Glossary of Financial Terms

Understanding the world of finance can be complex, with many terms, phrases, and jargon that can be difficult to parse through. To help, we put together this glossary of finance terms. This glossary contains commonly used terms you’ll encounter, along with straightforward definitions. This can be an invaluable resource for finance teams, startup founders, SMBs, and more.
ACH Transfer

Automated Clearing House (ACH) transfers are direct deposits sent through the National ACH network. ACH transfers are initiated once appropriate paperwork is filed with a financial institution. Intermediary banks, credit unions, and other financial institutions process ACH requests in batches. This means these transfers can take up to three business days to process.

ACH transfers vs wire transfers

Audits are an independent financial review of a company’s internal controls and financial reporting. Governments have strict rules for external audits. This ensures audits can be used for reports to the investors, legislators, and the general public. An audit can provide an external tick of approval that a company’s financial statements and performance are all being accurately reported.  And an audit can also provide insights about any financial controls or processes that management needs to improve.

Managing Ramp's first audit
Annual Percentage Rate (APR)

Annual percentage rate (APR) is the total annual cost of a loan, including all interest and fees. This is calculated using the original loan amount, or principal, and is expressed as a percentage. It's important to understand APR, because it indicates the actual cost of borrowing.

Business Credit Cards

Business credit cards enable cardholders to make purchases by using credit issued by the credit card company (think American Express, Visa or Mastercard). Instead of using cash for each purchase, it’s issued as a loan and noted in a monthly credit card statement. This loan amount—the credit card balance—must be paid back in installments to the card provider over a period of time, with an additional amount of interest specified by the card provider.

Best business credit cards: Automation is key
Balance Sheet

Balance sheets detail business’s assets, liabilities, and any owners' equity at a certain point in time.

How to create a balance sheet
Balloon Loan

Balloon loans are loans that are designed so that small business owners pay frequent payments on a predetermined schedule and then make one ‘balloon’ payment at the end. These can be appealing to young companies because the payments are smaller at first when the company is more likely to be under financial stress. However, the final balloon payment is often substantial.


Cashback is when you receive a percentage of a transaction as a cash reward, as a credit on your account. For example, if you bought a $100 office chair with a corporate card provider that gives you 1.5% cashback, like Ramp, you would receive $1.50 in cashback. Cashback is an alternative to loyalty points that is a better fit for small businesses that want to incentivize saving and cash flow.

What is Cashback
Charge Cards

Charge cards are payment cards where the balance must be paid off in full at the end of each month. And it’s only when the balance isn’t paid off in full each month that a charge card’s interest rate kicks in. Charge cards can be an effective way of managing budgets when you have financial predictability. Some charge card issuers may also allow for more flexibility with monthly spending limits, based on fluctuating factors, such as quarterly sales.

What’s the difference between credit cards and charge cards?
Corporate Cards

Corporate cards are credit or debit card companies can issue to their employees. Staff can use their corporate card to pay for work expenses, like home office equipment, work lunches, or tickets and travel to conferences. Modern corporate cards provide businesses with a way to manage their spending, away from the traditional approach of reimbursements, expense reports, and procurement policies.

What are Corporate Cards
Capital Gains / Capital Losses

Capital gains are the difference between the current value and the initial purchasing price. The gain is merely a paper gain until the asset or investment is sold. A capital loss is a drop in the value of an asset or investment since purchase.

Cash Flow

Cash flow is the amount of operating cash that "flows" through a company and influences its liquidity. Cash flow reports show activity over a set time frame, usually a month or one accounting period. Maintaining strict cash flow control is critical if your business is new, because available cash may be limited until the company grows and produces additional working capital.


Dilution is a reduction in your share of company ownership. It’s important later in a company’s life too, if it ‘goes public’ with an Initial Public Offering (IPO) or offers additional shares through a secondary stock offering. In short, the more shares a company offers the more ‘diluted’ its ownership becomes. If your company provides non-qualified stock options to your employees—and one or more of them exercises their options—then this would cause dilution.

What is Dilution
Expense Reports

Expense reports are reports that list various business costs. These costs are typically incurred by individual employees, units, or entire departments. Sometimes the expenses are project-based, sometimes they are ongoing. There are a few different kinds of expense reports, including T&E expense reports, monthly expense reports, and recurring expense reports. Each kind of expense report includes an itemized list of expenses, like meals, transport fares, and home office equipment. Accurate expense reporting helps businesses record department-wide and company-wide costs, which can then be reported (and often claimed) to state and federal governments in tax reports.

10 reasons to kill expense reports

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is a proxy for free cash flow (FCF) because it includes depreciation and amortization.

Financial Forecasting

Financial forecasting involves building department-level and company-wide budgets, analyzing the performance of strategic plans and investments, and predicting what might need to change based on analytics and expected performance. Importantly, financial forecasting is used to estimate key metrics such as revenue, profits, sales, and earnings.

