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Finance & Accounting (FP&A) terms
Financial planning and analysis, budgeting, close and spend analytics for the CFO's office.
Annual recurring revenue (ARR) The value of a subscription business's recurring revenue, normalized to a one-year run rate. Bookings, billings, and revenue Three distinct SaaS figures often confused: signed contract value, amount invoiced, and amount recognized as earned. Break-even analysis Calculating the sales volume or revenue at which total costs are exactly covered, with neither profit nor loss. Budget vs. actual A report comparing what was budgeted for a period against what actually happened, line by line. Burn rate How fast a company spends cash, usually measured monthly, and used to estimate how long its remaining cash will last. Cash conversion cycle (CCC) The number of days it takes a company to turn spending on inventory and operations back into collected cash. Contribution margin Revenue minus all variable costs, showing how much each sale contributes toward covering fixed costs and profit. Cost allocation Assigning shared or indirect costs, such as overhead, to the departments, products, or customers that use them. Deferred revenue A balance-sheet liability for cash received from a customer before the related goods or services have been delivered. Driver-based planning Building a financial plan from operational drivers, such as units sold or headcount, rather than top-down growth assumptions. EBITDA (earnings before interest, taxes, depreciation, and amortization) A profitability measure that adds back interest, taxes, depreciation, and amortization to earnings. Financial close The recurring process of finalizing a company's accounting records and producing financial statements for a period. FP&A (financial planning and analysis) The finance function responsible for budgeting, forecasting and analyzing company performance against plan. Gross margin The share of revenue left after subtracting the direct cost of producing or delivering what was sold. Headcount planning Forecasting how many people a company will hire, lose, and pay for across a plan period, by team and role. Revenue per employee A productivity ratio, total revenue divided by headcount, used to benchmark organizational efficiency. Revenue recognition The accounting rules for when revenue counts as earned and can be recorded, which is often not when cash is received. Rolling forecast A financial forecast that is continuously extended, adding a new future period as each period closes. Rule of 40 A SaaS benchmark stating that growth rate plus profit margin should add up to 40% or more. Scenario modeling Building several named versions of a financial plan, such as best, base, and worst case, under different assumptions. Unit economics The direct revenue and costs attributable to a single unit, such as one customer or one transaction. Variance analysis Comparing actual financial results to budget or forecast and breaking the gap into the specific causes behind it. Working capital The difference between a company's current assets and current liabilities, a measure of short-term operating liquidity. Zero-based budgeting (ZBB) Building each budget cycle from a zero base, requiring every expense to be justified again rather than carried forward.