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 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.

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.

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.

Days payable outstanding (DPO)

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.

Days sales outstanding (DSO)

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.

Estimated tax

Estimated tax is federal income tax paid in four installments during the year on income that is not subject to withholding, which covers most sole proprietors, partners and S corporation shareholders. For tax year 2026 the individual due dates are April 15, June 15 and September 15, 2026 and January 15, 2027; calendar-year C corporations pay April 15, June 15, September 15 and December 15, 2026.

Form 1099-NEC

Form 1099-NEC is the information return a business files to report nonemployee compensation paid to contractors who are individuals, partnerships, estates or certain LLCs. For payments made in tax year 2026 the reporting threshold is $2,000 (it was $600 for 2025 and earlier). The recipient copy and the IRS filing are both due January 31.

Form 941

Form 941 is the quarterly return on which an employer reports wages paid, federal income tax withheld, and the employer and employee shares of Social Security and Medicare tax. It is due by the last day of the month after each quarter ends: April 30, July 31, October 31 and January 31. The tax itself is deposited on a monthly or semiweekly schedule set by the IRS.

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.

Monthly financial statements

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.

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.