Holdings Financial Glossary

The minimum amount of income ($600 for most freelance work) a client must pay you before they're required to file a 1099-NEC reporting that income to the IRS.

The 1099-NEC reports nonemployee compensation (what you earned as a contractor), while the 1099-MISC covers other miscellaneous income like rents, royalties, and prizes.

A set of 14 characteristics the IRS uses to determine whether an organization qualifies as a "church" for tax purposes.

An independent appraisal of your startup's common stock fair market value, required by the IRS to set stock option exercise prices.

Churches are automatically recognized as tax-exempt under Section 501(c)(3) without having to formally apply to the IRS.

Three different IRS tax-exempt classifications that determine what your organization can do, how it's taxed, and whether donations to it are tax-deductible.

An IRS tax filing that lets you pay taxes on restricted stock at the grant date (when it's cheap) instead of when it vests (when it might be worth much more).

Accounts payable is money you owe to vendors and suppliers; accounts receivable is money your customers owe to you.

A report that categorizes your outstanding invoices by how long they've been unpaid — typically in 30-day buckets (current, 30, 60, 90, 120+ days) — showing you who owes you money and how overdue it is.

The average number of days it takes your agency to collect payment after sending an invoice — lower is better for your cash flow.

Your agency's total revenue minus pass-through costs — the money that actually stays in your agency to cover salaries, overhead, and profit.

A comprehensive year-end summary of the church's financial activity — including income, expenses, fund balances, and budget comparison — presented to the congregation for transparency and accountability.

Clauses that protect preferred investors from losing value if the company raises a future round at a lower valuation (a down round).

Your monthly recurring revenue multiplied by 12, representing the annualized value of your subscription business.

Three levels of CPA financial statement services — an audit provides the highest assurance (CPA tests everything), a review provides limited assurance (CPA does analytical procedures), and a compilation provides no assurance (CPA just organizes your numbers).

A financial snapshot showing everything your business owns (assets), everything it owes (liabilities), and the owner's stake (equity) at a specific point in time.

Time when a billable employee has no client work to do — they're available and getting paid, but not generating revenue.

A church fund used to provide financial assistance to individuals in need — such as help with rent, utilities, medical bills, or groceries — following documented policies.

Bill rate is what you charge the client per hour; pay rate is what you pay the person doing the work — the spread between them is your gross margin on labor.

A single hourly rate that averages together the different rates of everyone working on a client's account.

The legal obligation of nonprofit board members to act in the organization's best interest, exercise reasonable care, and remain loyal to the mission — not to their own personal interests.

A three-party agreement where a surety company guarantees to the project owner that you'll complete the work according to the contract — and if you don't, the surety pays to make it right.

The choice between growing your startup with your own revenue (bootstrapped) or with investor capital (venture-backed) — each comes with different trade-offs in speed, control, and risk.

The exact point where your total revenue equals your total costs — you're not making money yet, but you're not losing it either.

A smaller fundraise between major rounds, typically using convertible notes or SAFEs, designed to extend runway until the next priced round.

The rate at which your startup spends cash each month, calculated as total monthly expenses minus revenue.

Your personal credit score (300-850) reflects your individual credit history; your business credit score (0-100) reflects your business's payment history and financial health as a separate entity.

The three most common legal structures freelancers choose from — each offering different levels of liability protection, tax treatment, and administrative complexity.

A business expense is a cost that is ordinary and necessary for running your freelance business and can be deducted from your taxable income — a personal expense cannot.

Insurance that replaces lost income and covers ongoing expenses when your business is forced to shut down temporarily due to a covered event like a fire, storm, or other disaster.

Government-issued permits that authorize you to operate a business in a specific location and comply with local zoning and safety regulations.

The total cost of acquiring a new customer, including all sales and marketing expenses divided by the number of new customers gained.

A spreadsheet or document that shows who owns what percentage of your company, including founders, investors, and employees with equity.

The process of forecasting your team's available hours against incoming work — so you know when to hire, when to use freelancers, and when to stop taking on new projects.

A focused, time-limited fundraising effort to raise a large sum for a major project — like a new building, renovation, or debt elimination — beyond regular tithes and offerings.

