Author Archives: TheMill

How to Read The Balance Sheet

The below post is from @OnlyCFO who are a great source of financial information and you can follow them on Twitter at (@OnlyCFO) / Twitter

How to Read the Balance Sheet

People often talk about the income statement, but most people don’t really understand how to properly read a balance sheet. A balance sheet is a snapshot at a point in time of a company’s financial health. This is in contrast to an income statement which is for a specific period of time (monthly, quarterly, annually, etc).

A balance sheet includes three main sections:

  1. Assets: What a company OWNS
  2. Liabilities: What a company OWES
  3. Equity: Value attributable stockholders

If you have taken an accounting 101 course then you have heard of the formula that assets must equal liabilities plus stockholders’ equity. What many people don’t understand is that the income statement (represented by “net income (loss)” below) is one part of the balance sheet.

Below is Snowflake’s balance sheet. As with all financial statements, the balance sheet is best reviewed when compared to a prior period so you can see the changes.


Sections of the balance sheet

Here is a cheat sheet for the main sections within a software company’s balance sheet. Many captions are similar across industries, but software companies have some unique aspects.


The first section on a balance sheet is assets. Assets are what the company OWNS. Assets are things that can be sold for money if liquidated or used to generate future monetary benefits.

Assets are typically presented in order of liquidity (i.e. how readily they can be converted to cash or used to generate cash).

Below are the main sections of a software company’s asset section:

  1. Current Assets – the company expects to be able to convert to cash OR consumed within one year. Current assets include things such as the below.
  2. Cash and cash equivalents
    1. Money in the bank or in very short-term (< 90 days) maturity, liquid investments such as T-bills, CDs, and money market funds.
  1. Short-term investments

Investments in debt securities with maturities greater than 90 days (but typically less than 1 year) when purchased.

  1. Accounts receivable

Money currently owed from customers. This is the amount invoiced to customers or contractually owed based on services performed.

Most B2B SaaS companies have annual upfront invoicing terms, which means that immediately as an invoice is issued the entire amount becomes part of accounts receivable (even though it is for future services).

  1. Deferred commissions

Accounting rules require SaaS companies to almost always capitalize a large portion of sales commissions and recognize the expense over time (typically between 3 and 5 years).

If a commission is earned solely based on closing a deal, then it is likely capitalizable on the balance sheet. This would typically include commissions for AEs, AE managers, SEs, etc. Commissions for most SDRs though are based on some metric before a deal is closed (like meetings set) so those costs are expensed on the income statement as incurred and not capitalized.

Deferred commissions example: Sales rep earns $10k on January 1st, 2022 for selling a SaaS widget. Instead of expensing the $10k on the income statement on January 1st, it is put on the balance sheet as an asset and then expensed evenly each month for the next few years (depending on the company’s accounting policy). For SaaS companies, this is usually between 3 and 5 years.

Because commissions are capitalized certain SaaS metrics can get messed up and become misleading.

  1. Prepaid expenses and other current assets

This can include a variety of things but some major items for SaaS companies include software (we love to buy lots of other SaaS products), marketing events & programs, rent, insurance, etc.

  1. Non-Current Assets – these are not expected to be converted to cash OR used within one year. Some items here include:
    1. Long-term investments

These are investments with maturities greater than one year.

  1. Property and equipment

Most SaaS companies are not very capital intensive. Typical items included in this section include:

  1. Computer equipment
  2. Furniture
  • Office improvements
  1. Internal use software – these are costs used to develop software for internal purposes.

For SaaS companies, internal use software includes a portion of the costs used to develop the SaaS solution, which is typically a small percentage (< 5%) of engineering costs.

  1. Operating lease right-of-use assets

This represents the company’s right to use a leased item over the lease term. The asset is recognized based on the present value of all lease payments over the lease term. The most common leases included here are office leases, but there could be others.

  1. Goodwill

Premium amount paid over what is determined to be the fair value of an acquired company. Goodwill frequently results when a company buys another company.

