The Frequency Accounting Glossary

The total amount of money a business brings in through sales or services, before any expenses are subtracted. The operational truth: Revenue is historical and theoretical until it's collected and cleared in the bank account. A big month of invoiced revenue means nothing if none of it has actually landed in your checking account yet.

What's left over after all operating expenses, interest, and taxes are subtracted from your total revenue. The operational truth: Profit is an accounting construct. A business can be highly profitable on paper and still go bankrupt if the cash is tied up in unpaid invoices, inventory, or a big tax bill nobody set aside for.

The actual movement of money in and out of your business bank accounts over a specific period.

A measure of how much cash or easily accessible money your business has on hand to meet immediate, short-term obligations (like payroll or rent). The operational truth: Cash is oxygen; liquidity is how well your business breathes.

The difference between your current operational assets (cash and outstanding invoices) and your current liabilities (debts and upcoming bills). It's the cash required to keep daily operations running smoothly.

The cash generated specifically by your core business operations, excluding outside investments or financing. The operational truth: If OCF is consistently lower than Net Income, you're making sales but failing to collect the cash.

The percentage of revenue you retain after covering the direct costs of delivering your service or product. Higher margins act as a protective buffer during slow client payment cycles.

The ongoing costs of running your business that aren't tied to any single job or client — rent, software subscriptions, insurance, admin salaries. Overhead doesn't disappear in a slow month, which is exactly why it has to be planned for in a good one.

The exact amount of revenue you need to bring in to cover all your costs — the line where you stop losing money and start making it. Everything past that line is where profit actually begins.

A short-horizon financial model that projects your cash inflows and outflows exactly 13 weeks into the future. It aligns with payroll, tax quarters, and client payment cycles to prevent liquidity crises before they happen — not after.

A breakdown of how long your clients' unpaid invoices have been outstanding (typically grouped by 0–30, 31–60, 61–90, and 90+ days). The operational truth: The older an invoice gets, the less likely you are to collect it. A polite follow-up at day 31 is worth more than an aggressive one at day 91.

The flip side of AR: what your business currently owes to vendors, suppliers, or contractors. Managing AP well is about timing — paying on time to protect relationships and credit, without paying so early that you strangle your own cash position.

A separate, physically isolated bank account where a portion of every dollar earned is immediately deposited to fund future federal, state, and local tax liabilities.

A business structure (like an LLC or S-Corp) where business profits "pass through" directly to the owner's personal tax return. Because taxes aren't withheld automatically the way they are from a paycheck, intentional tax reserves are required — this is the single most common reason pass-through owners get blindsided every April.

Payments the IRS requires from self-employed individuals and pass-through business owners four times a year (typically mid-April, mid-June, mid-September, and mid-January) because no employer is withholding tax from a paycheck on your behalf. Missing these doesn't just delay the bill — it adds penalties on top of it.

The Social Security and Medicare tax (15.3%) that self-employed individuals pay on their own behalf, since there's no employer splitting the cost with them. It's calculated separately from, and in addition to. regular income tax.

The money a business owner takes out of the company for personal use, outside of regular payroll. The operational truth: Pausing owner distributions indefinitely is one of the earliest signs of a business trapped in survival mode.

What's actually "yours" in the business — total assets minus total liabilities. It's the number that answers "if I sold everything and paid off every debt today, what would be left?"

Predictable or unpredictable fluctuations in cash flow caused by seasonal demand, varying project timelines, or irregular payment dates.

How many months your business could keep operating on its current cash reserves if revenue stopped tomorrow. A short runway isn't automatically a crisis — but not knowing your runway number at all is.

A CPA focuses on high-level tax strategy, deductions, and filing your returns once a year. A bookkeeper manages the real-time, day-to-day financial health of your business, categorizing transactions so your books stay tax-ready all year — not scrambled together in March.

The process of cross-checking your internal bookkeeping records against your actual bank and credit card statements to ensure they match down to the penny.

The master record of all your business's financial transactions — debits, credits, assets, liabilities, revenue, and expenses.

The structured system of organizing every business expense and income transaction into clear, IRS-compliant buckets so you always know exactly where your money is going.

Connecting your customer checkout systems (like Square, Shopify, or Clover) directly to your bookkeeping software so sales and fee data flow automatically and accurately.

The process of untangling unorganized financial records, un-reconciled accounts, or personal-business spending overlap to establish an accurate historical baseline.

