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Capital Expenditure (CAPEX) is money a company spends to purchase, upgrade, or maintain long-term assets like equipment, buildings, or vehicles. CAPEX is capitalized (added to the balance sheet) and depreciated over time, unlike operating expenses which are deducted immediately. CAPEX investments directly impact future revenue generation.

Operating Expenses (OPEX) are costs a business incurs to run daily operations that are not directly tied to production, including salaries, rent, utilities, marketing, and administrative costs. OPEX is deducted from Gross Profit to calculate Operating Income and excludes one-time or non-operational costs.

Net Profit Margin is the percentage of revenue that becomes profit after all expenses, taxes, and interest are deducted. It’s calculated as (Net Income / Revenue) and represents the bottom-line profitability of a business, showing how efficiently a company converts sales into actual profit.

Cost of Goods Sold (COGS) represents the direct costs of producing goods sold by a company, including raw materials, labor, and manufacturing overhead directly tied to production. COGS is deducted from revenue to calculate gross profit and is critical for assessing production efficiency and pricing.

A Chart of Accounts is a list of all accounts used in a company’s accounting system, organized into categories (assets, liabilities, equity, income, and expenses). It serves as the foundation for recording transactions and generating financial statements.

A late payment penalty is a charge added to an invoice if a client fails to pay by the agreed due date. Late payment penalties, such as a percentage-based monthly interest charge, incentivize on-time payment and compensate freelancers for extended cash flow gaps and administrative costs of pursuing overdue payments.

A kill fee is a partial payment made to a freelancer if a client cancels a project after work has begun but before completion. Kill fees protect freelancers from losing income due to client cancellations and are negotiated upfront, typically ranging from 25-75% of the project cost.