  1. Intangible assets

These are assets that are not physical, but frequently very valuable. These assets generally are a result of business/asset acquisitions because under accounting rules a company can’t typically create an intangible asset. There are two types of intangible assets: 1) finite-lived assets and 2) infinite-lived assets.

Below is the intangible asset breakdown for Snowflake.

  1. Deferred commissions, non-current

This is the amount of deferred commissions that will be expensed after one year. See the deferred commission explanation under the current section for more detail.

  1. Other assets

There is often some miscellaneous stuff in here, but larger companies like Snowflake may also have equity investments in both public and private companies also included in this section.


Liabilities are what the company OWES.

Liabilities are presented in order of when they are due, with the most current showing first. Similar to assets, liabilities are presented in two main sections (current and non-current).

  1. Current liabilities – obligations expected to be settled in <1 year
    1. Accounts payable

Vendor bills that are due for payment

  1. Accrued expenses and other current liabilities

These occur when expenses are incurred that haven’t been paid. If they relate to vendor expenses then if a vendor bill is received then it is transferred to accounts payable until paid.

  1. Operating lease liabilities

This is the other side of the “operating lease right-of-use assets” mentioned above. It is the amount owed over the contract term of the lease.

  1. Deferred revenue

For SaaS companies, once an invoice is sent to a customer then the amount of the invoice is added to deferred revenue. Deferred revenue is decreased when revenue is recognized. For SaaS companies revenue is recognized over the contractual term or as used for usage-based pricing products.

SaaS companies want their deferred revenue to be continually increasing because that implies that customer invoicing is increasing which implies that the company is growing by closing more deals.

  1. Non-current liabilities – obligations expected to be settled in 1+ years
    1. Operating lease liabilities, non-current

This is the long-term portion ( 1+ years) of the operating lease liabilities noted in the section above.

  1. Deferred revenue, non-current

This represents the portion of deferred revenue that won’t be recognized as revenue for 1+ years.

  1. Debt

While most VC-backed SaaS companies are primarily funded via preferred equity from venture capital firms, some companies will also use debt to help finance operations or acquisitions.

When debt becomes due within 12 months then it is added to the current liability section.

  1. Other liabilities

This is for other miscellaneous liabilities that don’t fit into one of the previous buckets. If anything becomes big enough in this section then it will need to be broken out separately.

Stockholders’ Equity

Stockholders’ equity is the value attributable to the business owners (aka stockholders).

Some people think of this section as the company’s net worth after netting the company’s assets and liabilities, but remember that a lot of the company’s value is not represented on the balance sheet. This is because companies build up significant value in their brand name, customer relationships, technology, etc that accounting rules prevent from being recognized on the balance sheet.

The main sections of stockholders’ equity include:

  1. Common Stock & Additional Paid-in Capital

These two sections primarily refer to all the money invested in the company by stockholders.

  1. Retained earnings (or accumulated deficit)

This represents the net profits from the income statement that are reinvested in the business. There are two things that impact retained earnings:

  1. Net income / (loss) adds or subtracts from it
  2. Dividends paid out decrease it

Given most SaaS companies are not profitable for a long time, they will typically use the caption “accumulated deficit”. Once a company is profitable and digs itself out of the hole, then the caption will switch to “retained earnings”.

How the Balance Sheet Balances

The balance sheet equation MUST always be true. If it ever doesn’t, then an accountant isn’t doing their job right.

Let’s take an example and see how it flows through the balance sheet.

Example: A SaaS company sells a $100k deal for its SaaS solution with a subscription term of 12 months and upfront payment terms.

As you can see above, at each point in the process the assets = liabilities + equity.

Remember that everything that flows through the income statement ends up hitting the equity section so when revenue hits the income statement it will also end up hitting equity.

Concluding Thoughts

The income statement is more intuitive and more commonly understood, but understanding the balance sheet is critical for understanding the health of a business.

