The numbers, in plain English.

Accrual accounting

Accrual accounting records revenue when it is earned and costs when they are incurred, regardless of when cash moves. Cash-basis accounting records them when money changes hands. Most management accounts are on the accrual basis, which is why profit and cash can move in opposite directions in the same month.

Anomaly flag

An anomaly flag is a figure that has moved outside its normal range against a fixed rule: revenue moving more than 10% on the month or 15% on the year, a cost line moving more than 25%, a new expense category, cash falling more than 10%, debtor days rising by more than five, a net loss, or current liabilities above current assets. A flag is a prompt for a second look, not a finding that something is wrong.

Burn rate

Burn rate is how much cash a business uses each month. Gross burn is total cash out; net burn is cash out minus cash in. Net burn is the figure that goes into cash runway, while gross burn shows the size of the cost base and is used for stress tests.

Cash runway

Cash runway is the number of months a business can keep operating at its current rate of spending before cash runs out. It is cash on hand divided by average monthly net burn (cash out minus cash in). A snapshot, not a forecast: it assumes the next month looks like the recent average.

Cash-flow forecast

A cash-flow forecast projects the bank balance forward month by month from expected receipts and known payments: customers, suppliers, payroll, tax, loan repayments and one-offs. Unlike runway, which assumes the recent average continues, a forecast uses what is actually due, so it shows where the pinch points fall.

Corporation Tax

Corporation Tax is the tax a UK limited company pays on its taxable profits. For financial year 2026 the rate is 19% on profits up to £50,000, 25% above £250,000 and a rate that rises between them through marginal relief. Payment is due 9 months and 1 day after the accounting period ends; the CT600 return is due 12 months after.

Creditor days

Creditor days is the average number of days a business takes to pay its suppliers: trade creditors (accounts payable) divided by purchases or cost of sales for the period, multiplied by the days in the period. Read with debtor days, it shows whether a business is being paid before or after it pays.

Current ratio

The current ratio is current assets divided by current liabilities, read from the balance sheet. It is a rough test of whether the cash, debtors and stock a business holds would cover the bills due in the next twelve months. A ratio above 1 means current assets exceed current liabilities.

Customer concentration

Customer concentration is the share of revenue that comes from the largest customer, or the largest few. A business earning half its revenue from one customer is exposed to anything that happens to that customer, which is why the figure appears in most management packs and in the Nella Score.

Debtor days

Debtor days is the average number of days customers take to pay. The usual formula is trade debtors (accounts receivable) divided by revenue for the period, multiplied by the number of days in the period. A rising figure means cash is tied up in unpaid invoices for longer.

Gross margin

Gross margin is gross profit as a percentage of revenue, where gross profit is revenue minus the direct cost of the goods or services sold. It isolates pricing and direct costs from overheads, which is why a falling gross margin on steady revenue usually points to input costs, discounting or a change in sales mix.

Making Tax Digital for Income Tax

Making Tax Digital for Income Tax is HMRC's requirement that sole traders and landlords keep digital records and send quarterly updates through compatible software, followed by a final declaration. It applies from 6 April 2026 to those with qualifying income over £50,000, from April 2027 over £30,000, and from April 2028 over £20,000.

Management accounts

Management accounts are the internal monthly (or quarterly) report of how a business is performing: a profit and loss, a balance sheet, a cash view and a short set of KPIs, with a note on what changed and why. They are built for decisions, not for filing, and have no prescribed format.

Nella Score

The Nella Score is a finance health check from 0 to 100, calculated from a business's own accounting data. It scores five dimensions out of 20 each: cash visibility, margin health, debtor risk, bookkeeping quality and growth readiness. The arithmetic runs in code, so the same figures always give the same score; an AI model writes the explanation but never sets the number.

Net margin

Net margin is net profit as a percentage of revenue: what is left after cost of sales, overheads, interest and tax, divided by sales. It shows how much of each unit of revenue the business keeps once everything has been paid.

Payments on account

Payments on account are advance payments towards the next Self Assessment tax bill, each half of the previous year's bill, due on 31 January and 31 July. They apply when the previous year's bill was over £1,000 and less than 80% of the tax was collected at source. Any balance is settled on the following 31 January.

VAT return

A VAT return reports the VAT a business has charged and the VAT it has paid over a period, usually a quarter, and the difference is paid to or reclaimed from HMRC. For 2026/27 a return and payment are normally due one calendar month and seven days after the end of the period. Registration is compulsory once taxable turnover passes £90,000 in a rolling 12 months.

Working capital

Working capital is current assets minus current liabilities: the money tied up in running the business day to day. Cash, customer invoices and stock on one side; supplier bills, tax owed and short-term borrowing on the other. It rises when customers pay slowly or stock builds, and that rise absorbs cash.

Nella provides financial information and education, not accounting or tax advice.