Business operations
glossary.

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.

Money owed to a business by customers, grouped by how long each invoice has been outstanding - typically in 30-day bands covering 0 to 30, 31 to 60, 61 to 90, and 90-plus days overdue. Used to prioritize credit control activity and identify at-risk balances.

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 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 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.

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.

An individual order placed against an existing framework agreement or blanket contract, using pre-agreed terms and pricing without a separate tender or commercial negotiation for each purchase.

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.

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.

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.

Inventory that a supplier physically places at a customer's premises while retaining ownership until it is consumed, used in production, or sold. Payment is triggered at the point of use, not on delivery.

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.

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.

The amount by which actual project costs exceed the original approved budget. A cost overrun reduces profit margin on the affected job and, if left unmanaged, can convert a contract that was expected to be profitable into a financial loss.

The total direct costs incurred to deliver a product or complete a job, including materials, direct labor, and sub-contractor costs. Revenue minus COGS equals gross profit - the measure of whether the work itself is profitable.

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 maximum outstanding balance a supplier agrees to carry for a customer at any one time. When a customer reaches their limit, new orders are paused until invoices are paid down.

A credit note is a document issued by a seller to reduce or cancel a previously raised invoice, recording an agreed reduction in the amount a customer owes for returned goods, pricing errors, or partial refunds.

The average number of days a business takes to pay its suppliers, calculated as trade creditors divided by annual purchases multiplied by 365. Also called Days Payable Outstanding or payables days.

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.

A sales technique where a seller recommends complementary or related products to a customer already making a purchase, with the aim of increasing the total transaction value and deepening the customer relationship.

The total amount a business spends on sales and marketing to win one new customer, calculated by dividing total acquisition spend by the number of new customers gained in the same period.

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.

The percentage of existing customers who place at least one repeat order in a defined period. Calculated as: (customers at end of period minus new customers acquired) divided by customers at start, multiplied by 100.

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.

A site document used in construction to record the labour hours, materials, and plant used on work instructed and paid at daywork rates. The signed sheet provides a verified basis for billing time-and-materials variations and is required evidence at application for payment.

A quotation that has expired, been replaced by a revised version, or where the prospect has stopped engaging. Dead quotes represent conversion opportunities that did not materialize and should be removed from the active sales pipeline.

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.

A contractual period after practical completion - typically 6 to 24 months - during which the contractor must return and fix defects in their workmanship or materials at no charge. The second half of retention is withheld until the DLP ends and defects are certified as made good.

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.

An arrangement where a supplier delivers goods directly to the end customer on behalf of the buying business. The buyer handles pricing and customer invoicing; the supplier handles physical fulfillment from their own stock or warehouse.

Rental of equipment without an operator or crew. The customer supplies their own technicians to operate and return the kit. Most common in AV and live events hire. Contrasts with wet hire, which includes a qualified operator in the rate.

A contract provision allowing a job or contract price to be adjusted if specified input costs - materials, labour, or freight - rise beyond a defined threshold after the contract is signed.

The time a task can be delayed without pushing back the project's overall completion date. Tasks on the critical path have zero float. Near-critical tasks with low float require close monitoring.

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 legally binding contract between an equipment owner and a hirer that defines the hire period, rates, permitted use, liability for damage or loss, and return conditions. Standard practice in AV, events, and plant and equipment hire businesses.

A short-term funding arrangement where a business releases cash from its outstanding sales invoices before customers pay, typically receiving 70-90% of the invoice value within 24-48 hours from a specialist lender.

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.

A central record linking all cost, revenue, and operational information for one customer order or project. Connects the accepted quote, purchase orders, works orders, delivery notes, and invoices under a single job reference number.

A document given to a field operative before a site visit, summarizing scope of work, materials required, hours allocated, safety requirements, and what must be signed off on completion. Used in electrical, plumbing, construction, and AV service businesses.

The process of assembling multiple individual items into a single packaged set ready for dispatch. Common in promotional merchandise and AV hire, kitting requires coordinating inbound components from multiple suppliers against a single outbound delivery deadline.