Source: @OnlyCFO

How to Read an Income Statement

The below post is from @OnlyCFO who are a great source of financial information and you can follow them on Twitter at (@OnlyCFO) / Twitter

The income statement is one of three primary financial statements:

All three of these statements are prepared in accordance with GAAP (Generally Accepted Accounting Principles) for US companies or the international version for foreign-based companies. These are the accounting rules for how everything should be accounted for, but they are frequently updated and changed.

Below is CrowdStrike’s 2022 income statement.

Income Statement Cheat Sheet

Below is the quick cheat sheet on the main income statement lines. If you want the detail and explanations then keep reading…


SaaS companies usually have two categories of revenue:

  1. Subscription revenue – the “good” revenue
  2. Professional services & other – considered either bad or neutral revenue

If the professional services revenue is immaterial, then a lot of companies will just show one line called “revenue” on their financials. For internal management reporting all major revenue categories should be broken out so each revenue type can be reviewed separately.

SaaS Revenue

Depending on who you are talking with, the word “revenue” can mean a dozen different things at SaaS companies. Check out the below tweet storm on the differences in a lot of these acronyms.

On the income statement when we say “revenue” we are referring to GAAP revenue. All other commonly used acronyms about “revenue” such as ARR, CARR, and ACV are annualized amounts. For GAAP revenue these amounts must be spread across the period that the service is delivered (subscription or usage period).

There are two main types of SaaS revenue recognition models (and there are various degrees of hybrid models in between):

  1. Consumption-based pricing models
  2. Term-based subscription model

Below are the typical revenue recognition rules, but each company’s specific facts may impact how revenue is recognized. Many thousands of pages have been written on this topic because it’s complex!

Consumption-Based Pricing (aka usage-based)

For companies with a pure consumption-based pricing model, GAAP revenue will be recognized as consumed.

Example: Company ABC signed a $120K deal for 10 GB of data usage on January 1st, 2023.

Solution: Revenue is only recognized as it is consumed so usage-based pricing revenue may be lumpier that the traditional SaaS model.


Consumption-based pricing revenue is seasonally impacted

“And also Q4, as I said, is one that has seasonally higher number of holidays with people taking — and remember, about 70% of our revenue is tied to human interaction with our system, 30% is really driven by scheduled jobs. So, that has an impact.” Mike Scarpelli (Snowflake CFO)

Consumption-based pricing revenue is more impacted by the macro environment

“We recognize revenue based on customer consumption of our platform, and that consumption is closely related to end-user activity of the application, which can be impacted by macroeconomic factors.” – Michael Gordon (MongoDB CFO)

Subscription Pricing (term based)

This is referring to the traditional SaaS pricing model. This can be a number of seats or licenses that you have access to for the term of the contract – doesn’t matter how much you use the software.

Example: Company ABC signed a $120K deal on January 1st, 2023 for 5 seats for a subscription term over the next 12 months.

Solution: Revenue is recognized ratably over the subscription term. This is true regardless of the usage level because it is continually available to be used throughout the subscription term.

Professional Services & Other

This revenue is almost always broken out from subscription revenue unless it is so immaterial that it doesn’t really impact gross margins. Most investors look at professional services revenue as either bad or neutral to a company’s valuations because of the following:

  • Professional service gross margins are usually very low (or even negative) for SaaS businesses.
  • The scalability and distribution of SaaS are why it can grow so fast. Service businesses just can’t do that because of the reliance on people.
  • High professional services may mean people are making up for a bad SaaS product.
  • If implementation services are high due to product complexity, then the distribution of the SaaS solution might be significantly slower.

When is professional services revenue recognized?

Depends. Typically professional services are recognized as they are performed.

But the revenue might need to be recognized over the term of the software subscription if:

  1. The services significantly customizes the SaaS solution
  2. The services from the company are required in order for any value to be obtained from the SaaS solution

Most SaaS companies are able to recognize professional service revenue as it is performed.

