Business operations
glossary.

An accounting method that records costs and revenues in the period they are incurred or earned, regardless of when cash is paid or received. Accruals give a more accurate picture of financial performance than cash-only records - especially for businesses running multiple concurrent jobs.

Average order value (AOV) is the mean revenue earned per customer order over a set period, calculated by dividing total revenue by number of orders. It helps project-based businesses track job size trends and identify capacity and pricing opportunities.

A backorder is a supplier notification that an ordered item cannot ship immediately because stock is temporarily unavailable, but will be fulfilled once stock is replenished. It arises after an order is placed, distinct from a standard lead time agreed at ordering.

A bill of materials (BOM) is a structured list of every material, component, and quantity needed to complete a job or project. It connects the quote to procurement and job costing, ensuring every item is ordered and every cost is tracked.

A document used in construction and fit-out projects listing the measured quantities of every material, labor type, and task required. Contractors price each line item at their own unit rate to produce their tender bid.

A long-term procurement agreement with a supplier for recurring supply of specified goods or services at agreed pricing over a set period. Individual call-offs are made against the blanket order rather than raising a separate PO for each transaction.

A cash flow forecast is a projection of the cash a business expects to receive and pay out over a future period - typically a rolling 4, 8, or 13-week window. It tracks when money actually moves, not just when revenue is recorded.

The process of testing, verifying, and documenting that an installed system performs to its design specification before client handover. A distinct phase from installation, and the trigger for final payment on most AV, electrical, and renewables projects.

The total of all direct costs incurred to produce the goods sold or deliver services completed in a period. Deducted from revenue to calculate gross profit. In project-based businesses, sometimes called cost of sales.

The process of managing customer credit to minimize overdue debt and bad debt losses. Includes setting payment terms, monitoring invoice aging, and running a structured chase sequence for outstanding invoices.

The longest sequence of dependent tasks in a project that determines the earliest possible completion date. Any delay to a critical path task delays the whole project by the same amount. Tasks off the critical path have float - time buffer before their delay affects the end date.

The total revenue a business can expect from a single customer across the full length of their relationship, calculated by multiplying average order value by purchase frequency and customer lifespan.

A day rate is a fixed daily charge for a contractor, tradesperson, or freelancer's labor - either agreed as a standalone daily fee or calculated from an hourly rate multiplied by the standard working day length.

The average number of days it takes a business to collect payment from customers after issuing an invoice. Calculated from outstanding trade receivables and annual credit sales. A key indicator of cash collection speed and credit control effectiveness.

The technique used to apply a logo, text, or design to a promotional product. The chosen method directly affects cost per unit, minimum order quantity, lead time, and the artwork format required.

The period after practical completion during which a contractor is contractually obliged to return and remedy any notified defects at no cost to the client. Typically 6 to 24 months. The DLP end date triggers the final retention release once a Certificate of Making Good Defects is issued.

A delivery note is a document sent with a supplier shipment that lists the goods included. It lets the buyer check what was received against what was ordered before approving the supplier's invoice for payment.

A long-term procurement arrangement setting agreed prices, terms, and conditions between a buyer and one or more suppliers. Individual orders placed within the agreement are called call-offs, and the framework itself does not guarantee any minimum purchase volume.

An internal document confirming that goods from a supplier order have been physically received and checked against the original purchase order. Forms the third document in three-way matching alongside the PO and supplier invoice.

The difference between revenue and the direct costs of delivering a product or service, expressed as a percentage of revenue. Gross margin shows how much money remains after covering cost of goods sold before overheads are deducted.

A handover pack is the bundle of documents and certificates given to a customer at project completion - including completion certificates, compliance records, O&M manuals, as-built drawings, and warranties. It frequently triggers the final payment milestone.

A method of recording all costs - labor, materials, and overhead - against a specific job or project. Shows whether individual jobs are profitable and where actual costs exceeded or came in under the original estimate.

The process of assigning estimated labor hours to specific jobs, tasks, or cost codes before work begins, then tracking actual hours worked against those estimates to measure efficiency and protect job profitability.

The total cost to acquire goods and take delivery of them at your location. Landed cost includes the supplier's quoted price plus international freight, import duties, port and handling charges, and any currency conversion costs - giving the true cost per unit before margin is applied.

Lead qualification is the process of assessing whether an incoming inquiry has genuine potential before investing time in a formal proposal. It evaluates budget, authority to purchase, specific need, and confirmed timeline.

Lead time is the total time between placing an order with a supplier and receiving the goods. It covers the supplier's production schedule, transit time, and handling, and determines when a job can start or progress.

Markup calculates profit as a percentage of cost; margin calculates profit as a percentage of selling price. A 25% markup produces a 20% gross margin - not 25%. Confusing the two leads to systematic underpricing across every job in a project-based business.

A defined event in a project marking the end of a phase or acceptance of a deliverable. Milestones trigger stage payments, authorize next phases, or confirm handover. They are completion events, not tasks or durations.

The lowest number of units a supplier will accept in a single order. MOQs recover fixed setup and tooling costs regardless of run length. In promotional merchandise, MOQs determine which products are viable for small campaigns and shape inventory purchasing decisions.

The process of deploying the people, equipment, and resources required to start a phase of work on site, including site setup, equipment transport, workforce briefing, and temporary facility installation before productive work begins.

The percentage of total revenue left as profit after all costs - direct costs, overhead, tax, and interest - are paid. Calculated by dividing net profit by total revenue. The most complete measure of whether a business is actually profitable.

A written document sent to a customer confirming their order has been accepted and will proceed on the agreed terms. It records the items ordered, the agreed price, payment schedule, and expected delivery or completion date.