A financial report that shows how cash actually moved in and out of your business over a specific period — the most honest picture of your financial health.

Cash accounting records income when you receive payment and expenses when you pay them, while accrual accounting records income when you earn it and expenses when you incur them — regardless of when money changes hands.

Cash donations are gifts of money (checks, electronic transfers, credit cards); non-cash donations are gifts of property like vehicles, stocks, real estate, or goods — each with different IRS documentation rules.

A formal document that modifies the original scope of work — adding deliverables, extending timelines, or adjusting the budget when the client requests something new.

A forced reversal of a credit card payment initiated by the cardholder's bank, usually due to a dispute over the transaction — the merchant loses the sale amount plus a penalty fee.

A state-level registration requirement that nonprofits must complete before they can legally ask for donations in most U.S. states.

A complete list of every financial account in your business, organized by category — the foundation of your entire bookkeeping system.

Under IRC Section 7611, the IRS faces special restrictions on when and how it can audit a church, including requiring high-level approval before initiating an inquiry.

An annual financial plan that estimates a church's expected income and allocates spending across ministry areas, operations, staffing, and missions.

Policies and procedures that protect church finances from errors, fraud, and misuse — including separation of duties, dual signatures, regular reconciliation, and independent oversight.

The church treasurer oversees the day-to-day financial operations — managing accounts, paying bills, tracking donations, preparing reports, and ensuring compliance with financial policies.

The IRS distinguishes between churches (which get automatic tax exemption), religious organizations (which must apply), and ministries (a broad term that could be either).

The rate at which clients leave your agency over a given period — high churn means you're constantly replacing lost revenue instead of growing.

The percentage of customers or revenue you lose in a given period — the silent killer of subscription businesses.

A portion of a minister's salary that the church designates for housing expenses — excluded from federal income tax under IRC Section 107.

The danger of relying too heavily on a small number of clients — if your biggest client leaves and they represent 30% of revenue, your agency is in serious trouble.

The initial period (usually one year) during which no equity vests — after the cliff, a large chunk of equity vests at once.

The direct costs of producing or purchasing the goods and services your business sells — materials, labor, and manufacturing overhead.

Common stock is held by founders and employees with basic ownership rights; preferred stock is held by investors and comes with special protections like liquidation preference.

A board-approved policy requiring board members, officers, and key employees to disclose personal or financial interests that could influence — or appear to influence — their decisions on behalf of the nonprofit.

An annual document a church provides to donors summarizing their tax-deductible contributions for the year, required for donors to claim charitable deductions.

A short-term loan to a startup that converts into equity during a future funding round instead of being repaid in cash.

A formal, documented plan that describes how your nonprofit divides shared costs across programs and functions — required by most government grants and essential for audit readiness.

A pricing model where you charge the client your actual costs plus a fixed percentage markup as your profit.

A registered trade name that lets your business operate under a different name than its legal entity name.

A tax method that lets you spread the cost of expensive business assets (like computers, cameras, or furniture) over several years, deducting a portion of the cost each year instead of all at once.

A plan that spreads the cost of a business asset over its useful life for tax and accounting purposes, rather than deducting the full cost in the year of purchase.

A restricted pool of money given by donors for a specific purpose — like a building project, missions trip, or equipment purchase — that the church cannot redirect to general expenses.

The official IRS letter confirming that your organization has been granted tax-exempt status — essentially your nonprofit's birth certificate.

The reduction in existing shareholders' ownership percentage when a company issues new shares to investors or employees.

A percentage discount on the Series A share price that rewards early SAFE or convertible note investors for taking risk before a priced round.

A charitable giving account managed by a sponsoring organization (like Fidelity Charitable or a community foundation) where the donor gets an immediate tax deduction but recommends grants to nonprofits over time.

An accounting method where every transaction is recorded in two accounts — a debit and a credit — so your books always balance.

A funding round where the company raises money at a lower valuation than its previous round, signaling a decline in perceived company value.

Drag-along lets majority shareholders force minority shareholders to join a sale; tag-along lets minority shareholders join a sale on the same terms as the majority.