Cost of Revenue (COGS)

A lot of people just say “COGS”, which stands for cost of goods sold, but there aren’t any “goods” in pure SaaS so when it is reported on financial statements this line just says “cost of revenue”.

Cost of revenue is broken out the same way that revenue is broken out:

  1. Cost of revenue – subscription
  2. Cost of revenue – professional services and other

Cost of Revenue – Subscription

The major categories that are included here include the following:

  1. Customer hosting costs – AWS, GCP, Azure
  2. Support team – responding to customer support tickets
  3. Dev Ops – people ensuring uptime and reliability of accounts
  4. Software and other costs for the teams above
  5. MAYBE customer success – see below

Most SaaS companies are fairly consistent with these groupings with a few exceptions:

  • Early-stage companies aren’t great at properly breaking things out and allocating the right things to COGS. I almost never trust COGS for companies less than $15M ARR and a built-out accounting team.
  • Customer Success: Even in public companies there is diversity on whether this team lives in COGS or S&M (or how they are allocated between the two). Companies have to determine what their customer success team is actually doing to determine where it should be recorded on the income statement, but there will always be an element of judgment. Accounting rules aren’t black and white for this. My thoughts on how to categorize customer success below.

Investors need to make sure they understand what is being included/excluded in COGS so they can make informed decisions when comparing it to other companies.

Cost of Revenue – Professional Services & Other

Professional services COGS is pretty straightforward:

  • People costs for delivering the services
  • Software and other people-related costs to deliver the services
  • Costs for any other revenue generated

Gross Margins

Gross margins tell you how much (either as a $ or % of revenue) profit you have after subtracting COGS from revenue. In the formula below, we can see gross margin expressed as a percentage of revenue. Viewing gross margin as a percentage of revenue is generally more useful because then it is comparable across benchmarks and other companies.

Gross Margin = (Revenue – COGS) / Revenue

COGS is a very protected financial expense group because SaaS company valuations are (or at least should be) highly correlated with gross margins.

SaaS vs Professional Services Gross Margins

As noted earlier, there is a reason investors typically view professional services revenue as either bad or neutral in their investment decisions. Professional services’ gross margins are very low when compared to SaaS gross margins.

Having said that, Crowdstrike’s professional services gross margins are phenomenal at 33%….Most SaaS companies either lose money or break even on professional services for a long time and may only be slightly profitable at scale.

But the ability to have subscription gross margins of 76% with essentially limitless distribution is what makes SaaS so special.

Below is a table from Clouded Judgement for the highest valuation multiple companies and it shows the average gross margin is 74%.

Operating Expenses (aka “OpEx”)

The operating expense section of a SaaS company’s income statement almost always has the following categories:

  1. Sales and marketing (S&M)
  2. Research and development (R&D)
  3. General & administrative (G&A)

What is included in each category?

Sales and marketing (S&M)

  • Sales team payroll (AE, SDR, SEs, sales management, etc)
  • Marketing payroll (demand gen, PR, events, comms, etc)
  • Customer success payroll (see COGS section on debate between COGS and S&M)
  • Rev ops and sales enablement
  • Software and other non-headcount costs for these teams
  • Trial hosting costs (such as AWS)

Research and development (R&D)

  • Engineering, product, and design team payroll-related costs
  • Software and other non-headcount costs for these teams
  • Dev infrastructure costs (such as AWS)
  • Note – a lot of earlier-stage companies don’t properly break these costs out properly between COGS, R&D, and S&M
  • Quality assurance (QA)

General & administrative (G&A)

  • Finance, legal, HR, and other executive payroll-related costs
  • Corporate insurance
  • Financial audits
  • Charitable contributions

Specific Callouts in OpEX

In addition to these core expense groups that show up on the income statement, there are a couple of key expense callouts that you should also understand so you know how to compare the income statements of different companies.

