Have you ever had a conversation with a co-worker or boss where they start using terms and acronyms that you don’t really understand?
Yup, I’ve been there.
Especially as a new graduate or new employee, it can be easy for people to start referring to these terms nonchalantly in conversation. And most of the time, people don’t mean to use terms or acronyms that you don’t know, but in a professional office, these terms can be used very commonly and if you don’t want to stop every conversation with “hey, what does that stand for?” (although there’s nothing wrong with that!), than this is the article for you.
While you may not be working in the financial industry, there are definitely a few financial terms and documents that you need to know. As long as the company you are working for makes money and pays you, these are the 8 terms and documents that every professional needs to know a the very least at a basic level.
Every profession and industry is different in terms of the financial documents and terms that will come across their desk, but master these basic documents and terms, and you will definitely be impressing your boss when they ask you to “send this over to accounting to have it JVed” and you know exactly what they mean.
Let’s get started.
Let’s start with you! The most important financial document you need to know about is the one that’s about you getting paid. In Canada, your tax document that lists out what you were paid and all of your deductions is called a T4 slip. The American equivalent of W2 is very similar. It’s essential that you keep this documents when filing your taxes. Whether you file your own taxes or use an accountant, taxes are important. Not paying or filing your taxes can have major consequences in the long run. Keep these documents.
Pro tip: Even if you are working part-time and it feels like you aren’t making that much income, it may be easy to dismiss your T4 and not bother filing your taxes. Because really, if you make less than 10k, the CRA is probably not going to chase you down. Why? Because they probably owe you money! Even if there are no consequences for not filing your taxes when you make a low income, you may be losing out on money because you might be eligible for a tax refund. So talk to a professional about your options and don’t dismiss important documents like this when they are mailed to you.
2. Request for Proposal (RFP)
The next few documents are specifically if you are looking in sales but as I’ve learned throughout the years, everyone is to some extent, in sales. Especially if you work in a start-up company, you might have to wear many hats and may be submitting RFPs to bid on projects. So what is an RFP? A Request for Proposal is document that solicits a proposal to a project. For example if you work for an engineering company, they will submit RFPs to different bids to try to win specific project. On the other side, if you need services or projects completed, like you are looking for a someone to take over your marketing or PR for your company and you don’t want to look at individual companies. Your organization could put out a bid for it have other companies reply to that RFP so companies can come to you with a plan and proposal of what they believe you need. Although these are done mainly for large organizations as it’s a time consuming/complex process, the RFP and bidding process is very important for organizations that have to retain bidding processes for big accounts.
Another common thing your company may commonly issue out is a “quote.” Quotes are really simple and you are probably used to them in your everyday life. Quotes are the estimated price of a job, product, or service, and it’s important to understand because is the foundation of a series of documents to follow.
4. Purchase Order (PO)
So you’ve either received or sent a quote. What comes next? A Purchase Order or commonly known as a PO is exactly what it sounds like, it’s an order. A PO comes after an agreement is made upon the quote and all of the contracts are signed. It’s basically a guarantee that a supplies/services will be delivered or received (depending on which end you are on) and that it is the number you refer back to when you need reference the order when you request payment or need to pay of the PO.
Which comes the next part, invoices. If you are not familiar with an invoice, you actually get invoiced every single day. Invoices are bills. Just like how you are billed at the end of a dinner, invoices list out all the items that were provided (or you provided) and a big number at the end with the payment due.
I spent a lot of time working in finance and it’s still a part of my role today so this may not seem applicable to a lot of positions, but trust me it is. If your organization does any type of business where you buy anything from office supplies to services or you provide anything such as products and services, you need to know how properly read or create an invoice. I won’t get into too many financial details here but the basics of creating or processing an invoice are as follows:
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6. Insurance / Liability
There’s a million different types of insurance that one can have depending on your industry but there’s three main buckets of insurance that you need to familiarize yourself with as a entry level employee.
Commercial General Liability
Also known as General Liability insurance is the basic insurance that every company (even if you are home-based) should have. It’s insurance for any company that provides goods and services, so like any business you would work for that sells anything.
Professional Liability Insurance (PLI) or Errors and Omissions Insurance (E&O)
Professional Liability Insurance is often referred to as Errors and Omissions Insurance and it’s applicable and required of any that works in a professional designation. This includes lawyers, accountants, constants, real estate agents, hair salons, etc. It’s a policy that defends against the possible mistakes that can be made through professional services and consulting because of the expertise and knowledge required. It is not the same as general liability and it’s important to understand the difference. For example, if you work for an engineering construction company that also does design work, the architect will require PLI insurance, but the company will also require CGL if they construct the building.
Lastly, is the insurance that protects you as an employee! his will be very specific to your province, state, country, but worker’s compensation is the insurance that covers your wages or medical benefits if you are hurt on the job. It’s something that’s typically paid by your employer and where I live it’s called WorkSafeBC. It’s really important to know your rights as a worker and if you get hurt on the job, it’s important to know what you’re entitled to.
While you don’t need to the specifics of every insurance (unless you work in an insurance company), having the basic knowledge of how and what is protecting your organization is super important to know and could be super important if there is a dispute against your work or against a contractors (pro tip: you should make sure all of your contractors have insurance in case something goes wrong).
7. Accounts Payable / Accounts Receivable
The next set of terms are very accounting based and the first set of terms is actually super simple:
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8. Journal Voucher J/V
Lastly, depending on your organization, you may have a payment system set up (I’m an avid user of SAP) or smaller accounting software that you use to process invoices. In either case, your accounting team will probably keep a ledger and sometimes payments may need to be “JV-ed” over if they are not processed through an accounting software. This system will vary from organization to organization, but JV stands for “Journal Voucher” and it’s basically a physical log of a payment transaction. This ensures a paper trail for audit when a transaction is not logged electronically. Again, I don’t want to get into too much detail because every company is differently but essentially for my organization, all of our payment transactions are logged and monitored in a software called SAP.
However, if there’s a mistake and it went to the wrong account, or if the vendor is not set up in SAP, etc. and we need to pay them through another means, there still needs to be a log for that transaction. So it’s JVed and added to the Accounting Ledger that records the account number, transaction details, and appropriate approvals of why that transaction was made or changed. In every organization, every financial transaction must be tracked and audited so it’s super important to understand the basics of these documents even if you don’t work in finance. It makes everyone’s life easier, trust me.
While these 8 documents and terms won’t cover absolutely everything you need to know in your new job, they are a good start. And mastering these documents and terms, no matter what industry or role you work in, will definitely impress your boss. As a new graduate, it can be intimidating to walk into a new role. If you’re looking for more documents to read up on, look into my last post of the 4 meeting documents every young professional should know and master.