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Your Accountant Speaks a Different Language
Every financial term they use, translated into plain English. Not complicated. Just never explained properly.
By Geoff Womack · April 20, 2026 · 6 min read
You sit down with your accountant. They start talking about accrual basis and EBITDA and working capital and revenue recognition. You nod along because you don't want to look like you don't understand your own business. But you don't fully understand what they're saying. And that's not your fault.
These terms aren't complicated. They've just never been explained in a way that actually makes sense to the person running the business. Here's your cheat sheet.
The Big Four
These are the four terms that come up in almost every conversation with an accountant. If you understand these, you'll follow 80% of what they're telling you.
Accrual Basis
What your accountant says
"We're on accrual basis accounting."
What it actually means
You count revenue when you earn it, not when you get paid. You count expenses when you incur them, not when you write the check. If you finished a $10,000 project in March but the client pays in May, that $10,000 counts as March revenue.
Why it matters: This is why your P&L can show a profit while your bank account is empty. The money is earned but not collected. Understanding this one concept prevents more confusion than any other.
EBITDA
What your accountant says
"Your EBITDA this quarter was $45,000."
What it actually means
Earnings Before Interest, Taxes, Depreciation, and Amortization. Strip away the financing decisions (how much debt do you have), the tax situation (which varies by entity type), and the accounting rules (spreading the cost of big purchases over time). What's left is how much money the actual operations of your business generated.
Why it matters: This is the number investors, lenders, and buyers look at. It tells them how the business performs independent of how it's financed or structured. When someone says "what multiple are you trading at?" they mean your valuation divided by EBITDA.
Working Capital
What your accountant says
"We need to watch our working capital position."
What it actually means
Can you pay your bills for the next 12 months? Working capital is your current assets (cash, money owed to you, inventory) minus your current liabilities (bills you owe, debt due within a year). If the number is positive, you can cover your near term obligations. If it's negative, you have a problem.
Why it matters: A business can be profitable on paper and still run out of working capital. This is the number that tells you whether the lights stay on.
Revenue Recognition
What your accountant says
"When do we recognize this revenue?"
What it actually means
When does this money officially count? If a client pays you $12,000 upfront for a full year of service, do you count all $12,000 as revenue today? No. You recognize $1,000 per month as you deliver the service. The rest sits on your balance sheet as "deferred revenue" until you earn it.
Why it matters: Getting this wrong makes your financials unreliable. If you recognize all the revenue upfront, your Q1 looks amazing and Q2 through Q4 look terrible. Proper recognition spreads it evenly so your numbers reflect reality.
The Next Six
Once you've got the big four, these are the terms that round out your financial vocabulary.
Accounts Receivable (AR)
Money people owe you. You did the work, sent the invoice, but haven't been paid yet. High AR means you're financing your clients' cash flow with your own money.
Accounts Payable (AP)
Money you owe other people. Bills that have arrived but you haven't paid yet. Managing the timing between AR (money coming in) and AP (money going out) is the core of cash flow management.
Depreciation
Spreading the cost of a big purchase over its useful life. You bought a $30,000 vehicle. Instead of showing a $30,000 expense in month one (which would wreck your P&L), you spread it over 5 years: $500/month. The cash left on day one. The expense shows up gradually.
Net Margin
Your net income divided by your revenue, expressed as a percentage. If you made $8,000 on $100,000 in revenue, your net margin is 8%. This tells you how much of every dollar you actually keep after everything is paid.
Burn Rate
How much more you spend each month than you earn. If revenue is $10,000 and expenses are $15,000, your burn rate is $5,000/month. Divide your cash by your burn rate and you get runway: how many months until the money runs out.
Chart of Accounts
The master list of categories your business uses to organize financial transactions. Revenue, COGS, rent, payroll, marketing, software. Every dollar gets assigned to a category. A clean chart of accounts means your P&L tells a clear story. A messy one means nobody knows where the money went.
The Bottom Line
Your accountant isn't trying to confuse you. They're using precise language because precision matters in finance. But you deserve to understand what that language means. Print this page. Bring it to your next meeting. Ask better questions. The more you understand your numbers, the better decisions you'll make.
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