Allocated Departments

There are certain expenses and teams that are frequently allocated across all of the above expense groups based on relative headcount (or some other reasonable allocation methodology). These are judgemental and there is sometimes diversity in how they are treated.

  • IT – people and software the entire company uses
  • Recruiting – internal recruiting resources
  • General – Facilities, company offsites, etc

Understand how they are coded versus other companies so proper comparisons can be made.

Stock-Based Compensation (SBC)

SBC has recently been a hotly discussed topic amongst tech companies as a result of the implied shareholder dilution that results from sky-high equity awards given out in Silicon Valley.

Here are the basics that you should know about SBC:

  • SBC includes all equity-based awards that are given to employees, consultants, advisors, etc.
  • Equity awards may include: stock options, RSUs, RSAs, PSA, SARs, etc
  • SBC expense is based on
  • The fair value of the award on the date of the grant. This is important because if the stock price subsequently shoots up or crashes, then that is not reflected in SBC expense.
  • SBC expense is recognized over the vesting term (i.e. the period of time the equity award is earned). For tech companies, somewhere around 95% of companies have equity awards that vest over 4 years.

Based on the above, you need to understand that SBC expense does not equal the amount of dilution. Especially during times of high stock price volatility, the SBC expense and shareholder dilution can diverge significantly.

Below is an interesting chart from Guggenheim on SBC % based on growth rates.

Sales Commissions

This is an area that the accounting rules has changed in the last few years. Prior to the accounting overlords changing the rules, most SaaS companies expensed sales commissions in the period they were earned by the sales folks.

Under the new accounting rules, most sales commissions for SaaS companies get capitalized on the balance sheet (i.e. not expensed immediately) and then expensed over a period of time determined through some judgment. Almost all SaaS companies expense sales commissions over 3 – 5 years.

Not all sales commissions are expensed over time though. Some are expensed immediately. Only sales commissions that are solely dependent on the contract getting signed are deferred and expensed over time. All other sales commissions are expensed immediately.

So AEs and their managers would almost always be capitalized and expensed over time since they only get paid if the deal is signed, but SDRs whose commission is based on setting up meetings are expensed immediately.

Other income (expense)

  • Interest expense and income
  • foreign exchange gains and losses
  • Investment gains and losses

Income Tax Expense

As crazy as it might sound to some SaaS companies, eventually the goal is to be profitable and make money. Once this crazy phenomenon happens a company will owe income taxes.

But income taxes might be owed before a company is profitable.

  1. Foreign entities: If a company has set up foreign entities, then based on the tax laws there will usually be income taxes owed in these foreign jurisdictions.
  2. Financial net income doesn’t equal taxable income: Not going to explain all of this, but there are lots of differences so a company might have taxable income before financial statement income.
  3. Change in tax laws for research and development expenses. This may actually be a pretty big deal if it doesn’t get repealed. See the Twitter thread below

Concluding Thoughts

All investors and business operators should understand the basics of an income statement. If you don’t understand an income statement then mistakes will be made in allocating capital and making investment decisions. Source: @OnlyCFO

10 Step Guide to Starting Your Business with LEO (Local Enterprise Office)

The following material is provided by the Local Enterprise Office (LEO). For more information on supports available to your business from Louth LEO please click here.

If you’re thinking of starting a business, LEO’s Start Your Own Business programme will help you, from developing and researching your ideas, learning basic business start-up skills and expanding your potential with marketing and financial planning advice. LEO’s Start Your Own Business programme introduces you to thinking about running your business and testing out
your business ideas and plans along with like-minded people.

Step 1: Test Your Business Idea

– LEO’s Start Your Own Business programme provides you with an opportunity to assess the potential of your business idea.
– Have I got the right business skills?
– Think about who will buy your product or service.
– What is the benefit to them and how much will they pay?
> Use our experience to realise your business idea.

Step 2: What About Market Research?

