Business operations
glossary.

ABC analysis ranks every stock item by annual consumption value - annual demand multiplied by unit cost - and sorts the ranked list into three classes, so that counting, reorder and purchasing effort goes to the items that carry the value.

Work carried out during a project that will not form part of the finished result, along with the cost it incurs. Abortive costs arise when a scope is cancelled, a design is superseded, or a project is halted before completion.

A formal verification process at the end of a project or installation confirming that delivered systems, equipment, or completed works meet agreed specifications before the customer signs off and final payment is released.

The ongoing process of managing existing customer relationships after the initial sale, with the aim of retaining the account, increasing order frequency, and identifying opportunities to grow the customer's spend over time.

The total amount a business owes to suppliers and creditors for goods or services already received but not yet paid. Accounts payable sits on the balance sheet as a current liability until invoices are settled.

The total amount owed to a business by customers for goods or services already delivered but not yet paid. Recorded as a current asset on the balance sheet, accounts receivable directly shapes working capital availability and cash flow.

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.

Costs a business has incurred but not yet paid or received an invoice for. Recorded as current liabilities on the balance sheet under accrual accounting, representing obligations that belong in the period when the cost occurred.

Accrued revenue is income earned by delivering goods or services that has not yet been billed or received as payment. Under accrual accounting, it is recorded as a current asset on the balance sheet until an invoice is raised.

A payment made to a supplier or contractor before goods are delivered or work is performed, used to cover upfront procurement or mobilization costs. Also referred to as a down payment, deposit, or mobilization advance.

Aged debt is money customers owe you, grouped by how long each invoice has been outstanding - usually in bands of 0 to 30, 31 to 60, 61 to 90 and over 90 days. The aged debtors report is where you read it, and it decides which invoice credit control chases first.

A financial report listing every outstanding supplier invoice a business owes, grouped by how long each has been unpaid. The standard structure uses four time bands: 0-30, 31-60, 61-90, and over 90 days. Also known as an aged creditors report.

A pre-set spend limit above which a purchase, quote, or contract must be reviewed and authorized by a specific person or role before it can proceed, giving businesses structured control over commitments without requiring the owner to approve everything.

A formally maintained register of suppliers that a business has assessed and authorized for purchasing. Only suppliers on the list may be used for specified categories of goods or services, ensuring quality and compliance standards are met.

A document that specifies all decoration requirements for a promotional merchandise order, including logo files, PMS colour references, placement, sizing, and decoration method. Required before production can begin.

A revised set of construction documents showing what was actually installed on site, including all changes made to the original design during the build. They form part of the project handover pack and serve as the reference for future maintenance and modifications.

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 back charge is a deduction applied to a sub-contractor's or supplier's payment to recover costs the contractor incurred because of that party's defective work, delays, site damage, or failure to comply with contractual obligations.

A backlog is the total volume of confirmed orders or jobs a business has received but not yet delivered or completed. It shows whether fulfillment capacity is keeping pace with incoming demand.

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.

An accounting entry that reduces the reported value of accounts receivable by the amount estimated to be irrecoverable, matching the potential cost of non-payment to the period in which the original sale was made.

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 bill of quantities, or BOQ, lists the measured quantities of every item of work on a construction project so that each tenderer prices the same scope. It is prepared by a quantity surveyor from the drawings and specification, and priced line by line at tender.

Undecorated products held in stock by a promotional merchandise distributor or decorator, ready to be customized with a client's branding. Blank goods are sourced from product suppliers and pass to a decorator before dispatch.

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.

The level of revenue or sales volume at which a business covers all its costs exactly, with no profit and no loss. Every sale above break-even contributes to profit; every shortfall below means a loss.

The difference between a budgeted cost or revenue figure and the amount actually recorded. A negative variance means costs exceeded budget or revenue fell short. Used to monitor job profitability and improve estimating accuracy over time.

A business health score is a composite rating that combines a company's gross margin, cash position, forward pipeline, and job delivery performance into a single indicator of operational and financial condition.

A mandatory UK tax scheme requiring contractors to deduct tax from subcontractor labour payments and send it to HMRC. The deduction rate is 0%, 20%, or 30% depending on the subcontractor's CIS registration status.

A call-off order is an individual order placed against an existing framework agreement or blanket contract, using pricing and terms that were agreed once at framework level. No separate tender or negotiation happens for each order.

The process of determining whether a business has enough people, equipment, and time to meet current and upcoming demand, and deciding how to close any gap between available capacity and the work in the pipeline.

Capital expenditure (CapEx) is spending on assets that deliver value beyond the current financial year - such as equipment, vehicles, and property. These purchases appear on the balance sheet and are recovered through annual depreciation rather than expensed in full when purchased.

The cash conversion cycle (CCC) measures how many days a business takes to convert its investment in stock and outstanding invoices into cash, after accounting for how long it takes to pay its own suppliers.

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.

A formal process for identifying, documenting, approving, and implementing changes to an agreed project scope or contract. Change control ensures that modifications are assessed for cost and programme impact before work proceeds.

The percentage of customers a business loses over a set time period. Measured monthly or annually, it is the inverse of customer retention rate and a direct indicator of whether a business is holding on to its existing customer base.

A cloud-based CRM is customer relationship management software hosted by the provider and used through a browser or app on subscription, with no local servers. It manages contacts, pipeline and follow-up, but stops at the point an order is won.

A collateral warranty is a separate legal agreement in construction giving a third party - such as a funder, tenant, or future purchaser - direct contractual rights against a contractor, subcontractor, or consultant if their work proves defective.

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.

A cost that a business has formally committed to pay through a signed contract, purchase order, or approved change order, but which has not yet been invoiced or recorded in accounts.

Consignment stock is inventory a supplier places at a customer's premises while keeping ownership of it. Title and the obligation to pay pass at the point the customer uses or sells the goods, not when they are delivered.

A budget reserve included in a project quote or contract to cover unpredictable costs. Expressed as a percentage of total project value - typically 5-10% for simple jobs and 15-20% for complex or high-risk scopes.

A deduction made by a main contractor from money owed to a subcontractor, typically to recover costs incurred because of the subcontractor's failure to meet their contractual obligations on site.

The total price agreed between a client and contractor in a construction or services contract, as stated in the signed contract documents. Variation orders and other adjustments may alter the amount ultimately paid.

The amount remaining from job or order revenue after all variable direct costs are deducted. Shows how much each job contributes to covering fixed overhead and generating profit, before fixed costs are applied.

A conversion funnel maps the stages a potential customer moves through from first awareness of a business to a completed sale, showing where prospects enter, where they drop off, and where the highest-value opportunities sit.

A cost centre is an internal department, team, or project within a business to which costs are assigned for tracking and reporting. It does not directly generate revenue but enables management accounts to show where money is being spent.

A numeric or alphanumeric identifier assigned to a category of project expenditure - such as labour, materials, or sub-contractor costs - used to allocate and track spending within a job costing system. Cost codes enable project managers to report actual costs against budget at the level of individual work activities.