Glossary of Business Management Terms
A Comprehensive Dictionary of Business Management Terms
If you want to understand business management, this dictionary of thirty management terms will get you up to speed.
Simply put, an accounts payable report gives you an overview of what your business owes for supplies, inventory, and services. A quick glance at this report reveals the identities of your creditors, how much money is owed to each creditor, and how long that money has been owed.
Every business has assets, which in their simplest terms are things of value. All businesses need assets to produce products or sell services. An asset is anything a business owns.
A B2B business is one that offers products or services directly to other businesses. The business can be the end buyer, such as when a company hires a copywriter (the copywriter is the B2B business) or it can be a source of the business, such as a drop shipper who provides products to other companies who then sell them to the end user. The drop shipper is a B2B company.
B2C is an acronym for business-to-consumer. A B2C business is one that sells products or services directly to the consumer.
A balance sheet is a statement of the financial position of a business which states the assets, liabilities, and owners' equity at a particular point in time. In other words, the balance sheet illustrates the business's net worth.
Benchmarking, or goal setting, allows a company to assess the opportunities they may have for improving a number of areas in their supply chain. These areas include productivity, inventory accuracy, shipping accuracy, storage density, and bin-to-bin time.
The common application of this phrase is to take on an overly large and potentially impossible task given the reality of your resources. The phrase implies a lack of connectivity to reality.
The term bottom line refers to the profitability of a business after all expenses are deducted from revenues.
Cash flow is the money that is moving (or flowing) in and out of a business in any given month. Cash may be coming in from customers, or clients, who are buying products or services. Cash may be going out in the form of payments for expenses, like rent or a mortgage.
The Chief Executive Officer (CEO), is the top executive in an organization. That top executive can have many titles. Sometimes it is an owner, founder, or manager. It can also be a managing partner or the president. In the largest organizations, and more frequently in smaller ones especially start-ups, the title of president is being replaced by CEO.
A continuous improvement plan is a set of activities designed to bring gradual, ongoing improvement to products, services or processes through constant review, measurement, and action.
The Financial Accounting Standards Board (FASB) is the primary body in the United States that sets accounting standards.
The fiscal year for all businesses ends December 31. Enterprises that can change their fiscal year (based on their structure) include sole proprietorships, members of a partnership in which all the partners are individuals, and corporations.
Fixed assets are anything a business owns, such as a factory or a proprietary formula for a product.
Generally accepted accounting principles (referred to as GAAP), are a set of rules and practices having substantial authoritative support. GAAP is the standard that companies use to compile their financial statements such as the income statement, balance sheet, and statement of cash flow.
A golden parachute is the name given to the clause in a top executive's employment agreement or contract that defines the payout the individual will receive should they be terminated by the organization before the end of their contract.
An insider in a company is someone who has access to important information about a company that might influence investor decisions that would impact the firm's stock price or valuation. This important information is often described as material information.
Liabilities are amounts owed by a business at any one time and are often expressed as payables for accounting purposes.
A line manager is a person who directly manages other employees and operations of a business while reporting to a higher ranking manager. The line manager term is often used interchangeably with direct manager.
Matrix management is commonly used in organizations if they have a need to share resources across functions (i.e, different departments). In a matrix management system, an individual has a primary report-to boss and also works for one or more managers, most typically on projects.
For many companies, one of their most valuable assets is their intellectual property which they must keep secret. A non-disclosure agreement is a legal document between employee and employer, in which the employer agrees to disclose certain information to the employee for a specific purpose. The employee then becomes legally bound not to disclose that information to anyone else.
A profit and loss statement (sometimes called an income statement), is a business report that shows net income as the difference between revenue and expenses.
A business's revenue is the money generated by all its operations before deductions are taken for expenses. Revenue can come from the sale of the company's products or services, from the sale of surplus equipment or property, or from the sale of shares of stock in the company. It can come from a variety of other sources such as interest, royalties, and fees.
ROI is the return on investment ratio (also referred to as the return on assets ratio). It is the profitability measure that evaluates the performance of a business, or investment, or the potential return from a business or investment. It divides the net profit by net worth, with the result expressed as a ratio or percentage.
Senior managers (typically used in large organizations with multiple layers of management) have responsibilities and authority broader in scope than a front-line manager. Senior managers are usually positioned to move into a director or general manager position.
The Shewhart Cycle is most often a circle with no beginning or end, meaning that the continuous improvement process of a business never stops. The cycle has four stages: planning (when you identify an opportunity and create a plan), doing (to test the plan on a small scale), checking (to evaluate the benefit of the plan), and acting (implementing the plan on a larger scale and then monitoring results).
A subject matter expert (or SME) is a business person with a deep understanding of a particular process, function, technology, machine, material, or type of equipment. Individuals designated as subject matter experts are typically sought out by others interested in learning more about, or leveraging, their unique expertise to solve specific problems or help with particular technical challenges.
When employees leave a company and have to be replaced, that's called turnover. A certain amount of turnover is unavoidable, but too much can ruin a company. The two general types of turnover are voluntary (when the employee chooses to leave) and involuntary.(when layoffs and similar actions force an employee to leave).
Variable expenses are those business expenses which vary depending on the volume of business, sales, or the volume of transactions. Examples of variable expenses include postage and shipping for customer purchases, purchase of raw materials, inventory of products to be sold, hourly wages of employees, and sales commission.
Vision is top managements dream of what they want the organization to be. It should not be confused with strategy, which is the large-scale plan the company follows to make the dream happen.