– From the outset market research is essential in helping you to identify your target market
and customers.
– It will also help you to identify your competitors and how to compete effectively.
– Research is also effective in assessing demand for a new product or service.
> Market research will establish the real potential for your product or service.

Step 3: What are Your Business Requirements?

– Have you considered the best location for the business?
– Identify your basic equipment requirements and costs.
– How many staff will you need to employ?
– Identify your overhead costs e.g. insurance.
– Can your business idea benefit from new technologies? e.g. by online selling.
> We give you access to information and specialist expertise.

Step 4: What are your Investment Requirements?

– Identify all start-up and running costs associated with the business.
– Identify ways of financing your business venture.
– Seek financial support and benefit from direct referral to Government agencies.
– Seek advice on other sources of support e.g. Banks, Credit Unions, Microfinance Ireland,
family support, other non-bank finance.
> LEO can give you advice on all financial sources that benefit you or your businesses.

Step 5: Developing your Marketing Strategy

– Marketing your business idea is a fundamental aspect of starting up.
– Research the most cost effective methods of marketing your business.
– Write your Marketing Plan.
> Learn from us how marketing works for you.

Step 6: Developing your Sales Plan

– How will you promote your product or service?
– Who and where is your target market (local, national, international)?
– What channels of distribution will be used?
– Determine your selling price and break-even point.
> Learn from us about how to plan, promote and grow your sales.

Step 7: What is the Best Legal Structure for you?

– What type of company will allow you to make the best decisions for your business?
You could be a:
– Sole Trader
– Partnership
– Limited Company
> We can help you decide on the right structure from the beginning.

Step 8: Managing the Risks

– Starting a business is a big step to take.
– A new business can be exciting. However, it can also be risky.
– For some it means risking personal savings and secure employment.
> We help you to best manage the risks.

Step 9: Avoiding Unnecessary Risks.

– Register your business with the Companies Registration Office (CRO). Visit
– Be aware of your tax obligations and register with your local Revenue office. Visit
– Be aware of other statutory obligations such as trading licenses, planning permission, insurance, health and safety, patents, etc.
– Be aware of your responsibilities under employment rights legislation.
> We can steer you to make sure your business is fully compliant.

Step 10: And Finally . . . Write your Business Plan

– Business Planning is fundamental to success in business – managing the company, generating
sales and growing jobs.
– It is the key to getting things done and making things happen.
– The finished business plan can be used as an operating tool that will help you to make important decisions and manage your business effectively.
> Using all the tools above LEO can train you to plan and deliver on all aspects of your business.

For more information on startup supports we recommend that you speak with Louth LEO

Accounting Terms 101

Accounting Terms Glossary

Accounts Payable (Creditors, Payables)
Accounts payable are those accounts where the business has an obligation to pay for receiving goods or services. They are classified as a current liability.

Accounts Receivable (Debtors, Receivables)
Accounts receivable are those accounts where the business is owed money for providing goods or services. It is an asset.


Accrual Concept
Accrual concept is one of the core accounting concepts. Accrual concept states that an economic event should be recorded in the period in which it is incurred rather than when it is paid for or when cash is received in return. It also includes the Matching concept which says that the revenues and related costs should be matched in the income statement


Accrued Expenses (Accruals)
Accrued expenses are those expenses which have been incurred but not yet invoiced or paid. They are usually  treated as a Current Liability

Accrued Income
Accrued income is income that is earned but not yet invoiced or received. It is treated as a Current Asset.


Asset is something that is owned by a business that has commercial value or exchange value. Assets are subdivided into Fixed Assets ie those that will be there for more than one year and Current Assets ie those that will convert to cash within one year


Balance Sheet
A balance sheet is the list of all the assets and liabilities of the business.


Capital Employed
Capital Employed reflects the Balance Sheet  value of the assets used by the business to generate revenue. It is calculated as follows:

Capital Employed = Fixed Assets + Current Assets – Current Liabilities. 

It can also be calculated by looking at the financing side of the balance sheet when it will be:                           .                            Capital Employed = Shareholders Funds + Term Liabilities



Cash includes all notes and coins held by the business together with all credit balances in bank accounts and sometimes includes short term investments in other liquid assets eg Government Bonds


Cash Flow Statement
Cash flow statement is a financial statement that provides details of the inflow and outflow of cash for the business. It is divided into three parts:

  1. cash flows from operations
  2. cash flows from financing,
  3. cash flows from investing


Collection Period (Days Sales Outstanding, Debtor Days)
Collection period defines the amount of time it takes to convert  average sales into cash. In other words, it reflects the average number of days credit taken by customers. It is calculated as follows

Collection Period = (Debtors X 365) / Sales


Consistency Principle
Consistency principle of accounting says that the same accounting policies and procedures should be followed in every accounting period. If policy is changed the relevant change should be disclosed in the notes to the accounts


Cost of Sales (Cost of Goods Sold)
Cost of Sales is the cost of procuring and processing goods. In a manufacturing business it includes direct material, labour and factory overheads. In a trading business it is usually just the cost of the goods traded. In a service business it is usually just the direct labour used in delivering the service.


Creditors reflect the total amount of money owed to suppliers but not yet paid. It is usually divided into Trade Creditors and Other Creditors


Creditor Days (Payments Period)
This reflects the average number of days taken to pay creditors. It is calculated as follows:

    .                          Creditor Days  = (Creditors X 365) / Cost of Sales

This is usually calculated on Trade Creditors


Current Assets
Current Assets are those assets that are usually sold or converted into cash within the normal trade cycle of the business which is usually taken to be one  year.


Current Liabilities
Current liabilities are the liability obligations of the business which it is expected to pay off within one year.


Current Ratio
Current ratio is the ratio that compares the current assets to the current liabilities in the business. It is calculated by the formula: Current Ratio = Current Assets / Current Liabilities.


Days Inventory
Day’s inventory shows the average amount of time that the items are held in the inventory. It is calculated as follows:

Days Inventory = (Inventory X 365) / Cost of Sales

Days Payable Outstanding
Days payable outstanding shows the amount of time it takes for the business to pay off its creditors (See Creditor Days)


Days Sales Outstanding
Days sales outstanding is the amount of time it takes for converting debtors/receivables to cash. (See Collection period)


A person or persons who owe money to the business are collectively known as debtors.


Debtor Days
Debtor days is the average number of days taken to convert receivables to cash. (See Collection Period)


Depreciation is a charge for the use of fixed assets which reflects the book value of the amount of the assets consumed every year in generating revenue or simply due to the reduction in its value caused by wear and tear, obsolescence etc


Dividend is a portion of the earnings of the business that is paid to the shareholders


Fixed Asset
Fixed assets are those assets that are required for normal conduct of business and will be on the Balance Sheet for more than one year


GAAP is the acronym for Generally Accepted Accounting Principles, which is an accepted set of accounting procedures, policies and rules.


Going Concern Concept
Going Concern Concept of Accounting assumes that the business will remain in existence for the foreseeable future.


Gross Profit
Gross profit is the excess of sales over production costs. It is calculated as follows:

Gross Profit = Sales – Cost of Sales


Intangible Asset
An Intangible asset is an asset that cannot be physically seen or felt, but its presence delivers economic benefits the business, e.g goodwill.


Inventory (Stock)
Inventory is the stock of raw materials, work in progress and finished goods


Liability is a loan or a debt of  the business that has not yet been discharged.


Matching Concept
Matching concept is the concept in accounting that says that  revenues should be matched with their related costs in the income statement. ( See Accrual Concept)


Net Profit
Net profit is the excess of income from all sources over all expenses.

Net Sales
Net sales is the amount of sales attained after deducting VAT,  sales returns, allowances, discounts etc.

