Overcoming the Jargon and Challenges of Accounting

One of the biggest stumbling blocks a person endures when navigating in Accounting is simply the field’s terms and jargon. And when you factor how these terms apply to your business management systems, it is easy to get lost in their translations.  Here are four over utilized Accounting words and how they are often translated when it comes to finances and cloud technology:

Accounts

“Accounts” is a term often loosely communicated and can have different meanings between your front and back office. Many organizations and their business management systems use the word “accounts” when referencing their customers or vendors. For example, a company name such as “Alpha Communications” is classified as an Account in CRM systems.   As it relates to accounting, the term can be applied to General Ledger Accounts or overall categorization number assigned to financial transactions (e.g. #12345-1).

Reconciliation

Are your books reconciled? This is a vague question. The word “reconciled” could imply contextually separate tasks within accounting and among organizations. For instance, it is used in the context of ensuring banking entries in your accounting system are consistent with bank statements. Alternatively, reconciling can be denoted for providing a detailed listing of records that make up a summary value for an individual ledger account in the trial balance. For example, many auditors will want to see a detailed listing of Accounts Receivables records that tie to the Trial Balance at the end of an accounting period. Making sure the detailed record listing is right is act of reconciliation.

Margins

From accounting to sales and operations, there are several ways to calculate profitability or margins. Also, the use of margins can vary by company and by industry.  Below are some common examples of margins:

• Gross Margin is typically Revenue less Cost of Goods Sold including labor materials and overhead.
• Contribution Margin is often associated with Gross Margin minus materials only or a portion of cost of goods sold.
• EBITDA or Operating Margin is often revenue minus cost of goods sold and sales and marketing expenses or Earnings before interest, taxes depreciation or amortization.

Invoice and Credit Memos First of all, invoices and credit memos can apply to customers or vendors.  Because of this, it is important to specify the type of invoice at the beginning of any conversation about credit memos. In addition, there are several synonyms for these terms used by companies, industries and software applications.  

• Synonyms for Customer Invoice include Billing, Sales Invoice, Account Receivable, Receivable
• Synonyms for Vendor Invoice include Account Payable, Payable, Purchase Invoice.

The bottom line is to make sure to get clarity on the accounting jargon used prior to performing any back office tasks.  This will help minimize the complexities associated with the diverse language and systems utilized in the Accounting arena.