Ko-Fi Prompt from 200002:
As an engineering person who has to interact with business/accounting people more often, what are the basics you need to know/understand? Especially for projects. Sometimes I feel like they are talking in a different language.
I found this a little vague, but here we go:
One of the processes a business student is taught is generally how to do large-scale project scheduling. What they see as a necessary deadline often works on different principles entirely than what the production teams (whether engineering, manufacturing, animating, or what have you) are looking at. If you find yourself regularly talking at cross purposes, ask what's in the schedule that's got this set. Accounting or management are much more likely to have knowledge of something you may not have known to take into account, like customs paperwork or legal fees that can only be submitted after a certain point in the project.
Credit and Debit are not what you think they are. They are accounting terms that track the money that comes into the company, money that goes out, and debts incurred. I wouldn't recommend trying to learn more details than that, because it's honestly a headache.
Accounts Receivable tracks money that comes in. Accounts Payable tracks money that goes out.
Accrued Expenses: an expense that has been incurred but not yet paid (basically: invoices you owe)
Depreciation: the loss of value that comes with time and use (think of how your car or laptop loses value when it's not the newest, unused thing in the market)
Revenue: the money that comes in as a direct result of goods sold
Profit: the money left after removing all expenses (supplies, rent, wages, etc.) If a product is sold for five dollars (revenue), and the expense per unit is four dollars, the profit is one dollar.
Margin: the profit in relation to revenue, expressed as a percentage. If the revenue is five dollars, and the profit is one dollar, then the margin is 20%.
Simple interest: increase in debt is based entirely on the original loan amount (the principal of the loan) Compound interest: increase in a loan changes based on the debt quantity at the start of a given period (quarterly, monthly, etc)
Dividends: On a regular basis, investors (people who own stock) are paid a certain amount of money as compensation for owning stock, having paid money to the company to invest at some prior point. This one of the three reasons people buy stock. The others are capital gain, which is the earnings gained when selling stocks after a rise in value, and gaining voting shares to influence the direction of the company (this is what people refer to when talking about controlling interest).
Overhead: Expenses of the business that are not direct, per unit elements of the production. Raw materials and factory worker wages are not overhead. Pretty much everything else is. This includes: company rent, debt repayment, accounting software costs, payroll costs, utilities, equipment maintenance, corporate taxes, certificate fees, advertising costs, and the wages of people who are not directly involved in manufacturing (e.g. R&D, payroll, HR, sales department, and so on).
