Accountants use acronyms like a second language, GM, COGS, EBIT, EBITDA, NPAT, ROI, ROCE, NPV, IRR, AR, AP, WCE, DSO the list goes on and on....
Over time a large amount of accounting and financial acronyms have become part of the business community vernacular which is great for communicating and understanding your business, but which may seem like a foreign language at first!
Here are a couple of the profitability acronyms to help your understanding:
On starting a company with more than one shareholder, shareholders are often advised to make a Shareholders' Agreement... why?
While a Shareholders' Agreement is by no means a legal requirement, shareholders are well advised to record their agreement at the outset of business operations in order to regulate the way business between them is conducted.
A Shareholders' Agreement is usually formed at the beginning of a new business venture.
A Shareholders' Agreement is a binding contractual arrangement between shareholders and governs their relationship with one another, their business relationships and arrangements.
Quite often, shareholders will ask whether a Shareholders' Agreement is actually needed particularly when the business is young, relationships are good and finances may be tight.
So, why should shareholders seriously consider entering a Shareholders' Agreement?
Remember: the initial cost in setting-up a Shareholders’ Agreement is nothing compared to the costs of disputes and you should therefore view the cost of preparing a Shareholders’ Agreement as an investment. An investment in the smooth-running and stability of your company.
Adequate protection of confidential information is an absolute must for SMEs as that information is so often one of the business' best assets.
The first question for businesses is “what is our confidential information”?
Often, confidential information will include client lists, your financials (including your margins), your design and methodology, ‘secret’ ingredients, contracting arrangements and proposed business takeovers/mergers.
The next question for your business is “how can we protect that confidential information”?
There are a range of legal and practical mechanisms that businesses can and should implement to protect their information, which is often one of their key assets.
These mechanisms include: