As an independent school technology leader, it's important to familiarize yourself with key accounting terms that a CFO (Chief Financial Officer) at a school would commonly use. Understanding these terms will enable effective communication and collaboration between the finance and technology departments. Talk with your business officer about which accounting terms you need to know and how your school’s technology budget operates.
Essential Accounting Terms
Accounts Payable (AP): The amount owed by a school to its suppliers or vendors for goods or services received but not yet paid for. Technology leaders often work closely with the finance team to ensure timely payment of technology-related invoices.
Accounts Receivable (AR): The amount owed to a school by its customers or students for goods or services provided but not yet collected. It's essential to monitor AR to ensure cash flow stability.
Accruals: Recording revenues and expenses when they are earned or incurred, regardless of when the actual cash exchange takes place. Accrual accounting provides a more accurate representation of financial activities.
Audit: An independent examination of financial records, transactions, and statements to ensure accuracy, compliance, and transparency. Technology leaders may be involved in providing necessary documentation and cooperating with auditors during the audit process.
Balance sheet code: In accounting, a balance sheet code refers to a specific identification or reference number assigned to individual accounts on a balance sheet. These codes help in organizing and categorizing different assets, liabilities, and equity items for tracking and analysis purposes.
Balance line item: A balance line item refers to a specific account or entry on a financial statement that represents the remaining amount after subtracting expenses or credits from the corresponding revenues or debits.
Budget: A financial plan outlining expected revenues and expenses for a specific period. It helps allocate resources and track financial performance.
Capital Expenditure (CapEx): The purchase of long-term assets that provide future benefits, such as buildings, equipment, or technology infrastructure. Technology leaders should collaborate with the CFO to plan and budget for CapEx investments.
Coding: In accounting, coding refers to assigning specific numerical or alphanumeric values to various transactions or accounts to categorize and organize them for tracking and analysis purposes.
Cost of Goods Sold (COGS): The direct expenses associated with producing or delivering goods or services. For educational institutions, this might include the costs of textbooks, software licenses, or classroom materials.
Depreciation: The systematic allocation of the cost of an asset over its useful life. Technology leaders should be aware of the depreciation of equipment and software to ensure accurate financial reporting.
Expense report: An expense report is a document that summarizes and details the expenses incurred by an individual or organization during a specific period, typically for reimbursement or financial tracking purposes.
Internal controls: Procedures and policies implemented to safeguard assets, ensure accurate financial reporting, and prevent fraud. Understanding internal controls is crucial for technology leaders to maintain data security and compliance.
Operating Expenses (OpEx): Day-to-day expenses incurred to keep the school operational. It includes salaries, utilities, maintenance costs, and other expenses necessary for running the institution.
Zero balance budget: A budgeting method where your income minus expenses equals zero, ensuring that every dollar is allocated and accounted for.