Glossary 

Accountant – A licensed professional who can analyze and audit a company’s financial statements, provide financial advice and represent the company at meetings with Tax, Bituach Leumi and VAT authorities. Accountants frequently work with a company’s CFO or controller.

Acquisition – When one company buys another by paying cash, acquisition of shares, share swap or by incorporating the company . Some acquisitions can be hostile, where the company to be acquired puts up a fight or uses a variety of actuons such as poison pill that devalues the stock if acquired.

Analysis of financial statements – The basic activity or an accountant who checks the company’s books and then describes how the company is doing, it’s worth, and takes step to correct problematic situations.

Advisory Board –  A group of external advisors to a portfolio company. Less formal than a Board of Directors

 

Business angels – Specialized investors  who provide enough initial cash to small startups to enable them to create a proof of concept and then raise more significant funds.  Angels usually receive a sizable chunk of potential shares for this activity.

Business grants – These are loans or payments made by the government to small companies to help them start up.  Some grants come from the Ministries of Trade, Investment, Finance, Chief Scientist, and others.

Bookkeeper – Someone who manages the company’s books including receivables, payables, cash flow, calculating income tax payments, bank reconciliations VAT payments, and creating reports such as monthly General ledger, P&L, VAT statements.

Budget audit – Businesses run according to a monthly and annual budget that tracks sales, expenses, capital expenses (rent, leasing, equipment, salaries) and opex including payments for services, electricity etc. Companies must track performance against their budget,  to see if they need to cutback on expenses, or, when they earn more than expected, make additional expenditures or hire extra employees.

Capital – The amount of money or assets that a company has.  This may be expressed by their facilities, equipment, human capitol, IP, etc.  

Cash flow – The amount of money a company received during the month versus what it must pay out,  Cash flow is a key marker of the health of a business. Even if a company has many long term obligations, if it is cash flow positive, it is attractive and can often make a go of it.

Crowdfunding–  The process of raising financial support for a venture via smaller amounts from many investors (“the crowd”), rather than the alternative pattern of larger amounts from a smaller number of supporters.

Due diligence – When a company is thinking of buying another company, they perform due diligence.  This includes a detailed audit, evaluating the IP, speaking to customers, checking for outstanding law suits, and finding out what’s happening behind the business plan and finances presented. Prospective employees will also do this with potential employers.

Equity investment – An investor puts money into a company in exchange for a stake in the company, a percentage of ownership.

Elevator pitch –  An elevator pitch is a brief presentation, typically 30 – 60 seconds in duration, presenting the entrepreneur’s concept/solution, business model, “go to market” strategy, and value proposition to potential angel or venture capital investors. A good elevator pitch interests investors and leads them to learn more about the opportunity

Exit – The method by which an investor and/or entrepreneur intends to sell their shares in the company or  “exit” their investment in a company. Common ways to exit are an IPO or buyout from another company. Entrepreneurs and VCs often develop an “exit strategy” while the company is still growing

Financial accounting reports –  These reports include a look at long term financial commitments including capital costs, leases, and loans.  It also focuses on the ability to repay these commitments from current operating cash reserves.

Financial controller – After the CFO, the primary financial authority in the company.  In many companies, the CFO is outward facing – raising money, shareholders, investors – while the controller is inward focused, insuring that the company runs smoothly from a financial perspective.

 

General ledge – The General ledger is a collection of all of the transctions a company makes. It reports incoming funds and outgoing funds. Profit or Loss Closely related to the budget, this reports shows monthly income against monthly expenses including both CAPEX and OPEX.

General audit – Conducted annually by certified external auditors, this checks all of the financial reports from the past year.  It is usually then presented to the Board and Shareholders, The audit also reviews  taxes owed and dividends.

Holding gain (or loss) – The gain or loss that accrues from holding on to an asset such a building, land, or an asset.

Investor reports Investors in a company want to understand how their money is being put to use.  A typical investor report will include P & L and budget vs actual.  It will also highlight major expenditures, changes in headcount and addition of senior management or Board changes. It also highlights any major issues that the company faces.

