shows your business’s assets (more on this next), expenses, profits and losses. A balance sheet is often used to check the financial standing of a business and to make predictions and plans for the year ahead.

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8. Assets

You might not be convinced that assets are strictly a financial thing, but in this case, it refers to any items of value that are owned by your business. These can be both tangible and intangible things such as premises, machinery, tools, vehicles, or intellectual property, branding, customer base etc.

All of these assets are considered important when valuing your business. Plus, some of these may contribute to your expenses throughout the year.

9. Payroll

Whether you need payroll or not in your business will depend on whether you have employees or you’re a one-man band. That being said, it always helps to understand terms like this as you might need them in the future.

Payroll is a list or database of your employees that are entitled to payments and benefits from your company, and it outlines what everyone is entitled to receive each month/year.

10. Cash flow

Cash flow is a term used to refer to cash entering and leaving a business (almost as if it were flowing like water, hence the name). Cash flow can be positive or negative depending on whether you’ve got more money coming in than going out, or vice versa.

11. Accounting period

You might have heard the term accounting period, and this refers to a pre-arranged period of time during which all important accounting functions take place. This is typically 12 months, but it doesn’t have to be; it can be any given period of time.

This should not be confused with a financial year, which we will look at next.

12. Financial year

When talking about a financial year, this term is typically used for tax and accounting purposes, and unlike an accounting period, this never changes. In the UK the financial year runs from 6th April each year.

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13. Fixed costs/overheads

We’ve touched on expenses above, but your fixed costs sometimes referred to as your overheads, are slightly different. This term refers to the day-to-day running costs of your business, such as rent, electricity, etc.

These are called fixed costs as they don’t vary based on the number of sales made (or not made as the case may be). In contrast, expenses may change if you require more or fewer materials or other resources to meet demand.

Are you clued up on these key financial phrases?

Although 13 may be unlucky for some, understanding these 13 key financial phrases is going to mean good things for your business. Whether they are all relevant to you right now or not doesn’t matter.

The more you know about your finances, and the better you understand these terms, the better prepared you are to assess your own financial standing, make plans for the future and generally feel more confident in your own abilities.

This is the key to success, especially if you run a small business.

So go on, get reading and make sure you are familiar with all of the above!



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MARKETING

PGA TOUR transforms fan experience, analytics and customer feedback

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PGA TOUR transforms fan experience, analytics and customer feedback

This week, the PGA TOUR announced a partnership with experience management (XM) technology company Qualtrics to begin a multiyear transformation of fan experience across all touchpoints for tour events.

The PGA TOUR will use Qualtrics’ XM, which includes Qualtric Social Connect and Qualtrics Customer and Employee XM products, to draw insights from how fans engage with digital platforms at tournaments and determine ways to improve the experience. This, in turn, will help meet the goal of cultivating new fans, as well, according to Travis Trembath, vice president fan engagement for PGA TOUR.

Improving the fan’s journey. “There are several stages in a tournament attendee’s journey, each which can make or break someone’s overall experience — from parking, to food and beverage, to restrooms and venue sight lines,” said Trembath. “Our goal is to improve all aspects to provide fans a best-in-class experience from start to finish.”

The journey also includes different levels of engagement through digital experience (DX) touchpoints. For instance, some fans use the PGA TOUR app while on-the-go to check scores and tournament news. Other fans want a more engaged DX that complements a tour telecast on a second screen. And there are also fans who seek out stats and other content relating to fantasy sports and betting.

“The partnership with Qualtrics will enable us to gain a deeper understanding of fan preferences across all of these channels and allow us to begin to optimize the experience on our existing platforms for different types of fans that consume the tour in different ways,” Trembath said.

Read next: What is a digital experience platform or DXP?

Feedback front and center. What will fuel the transformation? Feedback from fans. The tour already sends surveys to ticket buyers and a fan panel following an event. They also use social media listening tools. PGA TOUR will use the XM products to build out holistic fan profiles to make the feedback, and eventual improvements, more comprehensive.

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“One potential outcome of getting closer to our fans is that we may very well uncover new ways to engage fans that we had not previously contemplated or implemented,” said Trembath.

For current touchpoints, insights from customer preferences will inform the kind of content this is produced and distributed on digital channels.

“We understand our fans are looking for more immersive on and offline experiences; they want more behind-the-scenes access and content from our world-class athletes,” Trembath explained. “Qualtrics XM products will allow us to dig deeper and use a more systematic approach to learning about our fans’ preferences and experiences, and enable us to connect the dots to build more holistic profiles of our fans’ behaviors across multiple touchpoints.”

Read next: How to tackle the challenges of running successful hybrid events

Implementing Qualtrics XM. “The initial rollout will be focused on identifying macro insights that can be used to improve the overall experience for fans around the world,” said Trembath.

As a phase two, PGA TOUR will integrate fan preferences into their first-party fan database, resulting in more personalized experiences.

“The Qualtrics platform will be complementary to our Adobe digital marketing products and AWS data and analytics tools, enhancing our overall capabilities when it comes to learning and engaging our fans,” Trembath said.

Timeline for rollout. Some Qualtrics XM elements will be deployed this fall, including collecting feedback from websites, apps and social media.

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Real-time feedback through the Qualtrics XM platform will be incorporated into some tournaments in Q1 2023. The tour will use insights to make improvements to experience on-the-fly. Additionally, post-event feedback will be used to improve experience at specific annual tournaments the following year.

“As we uncover opportunities to improve the fan experience, we will act on them immediately,” said Trembath.


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Why we care. Golf tournaments have many of the same touchpoints as stadium sports, even if the golf course is a more open, outdoor venue. You have parking, ticketing, concessions and, of course, the game itself. With a lot of downtime between swings there’s also more opportunity for fans to consume content on a mobile device. So there is definitely a need to make sure that the experience is first rate. And who is a better authority on how to improve the experience than the fans themselves?

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Golf fans who also play the game have seen more technology at many high-end courses, so it’s reasonable to assume that they expect the experience at tournaments to continue to improve.


About The Author

Chris Wood draws on over 15 years of reporting experience as a B2B editor and journalist. At DMN, he served as associate editor, offering original analysis on the evolving marketing tech landscape. He has interviewed leaders in tech and policy, from Canva CEO Melanie Perkins, to former Cisco CEO John Chambers, and Vivek Kundra, appointed by Barack Obama as the country’s first federal CIO. He is especially interested in how new technologies, including voice and blockchain, are disrupting the marketing world as we know it. In 2019, he moderated a panel on “innovation theater” at Fintech Inn, in Vilnius. In addition to his marketing-focused reporting in industry trades like Robotics Trends, Modern Brewery Age and AdNation News, Wood has also written for KIRKUS, and contributes fiction, criticism and poetry to several leading book blogs. He studied English at Fairfield University, and was born in Springfield, Massachusetts. He lives in New York.

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