What is Financial Forecasting
Finance Automation

Finance automation uses machine learning and artificial intelligence to reduce manual tasks for finance teams, such as accepting and lodging paper checks as payment, manually chasing up invoices by phone or email, or entering AR and AP data into Enterprise Resource Planning software.

What is Finance Automation
Founder Guarantees

Founder guarantees require small business owners to personally guarantee their business's debt in the underwriting process of acquiring a business credit card for their new business. However, if a founder or business owner signs an agreement where these terms apply, personal assets like cars and homes are at risk of repossession.

What is a personal founder guarantee?
FICO Score

Fair Isaac Corp developed the process for computing a credit score. FICO scores range from 300 to 850, and the higher the score, the better the loan or credit card terms. Low credit scores (below 620) may make it challenging to obtain low-interest credit.

GAAP (Generally Accepted Accounting Principles)

GAAP, or generally accepted accounting principles, define financial reporting rules and conventions. GAAP helps standardize financial statements and ensures reporting consistency. GAAP is a commonly accepted set of accounting principles, standards and procedures as issued by the Financial Accounting Standards Board (FASB). Public US companies are required to follow GAAP when compiling financial statements.

What are GAAPs
Hedge / Hedging

Hedging is a strategy used by investors and businesses to protect their investments from unforeseen changes and external risks. Diversification, staying in cash, and arbitrage are common examples of hedging.

What is a Hedge
Human Resources Information System (HRIS)

The HRIS is a repository of employee master data that human resources uses to complete core HR processes. Data include names and ID numbers, social security numbers, historical performance appraisals, benefits, and bank details. Common functions of a HRIS include employee onboarding and offboarding, leave management, and issuing corporate cards.

Interest Rates

Interest rates determine how much you pay a lender for access to some form of credit as a borrower. That could be a loan, a corporate card, or bond. Interest rates can be fixed or variable. They are typically payable on a recurring basis, like every month, but some interest payments fall due all at once.

What are Interest Rates
Invoice Financing

Invoice financing is the practice of borrowing against your accounts receivable (AR). Invoice finance companies will float you the amount payable, along with a fee. Invoice financing is used to shore up cash flow, especially when a business does not yet have predictability about its aged receivables / day sales outstanding (DSO).

What is Invoice Financing
Joint Credit

Joint credit is a credit facility between two or more people. In a startup, that might be the co-founders. Financial institutions issue joint credit, based on both parties’ income, assets, and credit scores. Each borrower has a shared responsibility to repay the debt. And if payments are missed—or if there is a default—then both borrowers’ credit scores will be affected. Joint credit is often used when one founder or business partner has a stronger credit score than the other.

What is Joint Credit
Know Your Business (KYB)

KYB is the process of due diligence that financial institutions need to carry out to prevent  crimes such as money laundering, tax fraud, and outright theft. The KYB process involves verifying identities, owners, company registration records and financial statements, and the purposes of business relationships. KYB also involves ongoing monitoring to ensure transactions or parties are not flagged on anti-money laundering (AML) watchlists.

What is KYB?
Know Your Client / Know Your Customer (KYC)

Know Your Customer and Know Your Client (KYC) standards mean financial institutions must verify their customers, and gather information about their risk tolerance, political exposure, and financial profile. Both KYB and KYB are regulated. They’re standards financial services businesses need to meet whenever they onboard new customers and clients. For example, the U.S. Financial Crimes Enforcement Network requires that financial institutions verify the identities of anyone with at least 25% ownership⁠ of a company.

What is KYC?
Liquid Assets

Liquid assets are assets that can quickly be converted to cash without losing market value. They help businesses respond to market shocks or pay off debts. Examples of liquid assets include cash, checking and saving accounts, and investments such as securities, stocks, bonds, and mutual funds.

What are liquid assets?
Maverick Spend

Maverick spend occurs when someone purchases goods or services from contractors or non-preferred suppliers outside a company’s set procurement policy. Your firm won't receive any of the discounts you worked to obtain if you buy items or services outside of a contract — or from unapproved vendors.

How to control maverick spend
Net Profit Margin

Net profit margin is a ratio that shows the percentage of sales and other income that remain after deducting all business costs, such as cost of goods sold (COGs), operating expenses, interest, and taxes—all expressed as a percentage. It can also be seen as a measure of overall profitability for the business.

What is Net Profit Margin
Operating Budget

An operating budget is a budget that includes all of the cash and non-cash expenses of operating a company. Operating expenses include wages, rent, depreciation and profits on investments.

What is Operating Budget

Points are rewards credit card providers give you in return for spending. Card providers have created systems for giving their customers different numbers of points for different dollar amounts and purchases. Some points translate into equivalent points within other loyalty schemes, such as frequent flyer programs. Cardholders can also redeem their points for goods and services at partner retailers or the card issuer’s loyalty store.