A minister who is treated as an employee for federal income tax purposes but as self-employed for Social Security and Medicare tax purposes — a unique IRS classification that affects payroll processing.

A unique nine-digit identifier assigned by Dun & Bradstreet that identifies your business entity and is used to build and track your business credit profile.

A portion of an agency's sale price that's paid over time, contingent on the agency hitting specific performance targets after the acquisition.

Earnings Before Interest, Taxes, Depreciation, and Amortization — the standard measure of an agency's operating profitability and the basis for most agency valuations.

The actual hourly rate your agency earns on a project after accounting for all the hours worked — including the ones you didn't bill for.

Your marginal tax rate is the percentage you pay on your next dollar of income (your highest bracket); your effective tax rate is the overall percentage you actually pay on all your income combined.

A nine-digit number the IRS assigns to your business for tax identification — essentially a Social Security number for your company.

A cash reserve specifically set aside to cover your living and business expenses during dry spells, client losses, or unexpected emergencies — typically 3 to 6 months of expenses for freelancers.

A permanently invested pool of money where the principal is preserved forever and only the investment earnings are used to fund the nonprofit's work — creating a sustainable, long-term revenue stream.

Quarterly tax payments freelancers make directly to the IRS (and usually their state) to cover income tax and self-employment tax throughout the year, since no employer is withholding taxes from your paychecks.

The total pay package (salary, benefits, bonuses, and perks) for a nonprofit's top leaders — which must be reasonable, well-documented, and approved through a process that avoids conflicts of interest.

The fixed price per share that an option holder pays to convert their stock options into actual shares of company stock.

An arrangement where an established 501(c)(3) nonprofit legally sponsors a project or emerging organization that doesn't yet have its own tax-exempt status, allowing donors to make tax-deductible contributions.

The annual tax return that most tax-exempt organizations must file with the IRS, reporting their finances, governance, and activities to the public.

The annual tax form a church issues to its minister showing total compensation — but with unique handling because the housing allowance is excluded and no FICA is withheld.

The profit your agency earns on work done by freelancers or subcontractors — the difference between what you bill the client and what you pay the freelancer.

The process of dividing shared costs (like rent, utilities, and executive salaries) across your program, management, and fundraising functions based on a reasonable methodology.

An accounting system that tracks money based on the restrictions donors and grantors place on it, rather than just tracking overall profit and loss like a for-profit business.

General liability covers physical injuries and property damage caused by your business; professional liability (E&O) covers financial losses caused by your professional mistakes or negligence.

A board-approved document that outlines what types of donations your nonprofit will (and won't) accept, and the procedures for evaluating non-standard gifts.

A grant proposal asks a funder for money by describing what you plan to do; a grant report tells the funder what you actually did with the money they gave you.

The percentage of revenue remaining after subtracting the direct costs of delivering your service — hosting, support, and infrastructure.

Gross margin is the percentage of revenue left after subtracting direct costs; net margin is what's left after subtracting all costs, including overhead and taxes.

A tax deduction that lets self-employed freelancers deduct 100% of their health, dental, and vision insurance premiums from their taxable income — taken above the line, meaning it reduces your AGI.

A tax deduction that lets you write off a portion of your home expenses (rent, mortgage interest, utilities, insurance) if you use part of your home regularly and exclusively for business.

Two fundamental pricing models — charging by the hour for your time, or charging a flat fee for a completed deliverable.

Non-cash contributions to your nonprofit — goods, services, or use of facilities — that have measurable value and must be properly recorded in your financial statements.

An independent contractor controls how, when, and where they do their work and pays their own taxes, while an employee works under the direction of an employer who withholds taxes and may provide benefits.

A ratio that measures how many times your business sells and replaces its entire inventory during a specific period — higher is generally better.

Selling your unpaid invoices to a third-party company (a factor) at a discount in exchange for immediate cash — typically receiving 80-90% of the invoice value upfront.

A predetermined payment a client owes you if they cancel a project after work has begun, compensating you for time already invested and opportunity cost.