Two different ways of recording transactions. Cash basis counts money when it actually hits your bank account. Accrual basis counts income when it's earned and expenses when they're incurred, regardless of when cash actually moves. Most small businesses run cash basis for simplicity — but accrual gives a truer picture of long-term profitability, especially for project-based work.

A report showing your revenue, expenses, and resulting profit or loss over a specific period. This is the document that answers "did I actually make money this month?"

A snapshot, at a single point in time, of what your business owns (assets), what it owes (liabilities), and what's left over (owner's equity). Think of the P&L as a movie of your performance and the Balance Sheet as a photograph of your position.

The direct cost of producing whatever you sell — materials, direct labor, and production costs tied specifically to a product or service. This is what gets subtracted from revenue to calculate gross margin.

The IRS-recognized way of spreading the cost of a big purchase (a vehicle, equipment, a piece of machinery) across its useful life instead of deducting it all at once. It matters because it affects both your tax bill and how "profitable" your books look in the year you bought the thing.

The 12-month period a business uses for accounting and tax purposes. For most small businesses this matches the calendar year (January–December), but it doesn't have to.

A W-2 worker is a payroll employee — taxes are withheld automatically, and the business pays payroll taxes on their behalf. A 1099 worker is an independent contractor who is responsible for their own tax withholding. Misclassifying one as the other is one of the most expensive mistakes a growing business can make with the IRS.

The form a business collects from a contractor or vendor before paying them, used to gather the tax ID information needed to issue a 1099 at year-end.

The form a business must send to any non-employee (contractor, freelancer, subcontractor) it paid $600 or more to during the year. It's how the IRS confirms that income on both sides.

The federal tax ID number for your business — essentially a Social Security number for your company, used to open bank accounts, hire employees, and file business tax returns.

The combined taxes (Social Security, Medicare, federal and state unemployment) that an employer withholds from employee paychecks and matches out of its own funds. This is separate from, and in addition to, an employee's income tax withholding.

The connection a business has to a state — through physical presence, employees, or in many states simply enough sales volume — that legally requires it to collect and remit sales tax there. This has become increasingly relevant for e-commerce and multi-state service businesses since the 2018 Wayfair Supreme Court decision.

Tracking every single expense — raw materials, equipment rentals, direct labor, and subcontractor fees — to a specific job or project.

A metric that isolates a single project's revenue against its exact job costs to see if you actually made money on that specific build or contract.

A percentage of a contractor's payment (commonly 5–10%) that a client or general contractor withholds until the project is complete, as a guarantee against unfinished or defective work. It's cash you've earned but can't touch yet — and it needs to be tracked separately so it doesn't quietly wreck your cash flow forecast.

A formal amendment to a construction contract that adjusts the scope, cost, or timeline of a job after work has already started. Untracked change orders are one of the most common reasons a "profitable" job turns out to have lost money.

A report that compares billed amounts to actual costs incurred on active, unfinished jobs — used to catch a job that's quietly over budget before it's too late to fix.

A comparison of what you spend on your team's payroll and contractor fees against the total revenue generated by their work. It tells you if your agency is over-staffed or under-priced.

An upfront fee paid by a client to secure an agency's ongoing services over a set period, typically managed across payment timing versus service delivery.

Billable hours are the time your team spends on work clients are actually paying for. Utilization rate is the percentage of total working hours that are billable, versus time spent on admin, sales, or internal work. A low utilization rate usually explains a healthy-looking revenue number that still isn't turning into real profit.

Separating and logging raw commission splits, desk fees, and agent payouts to understand your true net brokerage income.

For property managers and real estate investors: a financial report that breaks down income, maintenance, and repairs per individual property unit rather than looking at the portfolio as a broad whole.

The fixed or variable costs associated with lead generation, property listings, and branding that must be safely budgeted for between closing cycles.

A separate bank account required in real estate transactions to hold client funds — earnest money, security deposits, rent collected on behalf of an owner — completely apart from the business's operating money. Commingling these funds isn't just a bookkeeping error; in real estate, it's a licensing violation.

Calculating the exact cost of backbar products, booth/room rent, and time spent on a specific service (a lash set, a chemical peel) to determine if your menu pricing is structurally sustainable.

The fee an independent stylist or esthetician pays a salon or spa owner to use a space and its equipment. For the person paying it, this is a fixed overhead cost that needs to be covered before a single service is profitable. For the salon owner collecting it, it's income that needs to be tracked separately from service revenue.