Why Ramp is committed to cash back over points

Procurement is the process of buying goods or services, typically prior to their use. The purpose of procurement is to buy items where cost, quality, and time of delivery are the prime considerations. The purchasing department, which manages the process of procurement, is responsible for ensuring that goods or services are bought at the right time and for the best price.

What is Procurement
Purchasing Cards

Purchasing cards, or p-cards, are a type of corporate charge card that allows purchases to be made without going through the typical purchase procedure. Unlike charge cards, p-cards were first introduced specifically with finance, HR, and procurement teams in mind.

What are P-Cards
Qualified Stock Options (a.k.a. Incentive Stock Options)

Qualified stock options, also known as incentive stock options, are a stock option only given to company employees. As a result, they come with preferred tax treatment. Employees pay no tax on qualified stock options when they are granted or exercised. If an employee exercises their options on the stock, they then must hold it for a year to retain its status as a qualified stock option. Unlike non-qualified stock options—which can be issued to anyone inside and outside a company—qualified stock options can’t be claimed as an operating expense.

How to evaluate your 409a valuation

Rewards are incentives, usually provided by credit card companies and banks, for depositing a certain amount each month or hitting a certain spending volume. Others will tie these rewards to repayment consistency. Most financial institutions structure these rewards as ‘points’, with no monetary value. Others offer partner rewards—vendor discounts in the form of credits, percentages off, or exclusive access to services.

What are rewards?
Spend Analysis

Spend analysis is the process of gathering, cleansing, and categorizing spend data to help identify trends and discrepancies across expense categories. The data from these analyses can help teams identify inefficiencies and ultimately increase spend visibility across their business.

5 expert tips on executing an effective spend analysis
Spend Management

Spend management is about getting value for money from company spend, while decreasing the costs of vendor, supplier, and contractor relationships. Analyzing spend, sourcing, and supplier relationships are key to spend management.

How to solve the spend management issues wrecking your budget
SaaS Management

SaaS management is the process of strategically managing your spending on software subscriptions at a company-wide level, using the best pricing and usage intelligence possible to drive contact negotiations and value for money. SaaS management is key to spend management for high-growth companies, who quickly find themselves exceeding traditional SaaS pricing tiers.

SaaS management strategies to maximize the ROI of your tools
Tail Spend

Tail spend is a high-volume of low-value expenses, such as office supplies and small tools, that make up an average of 80% of most company’s transactions—and 20% of total spend, according to Deloitte.

How to curb miscellaneous expenses with better tail spend management

Transactions are an exchange between two parties, for example a buyer and a seller, or a payer and a payee. The simplest transactions involve the transfer of cash. Other more complex transactions involve an exchange of assets or liabilities with a cash value, such as receivables, property, or stock options.

What are Transactions

Underwriting is when financial institutions take on a risk in exchange for a profit. Underwriters are involved in everything from banking and insurance through to securities. A common example of underwriting is when a bank raises capital on a corporation’s behalf through equity or debt securities.

What is Underwriting
Virtual Cards

Virtual cards are a temporary card designed to safeguard businesses and consumers against fraud and cybercrime. A virtual card has a randomly-generated card number, expiry month and year, and security code tied to your actual account. Many cards can be set up for a single use, or a small number of transactions.

Virtual cards for business: improve spend control & security
Vendor Management

Vendor management involves viewing and controlling the products, supplies, and services you purchase to operate your business. A sound vendor management program will help your business clearly see and control who supplies your business, modify contracts based on needs, and ensure spending aligns properly with service and product usage.

What is vendor management?
Wire Transfers

Wire transfers are rapid electronic fund transfers (EFTs) of funds between two entities, such as consumers or businesses. Here’s how wire transfers work: you can send the remittance through a bank or third-party payment provider, such as Western Union. You’ll need the recipient’s name, their bank account number, their routing number, and the amount of money to transfer. Third-party wire transfer services will also require the recipient’s address.

ACH transfers vs wire transfers
Xenocurrency / Xenocurencies

Xenocurrencies are a foreign currency. Xenocurrencies are those traded on markets outside the country where a central bank issued them. The US dollar is often used as xenocurrency, as is the Japanese Yen.

What is Xenocurrency

Year-to-Date is the beginning of the current fiscal year to a specified date before the year’s end. Finance teams use year-to-date when reporting on the current fiscal year.

What is Year-to-Date
Zero-Based Budgeting (ZBB)

Zero-based budgeting is a way of allocating departmental and company-wide resources based on necessity rather than historical budgets or assumptions. Think of ZBB as budgeting done from scratch.

What is Zero-Based Budgeting?
Zombie Spend

Zombie spend occurs when recurring charges continue even when a service or product is no longer needed. Think of software subscription purchased for a short-term project, or an independent contractor engaged by an employee or team that has since got the internal resources to do the same work internally. Much like tail spend—a high-volume of low-value expenses—zombie spend can become a larger problem if left unaddressed.

What is Zombie Spend