The percentage added to direct job costs to ensure a business recovers its fixed overhead expenses - rent, utilities, insurance, and administrative salaries - across every project it completes in a period.

PMS (Pantone Matching System) assigns a unique numeric code to each colour. In promotional merchandise, specifying a PMS reference ensures consistent brand colour reproduction across different suppliers, products, and decoration methods.

Payment terms are the agreed conditions defining when an invoice must be paid, any early-payment discount available, and the consequences of late payment. Common formats include Net 30, Net 60, due on receipt, and milestone-based stage payments for longer projects.

A formal construction contract milestone confirming works are substantially complete and the client can take possession, even if minor defects remain. Triggers the first retention release, the defects liability period, and the final account process.

A preferred supplier is a business or individual that has been pre-assessed and approved for repeat purchasing. Preferred status means agreed pricing, confirmed payment terms, and known lead times are already on record, eliminating the vetting cycle on each new order.

A preliminary document sent to a customer before goods are delivered or work is complete, stating the expected price and terms. Used to request advance payment or a deposit. A pro forma invoice is not a tax invoice and does not record a completed sale.

A method of invoicing where a contractor or supplier bills for work completed to date at regular intervals throughout a project, rather than raising a single invoice at completion. Keeps cash flowing and reduces financial exposure on long-running jobs.

The formal customer sign-off on a supplier-produced visual showing exact logo placement, colors, and decoration specification before production begins. Required for all custom-decorated promotional products, branded apparel, and printed items.

An estimated allowance included in a construction or fit-out contract for work that is known to be required but cannot be fully defined or priced at the time of contract signing. Formally instructed and adjusted to actual cost in the final account.

A formal written document issued by a buyer to a supplier authorizing the purchase of specific goods or services at an agreed price. Creates a binding agreement once accepted and locks the supplier price for the order.

Quotation validity is the period during which a quoted price is guaranteed. It sets the window in which a customer can accept the quote at the stated price, protecting the supplier from committing to prices that may no longer be achievable.

The percentage of quotes sent to prospective customers that result in a confirmed order. A core sales performance metric that shows how effectively your quoting process turns opportunities into revenue.

A request for quotation (RFQ) is a formal document sent to suppliers to request a price for a defined quantity of goods or services. It ensures responses are comparable by specifying the exact requirement upfront.

A charge applied by a supplier when a customer cancels or changes an order after production or procurement has already been committed. Covers the supplier's costs for stopping production, holding goods, or reselling custom items.

Retention is a percentage of contract value withheld from a contractor's payments - typically 3% to 5% - as security against defective or incomplete work. It is released in two stages: at practical completion and at the end of the defects liability period.

A per-unit charge applied for each additional color or imprint location when decorating a promotional product. Separate from the one-time setup fee and accumulates across every unit in the order.

Scope creep is the gradual expansion of a project's agreed work without formal approval or price adjustment. It occurs through informal additions and verbal instructions that are actioned without a written change order, eroding project margin over time.

A written document that defines the specific tasks, deliverables, and boundaries of a project or contract, establishing what is included in the agreed price and what is explicitly excluded. Used by contractors, AV integrators, and installers to prevent scope creep and support variation orders.

A one-time charge applied by a supplier to prepare decoration equipment or tooling for a specific design. Charged per method, per color, or per location, and appears on the supplier invoice separately from the per-unit run charge.

A document listing outstanding defects, incomplete work, or minor failures identified at the end of a project before formal handover. Used in construction, AV installation, and furniture fitting to define what must be resolved before final payment is released.

A written document defining the exact requirements for a product, material, or service before procurement begins. A specification records product codes, dimensions, finishes, materials, and performance standards to prevent ambiguity and reduce costly errors between quote and delivery.

A stage payment is an agreed amount invoiced when a project reaches a defined milestone rather than at job completion. Stage payments help project-based businesses manage cash flow across jobs that span weeks or months.

A sub-contractor is an individual or business engaged by a main contractor to carry out a defined portion of project work. They operate as a separate commercial entity, supply their own tools and insurance, and submit their own invoice on completion.

A formal competitive process in which a buyer invites contractors or suppliers to submit priced proposals for a defined project. The buyer issues an invitation to tender (ITT) with scope, specifications, and a deadline; respondents submit bids for evaluation before contract award.

Three-way matching is an accounts payable control that compares a purchase order, delivery note, and supplier invoice to confirm all three agree before payment is authorized. It prevents overpayments and catches delivery discrepancies before they cost your business money.

A billing arrangement where a contractor charges for all labor hours at a pre-agreed rate plus the actual cost of materials used, typically with a markup, rather than agreeing a fixed total price before work begins.

The practice of offering a customer a higher-value product, premium variant, or additional service at the point of quoting or ordering, increasing average order value without the cost of acquiring a new customer.

A variation order is a formal written document that authorizes and prices a change to the agreed scope, cost, or programme of a project. Used in construction, AV, and other project-based industries, it creates a written record before additional work proceeds.

A pricing reduction offered to customers who order above a set quantity threshold. The more units ordered, the lower the price per unit. Volume discounts are standard in promotional merchandise, construction materials, and office furniture procurement.

Win rate is the percentage of active sales opportunities - qualified leads or submitted quotes - that result in a confirmed order. It measures how effectively a business converts prospects into customers and is tracked as a key indicator of sales process health.

An internal document issued to a production, operations, or field team that authorizes and specifies the work to be carried out on a customer job. Records the required materials, tasks, and instructions needed to coordinate delivery and track job costs.

The total value of jobs that have been started but not yet completed and invoiced. WIP represents costs already committed on active projects before revenue is recognized or payment collected from the customer.