A penalty charge added to an overdue invoice — typically 1-2% per month — that incentivizes clients to pay on time and compensates you for the cost of waiting.

Insurance that protects your contracting business from financial losses when you're held responsible for property damage, bodily injury, or other claims arising from your work.

A document a contractor or subcontractor signs to give up their right to file a mechanic's lien against a property, typically in exchange for receiving payment.

A line of credit gives you flexible, revolving access to funds you draw as needed; a term loan gives you a lump sum upfront that you repay in fixed installments.

A term that guarantees investors get their money back (often with a multiple) before common shareholders receive anything in a sale or liquidation.

Three common business structures that differ in liability protection, tax treatment, and ownership flexibility.

IRS rules that restrict how much time and money a 501(c)(3) organization can spend trying to influence legislation — go too far and you risk your tax-exempt status.

A voluntary monetary gift from a congregation to a minister or guest speaker — often collected during special occasions — with specific tax implications depending on how it's handled.

The total revenue you expect to earn from a single customer over the entire duration of their relationship with your business.

The ratio of customer lifetime value to acquisition cost — the essential metric that tells you whether your growth is economically sustainable.

Markup is how much you add on top of your cost; margin is the percentage of the final price that's profit — they sound similar but give you very different numbers.

A corporate program where an employer matches an employee's charitable donation — effectively doubling (or sometimes tripling) the impact of the original gift.

A legal claim a contractor, subcontractor, or supplier can place on a property when they haven't been paid for work performed or materials supplied, giving them a security interest in the property itself.

A lump sum of cash given to your business in exchange for a percentage of your future credit card or debit card sales — fast funding but often very expensive.

A tax deduction for the business miles you drive, calculated either at the IRS standard mileage rate (67 cents per mile in 2024) or by tracking your actual vehicle expenses.

Financial contributions a local church sends to denominational, regional, or independent mission organizations to fund evangelism, humanitarian aid, church planting, and global outreach.

The predictable revenue your startup earns every month from active subscriptions, excluding one-time fees.

The number applied to your agency's EBITDA (or revenue) to estimate its total value — a 6x multiple on $500K EBITDA means your agency is worth roughly $3 million.

Payment terms on an invoice that specify when a client must pay — Net 30 means within 30 days, Net 15 within 15 days, and Due on Receipt means immediately upon receiving the invoice.

The nonprofit equivalent of equity — what's left when you subtract total liabilities from total assets, broken down by whether funds have donor restrictions.

Gross income is the total money your contracting business brings in before any expenses, while net income is what's left after you subtract all business costs — and it's what you actually pay taxes on.

A simple client satisfaction metric based on one question: 'How likely are you to recommend us?' — scored from -100 to +100, with higher being better.

The percentage of recurring revenue retained from existing customers over a period, including expansion revenue from upgrades and upsells.

Unrestricted cash (or liquid assets) set aside to sustain your nonprofit through unexpected shortfalls, emergencies, or gaps between expected revenue — typically measured in months of operating expenses.

An irrevocable election available only to ordained ministers who are conscientiously opposed to public insurance — opting out of Social Security and Medicare via IRS Form 4361.

The percentage of your agency's revenue that goes to non-billable costs — rent, admin salaries, software, insurance, and everything else that doesn't directly deliver client work.

The percentage of your nonprofit's total spending that goes to administrative costs and fundraising rather than programs — a widely used but increasingly criticized measure of nonprofit efficiency.

Two ways business owners pay themselves — a draw takes money directly from business profits, while a salary is a fixed, regular paycheck with taxes withheld.

A home owned by the church and provided to a minister as part of their compensation — the fair rental value is excluded from the minister's income tax.

Expenses your agency pays on behalf of a client — like media buys, printing, or stock photos — that get billed back to them without markup (or with a small markup).

The number of months it takes to recoup the cost of acquiring a customer from their subscription revenue.

The fees you pay every time a customer pays by credit card, debit card, or digital payment — typically 1.5-3.5% of the transaction amount plus a flat per-transaction fee.

Taxes that employers must withhold and pay on employee wages — including Social Security, Medicare, federal unemployment, and state unemployment taxes.