IPO – Initial public offering The first time shares of stock in a company are offered on a securities exchange or to the general public. At this point, a private company turns into a public company (and is no longer a startup).

Incubator / Accelerator–  A private legal entity, for profit, that supplies its portfolio companies with the following: work environment, administrative services, technological & business guidance, and legal & regulatory assistance, in exchange for equity in the company. In Israel, the Office of the Chief Scientist has a technological incubator program. The primary goal of the program is to transform innovative technological ideas, that are too risky and in too early a stage for private investments, into viable startup companies. The incubation term of a project is approximately two years and the total budget for the two-year term ranges from US $500,000 to US $800,000.

Journal voucher – An entry into the GL

Key result – These are important statistics that indicate how the business is operating.  It can be translated into KPR or Key Performance Results

Ledger balance – The ledger balance is the balance available as of the beginning of the day.

Management accounting – Management accounting is practiced by CFOs and Controllers.  They use the information contained in the major reports to help ensure the business remains viable and is not spending too much money.

NDA (Non-disclosure agreement) – An agreement between two parties to protect sensitive or confidential information, such as trade secrets, from being shared with outside parties.

Overhead – Overhead includes CAPEX items such as rent, equipment, salaries, taxes, benefits and pension payments.  It is the cost of running the business from a fixed cost point of view.

Profit and loss – A company that is earning more money is making a profit.  A company that is making a loss is making a loss.  A P & L report shows the anticipated losses and profits a company will have.

Quarterly statement -Corporations must issue quarterly statements that indicate how the company is performing. 

Reporting – Companies must report how they are performing.  For smb that may not be incorporated, a single annual set of reports for tax purposes is adequate.  For corporations, quarterly and annual reports are a necessity.

 

Seed – The seed round is the first official round of financing for a startup. At this point, a company is usually raising funds for proof of concept and/or to build out a prototype, and is referred to as a “seed stage” company

Shadow Payroll – Shadow payroll refers to a non-cash payroll established in the host country where an assignee is working. The shadow payroll is not the primary payroll from which the assignee is paid, as he or she usually continues to be paid from the home country payroll. By conducting a shadow payroll in the host country, the employer will be able to remit local taxes in the host country to the revenue authority .
The shadow payroll will assist the employer to meet local reporting obligations and produce the appropriate year end wage statements etc. 

Startup –  A company in the early stages of operation. Startups are usually seeking to solve a problem or fill a need, but there is no hardand-fast rule for what makes a startup. A company is considered a startup until they stop referring to themselves as a startup.

Term sheet – A non-binding agreement that outlines the major aspects of an investment to be made in a company. A term sheet sets the groundwork for building out detailed legal documents.

Unit costing – As opposed to a project cost, a unit cost details the cost per unit of a product or a service license.  This cost includes a portion of R & D or development costs plus a portion of overhead so it reflects the true cost of a product.

Vat compliance – – Global corporations must have a LOCAL address and representative for VAT purposes.  VAT is paid on a monthly or bi-monthly basis.  It takes the VAT that has been paid out and deduct the VAT that has been collected.  If there is a positive balance, this is paid to the VAT authorities.

Vat registration –  Every business in Israel that earns over ________must register with the VAT authorities.  Currently, companies must add a 17% tax to every invoice. Businesses can deduct the VAT they owe suppliers agains the VAT they collect and pay the difference. Running a business without VAT registration is illegal. 

Venture capital–  Venture capital is financing that investors provide to startup companies and small businesses that are believed to have long term growth potential. For startups without access to capital markets, venture capital is an essential source of money. Risk is typically high for investors, but the downside for the startup is that these venture capitalists usually get a say in company decisions.

Voucher register – This is used to calculate VAT and other taxes.  A business must use a cash register or computer program that tracks all sales for tax purposes.

Wage scale – This is a table that includes the wage, deducation and payments to pension, social security, taxes etc.  These are updated periodically and include details as the number of children an employee may have, whether they are a new immigrant, where they live and the size of the business.