The small business glossary.
42 terms every service business meets, from accounts receivable to work orders, explained in plain English.
Terms
- Accounts payable
- Money your business owes to suppliers and others for goods or services it has received but not yet paid for.
- Accounts receivable
- Money customers owe your business for work you have invoiced but not yet been paid for. Keeping it low is one of the quickest ways to improve cash flow.
- How to get paid faster
- Aged receivables
- A view of unpaid invoices grouped by how long they have been outstanding, such as up to 30 days, 31 to 60 days and over 60 days, so you know which to chase first.
- Chasing a late invoice
- Audit log
- A record of who changed what, and when, in a system. It lets a business investigate a mistake or misuse after the fact.
- Team and access
- Bill of quantities
- A document listing every item of work and material in a project with its quantity, unit and rate, used to price, revise and track fit-out and construction work.
- Interior design pack
- Billable hours
- The hours a client pays for. Quoting, unpaid travel, admin and marketing are usually unbillable, and your rate has to cover them too.
- Hourly rate calculator
- Break-even point
- The amount of work, or revenue, at which income exactly covers costs, so the business makes neither a profit nor a loss.
- Break-even calculator
- Cash flow
- The movement of money into and out of a business. A profitable business can still run short of cash if customers pay slowly or costs arrive before income.
- Deposits and milestone billing
- Change order
- A written, priced agreement to change the scope of a job after it has started, accepted by the client before the extra work is done.
- Churn rate
- The share of customers or members who leave in a period, usually a month. For a membership business it decides the future more than sign-ups do.
- Membership churn calculator
- Contribution
- What a job or a sale leaves after its own direct costs. It pays the fixed costs first, and what remains is profit.
- Break-even calculator
- Credit note
- A document that cancels all or part of an invoice already issued. It is used instead of editing or deleting the invoice, so the record stays complete.
- Invoice template guide
- CRM
- Customer relationship management: software for keeping track of customers, inquiries and the progress of each sale.
- Leads
- Data export
- Taking a complete copy of your data out of a system in an open format, such as a spreadsheet file, so you can keep it or move it elsewhere.
- Security
- Deposit
- A payment taken before work starts and credited against the final price, to secure a date and cover early costs such as materials.
- Deposits and milestone billing
- Direct costs
- The costs a particular job causes: its materials, subcontractors, equipment hire and the labor spent on it.
- Job costing
- Estimate
- Your best judgment of what a job is likely to cost. Unlike a quote, it is not a fixed price, and it may change as the work becomes clear.
- Fixed costs
- Costs that stay the same however much work you do, such as rent, insurance, salaries, vehicles and software.
- Break-even calculator
- Gross margin
- Profit after direct costs, as a share of the price. A job sold for $900 that cost $600 has a gross margin of 33.3%.
- Profit margin calculator
- Handover
- The point at which finished work is passed to the client, usually with a final walk-through, a snag list and the documents they need.
- Invoice
- A request for payment for work done or goods supplied, showing what is owed, when it is due and how to pay.
- Invoice template guide
- Job costing
- Tracking the actual costs of each job against what it earned, to see its real profit while there is still time to act.
- Job costing
- Late fee
- A charge for paying after the due date. It is enforceable only if it was agreed in advance and is lawful where you trade.
- Late payment calculator
- Lead
- A person or business that has shown interest in your services but has not yet agreed to buy.
- Leads
- Lifetime value
- The total a customer or member is expected to pay over the whole relationship, which tells you what it is worth spending to win and keep them.
- Membership churn calculator
- Markup
- Profit as a share of the cost. A 50% markup is only a 33.3% margin, which is why confusing the two underprices work.
- Profit margin calculator
- Merchant of record
- The company legally responsible for a sale: it takes the payment, issues the invoice and handles the sales tax.
- Pricing
- Milestone billing
- Billing a fixed share of a project's price as each agreed stage is reached, so money arrives as the work does.
- Deposits and milestone billing
- No-show
- A booked appointment the customer neither attends nor cancels, leaving time that cannot be sold again.
- No-show calculator
- Overheads
- The running costs of a business that are not tied to any one job, such as rent, insurance, the office and software.
- How to price your services
- Payment terms
- The agreed conditions for paying an invoice: when it is due, how to pay, and what happens if it is late.
- How to get paid faster
- Pipeline
- Every lead a business is working on, grouped by stage and valued, which shows what next month's work is likely to be.
- Leads
- Progress billing
- Billing in line with the share of the work completed, common on long jobs measured by quantity.
- Quote
- A fixed price for clearly defined work, which the customer can accept. Once accepted, it is the agreement both sides work to.
- How to write a quote that wins
- Retainer
- A fixed monthly fee for an agreed level of work or availability, with the scope written down so both sides know what it covers.
- Role-based access
- Giving each person access according to their role, such as owner, admin or staff, instead of giving everyone everything.
- Team and access
- Snag list
- A list of small defects or unfinished items found at the end of a job, fixed before final sign-off. Also called a punch list.
- Steady state
- The size a membership settles toward when joiners and leavers balance: new members a month divided by the monthly churn rate.
- Membership churn calculator
- Tenant isolation
- Keeping each customer's data separate in software many businesses share, so that no customer can ever see another's.
- Security
- Two-factor sign-in
- Signing in with something you know, your password, and something you have, such as a code from an app on your phone.
- Team and access
- Utilization rate
- The share of available working hours that are billable. It is the number most service businesses overestimate when they set their prices.
- Hourly rate calculator
- Work order
- An instruction to carry out a specific job, with the work to be done, the location and who is doing it.
- Repair and maintenance