A set of security standards (PCI DSS) that any business accepting credit card payments must follow to protect cardholder data from breaches and fraud.

An annual assessment charged by a denomination to each member church — calculated per member — to fund denominational operations, governance, and shared ministries.

A fixed daily allowance paid to cover lodging, meals, and incidental expenses when a contractor travels away from their regular work area for a job.

Pre-money valuation is what your company is worth before new investment; post-money valuation is the pre-money plus the investment amount.

The named stages of venture capital fundraising, each representing a larger round of investment as a startup matures.

The right for an existing investor to participate in future funding rounds to maintain their ownership percentage.

A financial statement that summarizes your revenue, costs, and expenses over a specific period to show whether your business made or lost money.

The percentage of your freelance revenue that remains as actual profit after subtracting all business expenses — the money you actually get to keep.

A compensation structure where employees receive a portion of the agency's profits in addition to their base salary — aligning the team's financial interests with the agency's success.

A billing method where you invoice for work completed during a specific period rather than waiting until the entire project is finished, keeping cash flowing throughout the job.

Churches are generally exempt from local property taxes on real estate used for religious worship and ministry purposes.

A mathematical test that determines whether your 501(c)(3) qualifies as a public charity (broad support from many donors) or a private foundation (funded primarily by a few sources).

A tax deduction that lets eligible freelancers deduct up to 20% of their qualified business income from their taxable income, effectively reducing their tax rate.

Payments you make to the IRS four times a year to cover your income tax and self-employment tax, since no employer is withholding taxes from your contractor paychecks.

A payment to a church where the donor receives something of value in return — only the amount exceeding the value of what was received is tax-deductible.

The percentage of billable work your agency actually gets paid for — the gap between what you could bill and what you actually collect.

The minimum salary an S-Corp owner must pay themselves — enough to reflect fair market compensation for the work they do — before taking any tax-advantaged distributions.

Unrestricted funds can be spent on anything the nonprofit needs; restricted funds must be used for the specific purpose the donor or grantor designated.

A percentage of each progress payment (typically 5-10%) that the project owner withholds until the project is substantially complete, serving as a financial incentive to finish the work.

The cumulative profits your business has earned and kept (rather than distributed to owners) since it was founded — shown in the equity section of your balance sheet.

A contract where a client pays you a recurring fee (usually monthly) to reserve a set amount of your time or deliverables on an ongoing basis.

The three main ways agencies charge clients — a recurring monthly fee, a one-time project price, or a fee tied to results.

The total value of contracted client work that hasn't been delivered or recognized as revenue yet — your agency's pipeline of guaranteed future income.

Your agency's total revenue (or AGI) divided by the number of employees — the simplest measure of how productive your team is.

Like revenue per employee, but it counts freelancers and part-timers as fractions of a full-time equivalent — giving you a more accurate productivity picture.

Revenue is the total amount of money your freelance business brings in before any expenses; income (or net income) is what's left after subtracting all business costs — the money that's actually yours.

A right that lets the company or existing investors buy shares before a shareholder can sell them to an outside third party.

A benchmark stating that a healthy SaaS company's revenue growth rate plus profit margin should equal or exceed 40%.

The number of months your startup can continue operating before it runs out of cash, based on your current burn rate.

A tax status you elect with the IRS (Form 2553) that lets you split your freelance income into salary and distributions, potentially saving thousands in self-employment taxes.

A simple investment document where an investor gives you money now in exchange for equity later, when you raise a priced round.

The process of charging sales tax to customers on taxable transactions and forwarding the collected tax to the appropriate state and local tax authorities on a regular schedule.

A connection between your business and a state that requires you to collect and remit sales tax in that state.

Government-backed small business loans offered through the SBA that provide favorable terms, lower rates, and longer repayment periods than conventional bank loans.

The IRS form (Schedule C, Profit or Loss from Business) that sole proprietors and single-member LLCs use to report business income and expenses on their personal tax return.

When a project gradually expands beyond the original agreement — more revisions, extra features, additional deliverables — without a corresponding increase in price or timeline.

A document that defines exactly what your agency will deliver, by when, for how much — and just as importantly, what's not included.

