Small Business Finance Software Key Terms

Get to know the terms used by small business finance software

Small business finance software helps a business keep its financial books in order. Each application will use a certain type of accounting system and keep records of types of expenses and income.

Some finance software works with software that processes a federal or state tax return for a given tax year. It may determine the net worth or equity of a business. Some software has a sunset policy that encourages users to upgrade to the latest version.

Double entry system

A double entry system, also referred to as double entry accounting, is an accounting method where each transaction has a debit and a credit, so the overall balance remains equal. Many business finance software applications use this system.

Envelope budgeting system

Envelope budgeting system works on the theory of having a series of envelopes for each expense and only spending money from those envelopes, as an effort to keep expenses in line with income.

Sunset policy

A sunset policy is a policy of some companies that produce business finance software, whereby after a certain date, it will no longer support a given version of the product and certain features may cease to work. Users of software with a sunset policy need to upgrade before the date, if they want to continue to use those features.

Types of expenses

Financial software categorizes each expense based on what type of expense it is. Fixed expenses stay the same over time, such as loan or insurance payments; variable expenses include costs for inventory, utilities and transportation; discretionary expenses are those that are not strictly necessary to running the business, such as entertainment expenses or charitable contributions.

Equity or net worth

Equity, also referred to as net worth, is the value you get when you compute the value of the assets of a business and then subtract the value of its liabilities.

Tax year

A tax year is the calendar year in which a tax return covers. There may be limitations to the amount of contributions or deductions that you can make in a given tax year.

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