Net Worth
Net Worth of a Business = Total Assets – Total Third Party Liabilities


Operating Profit (Earnings before Interest and Tax , EBIT)
Operating profit is the excess of Gross Profit over other operating expenses ie

                              Operating Profit = Gross Profit – S G & A expenses



Prepayments reflect amounts paid in advance to service providers for services which have not yet been received eg Rent paid in advance. They usually are treated as Current Assets on the Balance Sheet


Profit after Tax (Net Profit)
Profit after tax is the excess of revenue over all the expenses and after payment of tax.

Profit Before Taxes
Profit before tax is the profit earned by the business before making the deduction for tax.

It is calculated as follows:

 Profit before Tax =  Operating Profit – Interest Charges


Quick Assets
Quick assets is the sum of the current assets minus inventory.


Receivable is the money which is due to the business and has not yet been received.


Retained Earnings
Retained earnings are that part of the profit which has not been given to the owners, but retained in the business for future use.

Return on Capital Employed
Return on Capital employed is a measure of how effectively a business is using its capital. Return on Capital Employed = Operating Profit  / (Total Assets – Current Liabilities)

Return on Capital Employed = Operating Profit  / (Shareholders Funds +  Term Liabilities)


Return on Equity
Return on Equity = Net Income / Shareholders Funds


Selling, General and Administrative Expense (S,G & A Expenses)
Selling, general  and administrative expenses reflect all the non production costs incurred in  selling and distributing the goods and the administrative expenses of the business. They do not include interest or tax.


Shareholders Funds (Shareholders Equity)

This reflects the total amount owed by the business to the owners. It includes Share Capital, Share Premium, Retained Earnings and Revaluation Reserves


Tangible Assets

These are all the physical Fixed Assets of the business including Land and Buildings, Plant and Machinery, Office Equipment and Computers, Fixtures and Fittings, Motor Vehicles


Term Liabilities

Term Liabilities are those liabilities which are payable more than one year after the Balance Sheet date eg Bank Term Loans, Pension Liabilities


Total Assets
Total assets is the sum of all the fixed and current assets.


Trade Debtors
Trade debtors are those who owe the business money, on account of goods sold to them on credit.


Turnover is another name for net sales.


Useful Life
Useful life is the approximate amount of time for which an asset is assumed to be useful before it is fully depreciated.


Variable Costs
Variable costs are those which vary with an increase or decrease in production.


Working Capital
Working Capital = Current Assets – Current Liabilities

DDIH Pre-Accelerator Program

About Drogheda Digital Innovation Hub (DDIH)

The Mill is partnering with Louth Co. Council on the delivery of the Drogheda Digital Innovation Hub, (DDIH). The program will involve the delivery of a pre-accelerator program, a town centre hub and a dedicated program manager to promote enterprise development in the greater Drogheda area.

What is a Pre-Accelerator?

A pre-accelerator is a program focused on early stage startups, taking them from concept to MVP (minimum viable product).

A big part of the program is mentorship. Experienced mentors will come in and give the team guidance with product and customer validation, marketing, product development, pitch and anything else needed to build the product to a place in which it can attract investment and attention.

About DDIH Pre-Accelerator

DDIH is a pre-accelerator program designed to target the high skilled workers in Drogheda or who currently commute from Drogheda to Dublin each day. Drogheda and Co. Louth are in the heart of the M1 Economic corridor which is the most densely populated area of the island and home to some of the most innovative companies in both the traditional and new technology sectors.

The DDIH Pre-Accelerator will provide existing skilled workers within the Drogheda catchment with a viable option to develop their concept to help launch and scale their idea.

Benefits of a Pre-Accelerator
  1. Help develop your concept and establish your MVP (Minimum Viable Product)
  2. Get into a lean startup mindset
  3. Meet potential co-founders and other like-minded individuals
  4. Get easy access to the startup ecosystem
  5. Access to equity-free knowledge
Start Dates & Selection Process

The program which will commence in mid 2023 and we will provide more details on the application process in Q1 2023.