FICA is the payroll tax split between employers and employees for Social Security and Medicare; SECA is the self-employment equivalent that ministers pay in full because they're treated as self-employed for these taxes.

An IRS provision that lets you deduct the full purchase price of qualifying business equipment and software in the year you buy it, instead of depreciating it over several years.

An IRS provision that lets you deduct the full purchase price of qualifying business equipment in the year you buy it, instead of depreciating it over several years.

A 15.3% tax that self-employed individuals pay to cover Social Security (12.4%) and Medicare (2.9%) — essentially both the employer and employee halves of payroll tax.

A Simplified Employee Pension IRA that lets self-employed individuals contribute up to 25% of net self-employment earnings (max $69,000 in 2024) to a tax-deferred retirement account with minimal paperwork.

A rigorous annual audit required for nonprofits that spend $750,000 or more in federal awards in a single year, covering both financial statements and compliance with federal grant requirements.

A retirement plan designed for self-employed individuals with no full-time employees, allowing you to contribute as both the employer and employee for significantly higher annual limits than a traditional IRA.

Expanding an existing client's scope of work — adding new services, increasing deliverables, or upselling new capabilities to grow revenue from clients you already have.

The nonprofit equivalent of an income statement — it shows your revenues, expenses, and change in net assets over a specific period, broken down by restriction type.

The nonprofit equivalent of a balance sheet — it shows what your organization owns (assets), what it owes (liabilities), and what's left (net assets) at a specific point in time.

A financial statement unique to nonprofits that breaks down every expense by both its nature (salaries, rent, supplies) and its function (programs, management, fundraising).

The biblical principle that everything belongs to God and church members are caretakers of the resources entrusted to them — applied practically through faithful giving, budgeting, and financial management.

The right to buy company shares at a fixed price — ISOs get favorable tax treatment for employees, while NSOs are more flexible but taxed as ordinary income.

Three concentric measures of market size: Total Addressable Market (everyone), Serviceable Addressable Market (your segment), and Serviceable Obtainable Market (what you can realistically capture).

An IRS designation that allows qualifying organizations to operate without paying federal income tax on revenue related to their exempt purpose.

Temporarily restricted funds have restrictions that expire when a condition is met (time or purpose); permanently restricted funds must maintain their restrictions forever, with only the earnings available for use.

A non-binding document outlining the key financial and governance terms of a proposed investment — the starting point for fundraising negotiations.

A tithe is a biblical standard of giving 10% of income to the church; an offering is a voluntary gift above the tithe; a donation is the general legal term for any charitable contribution.

Revenue your agency has earned by completing work but hasn't yet invoiced to the client — money that's owed to you but hasn't been billed.

The revenue and cost analysis of a single customer or unit sold — the building block that tells you whether your business model is fundamentally profitable.

Income a church earns from a trade or business that is regularly carried on and not substantially related to its religious mission — subject to unrelated business income tax (UBIT).

Income your nonprofit earns from a regularly carried-on trade or business that isn't substantially related to your tax-exempt purpose — and yes, you owe taxes on it.

A tax you owe on purchases where sales tax wasn't collected — typically on out-of-state or online purchases used in your business.

The percentage of an employee's total available hours that are spent on billable client work.

The maximum company valuation at which a SAFE or convertible note will convert into equity, protecting early investors from overpaying if the company's valuation skyrockets.

A pricing strategy where you charge based on the value your work creates for the client, not the hours it takes you to do it.

A timeline over which an employee earns full ownership of their stock options or restricted shares, typically four years with a one-year cliff.

A form you fill out to give your clients your taxpayer identification number (TIN) so they can properly report payments they made to you on a 1099.

The value of client work your agency has started but hasn't finished or billed for yet — it's revenue you've earned on paper but haven't collected.

Insurance that covers medical expenses and lost wages for employees who are injured or become ill on the job — required by law in nearly every state.

Insurance that covers medical expenses and lost wages for employees injured on the job, required by law in nearly every state for contractors with employees.

The difference between your current assets and current liabilities — it measures whether your business has enough short-term resources to cover short-term obligations.