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.

A document issued by an MCS-certified installer confirming that a UK small-scale renewable energy installation - solar PV, heat pump, or battery storage - meets the Microgeneration Certification Scheme's standards for design, safety, and quality.

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.

A formal written claim submitted by a contractor or sub-contractor under a construction contract, requesting payment for work completed during a defined period. Payment applications carry statutory notice obligations and are distinct from a standard commercial invoice.

The process of grouping multiple approved supplier invoices into a single batch for payment rather than processing each one individually. Most businesses run payments weekly or bi-weekly to manage cash flow and reduce processing time.

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 financial guarantee provided by a surety - usually an insurer or bank - on behalf of a contractor. It protects the project client if the contractor fails to complete the works, and is typically issued for 10% of the contract value.

The total monetary value of all open quotes and opportunities in a sales pipeline at a given moment - representing the maximum revenue available if every live deal were won. Used to assess whether there is enough work in play to hit targets.

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 process in which buyers screen potential contractors or suppliers before inviting them to tender, assessing financial stability, technical capability, insurance cover, and relevant project experience.

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 price book is a structured catalog of products and services with preset prices and margins, used to ensure every quote is built from a consistent pricing foundation across the sales team.

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.

A purchase requisition is an internal document submitted by an employee to request approval to make a purchase. Once approved, it authorizes the procurement team to raise a purchase order with the supplier.

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 pre-defined list of standard prices for services, products, or labour used as the starting point for quotations. Rate cards reduce quoting time and maintain consistent, margin-aware pricing across the sales team.

The stock level at which a new purchase order should be placed to replenish inventory before it runs out. Calculated using average daily usage, supplier lead time, and a safety stock allowance.

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 retention bond is a financial guarantee issued by a surety company that replaces cash retention withheld from contractor payments in construction contracts, protecting the client against defects while freeing the contractor's working capital.

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.

The complete sequence of stages a business follows from first identifying a prospect through to closing a deal. Includes lead generation, qualification, proposal, negotiation, and close, with length varying by deal size and buyer complexity.

A projection of future revenue based on current open quotes, historical win rates, and known repeat orders - used to plan capacity, manage cash flow, and set realistic revenue targets.

A metric that measures how fast a business converts pipeline opportunities into revenue, calculated by multiplying deal count, average deal value, and win rate, then dividing by average sales cycle length in days.

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 formal agreement between a service provider and customer that defines the expected standard of service, including response times, performance metrics, and remedies if those standards are not met.

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 pre-installation visit to a customer's premises to assess physical conditions, take measurements, identify access constraints, and gather the information needed to produce an accurate quote.

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 one-off unplanned purchase made outside established supplier agreements, typically on the open market to fulfil an urgent need when preferred suppliers cannot deliver in time.

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 measure of how many times a business sells and replaces its stock within a set period, typically a year. Calculated by dividing cost of goods sold by average inventory value. A higher ratio indicates efficient stock management; a lower ratio points to slow-moving inventory.

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 supplier scorecard is a structured tool for measuring and tracking supplier performance against criteria such as on-time delivery, order accuracy, product quality, and pricing adherence.

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 total elapsed time from receiving a customer request or order to delivering the completed output. Includes internal processing time, supplier lead time, and transit - not just production time.

A unit rate is a fixed price per measurable unit of work - such as per square metre, per cubic metre, or per item installed. The total cost is calculated by multiplying the rate by the actual quantity of units completed.

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.

The percentage of available capacity - equipment hire days or staff billable hours - that actively generates revenue in a measured period. The primary efficiency metric for hire businesses and service teams.

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.

A sales forecasting method that multiplies each open opportunity's value by its estimated closing probability, giving a more realistic revenue forecast than the raw total of all open deals.

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.

The difference between a business's current assets (cash, outstanding invoices, stock) and its current liabilities (supplier invoices, short-term obligations). A positive working capital position means the business has enough liquid resource to fund operations without relying on credit.

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.