Glossary
Business document terms, in plain English.
What the words on an estimate, invoice or contract actually mean, from retainage to net 30. Where a term has its own guide, it links straight to it.
A
- Accounts receivable
- Money clients owe you for work already billed. Unpaid invoices make up your accounts receivable.
- Appointment confirmation
- A short letter that confirms the date, time and prep for a booked visit. Appointment confirmation guide
B
- Balance due
- What a client still owes after discounts, tax and any payments already made. It is the headline figure on an invoice. Invoice guide
- Bill to
- The person or company the invoice is addressed to and who is responsible for paying it. It can differ from the job site owner.
- Billable hours
- Time you can charge a client for, such as hours on site. Travel and admin time are only billable if you agreed to bill them. Time and mileage
C
- Cash flow
- The timing of money coming in and going out. A profitable job can still strain cash flow if you pay for materials weeks before you are paid.
- Change order
- A written record of work added to or removed from the original agreement, with its cost and the new contract total. Change order guide
- Completion certificate
- A document stating that work is finished, usually with the warranty, signed by the contractor and the owner. Completion certificate guide
- Contract sum
- The total agreed price of the job, including approved change orders. Progress invoices are figured from it. Progress invoice guide
- Credit note
- A document that reduces or cancels an invoice you already issued, naming the invoice and the reason. Credit note guide
D
- Deposit
- Money paid before work starts to secure the job or cover early costs. It is shown on the estimate and subtracted from the final balance. Estimate guide
- Discount
- A reduction in price, as a percentage or a flat amount, applied before tax.
- Draw
- One payment released from a larger contract as work progresses. Billing in draws is also called progress billing. Progress draws
- Due date
- The date payment is expected. On an estimate or quote the matching field is "valid until".
E
- Early payment discount
- A discount for paying quickly, written like "2/10 Net 30": 2 percent off if paid within 10 days, otherwise the full amount in 30. Late fees and discounts
- Estimate
- Your best price for a job, offered before the work starts. It can move if the scope turns out different from what was measured. Estimate guide
F
- Fixed price
- A job priced as one agreed amount regardless of how long it takes. The risk of running over sits with the contractor.
G
- Grace period
- A number of days after the due date before a late fee applies. Late fees and discounts
- Gross profit
- Revenue minus the direct cost of the job, such as materials and labor, before overhead.
I
- Invoice
- The document that asks a client to pay for work done, with the amount, the due date and how to pay. Invoice guide
J
- Job site
- The address where the work happens. Printed separately when it differs from the billing address.
L
- Late fee
- A charge added when a payment arrives after the due date and grace period. It only holds up if it was written into the terms beforehand. Late fees and discounts
- Lien
- A legal claim against a property that a contractor can sometimes file for unpaid work. The rules and deadlines vary by state, so check yours. This is not legal advice.
- Line item
- One row on a document: a description, a quantity, a unit price and an amount.
M
- Maintenance agreement
- A recurring service plan that sets out what is covered, how often and for what price. Maintenance agreement guide
- Margin
- Profit as a share of the selling price. A job that costs $100 and sells for $150 has a margin of 33 percent. Scope and margin builder
- Markup
- Profit as a share of your cost. The same $100 job sold for $150 has a markup of 50 percent. Markup is always a bigger number than margin for the same sale. Scope and margin builder
- Material cost
- What you pay for the physical goods used on a job, before any markup.
- Mileage deduction
- A tax deduction for business driving, calculated by multiplying miles by the IRS standard rate for the year. Keep a log of each trip. Time and mileage
- Milestone
- A defined point in a job, such as framing complete, at which a payment becomes due. Progress draws
N
- Net 30
- Payment is due 30 days after the invoice date. Net 15 and Net 60 work the same way.
- Net profit
- What is left after all costs, including overhead and expenses. It is the number that actually stays in your business. Financial health
O
- Overdue
- Past the due date and unpaid. Also called past due. Payment reminder guide
- Overhead
- The ongoing costs of running the business that are not tied to one job, such as insurance, software and the shop.
P
- Pay application
- A progress billing form that shows the contract sum, work completed to date, retainage, earlier payments and the amount due now. Progress invoice guide
- Payment reminder
- A short, friendly notice that a balance is due. Payment reminder guide
- Payment terms
- The agreed rules for paying: when it is due, accepted methods, late fees and any early payment discount.
- Progress invoice
- An invoice for the share of a larger contract completed so far, less retainage and earlier payments. Progress invoice guide
- Proposal
- A document that offers several options, often good, better and best, for the client to choose from. Proposal guide
- Purchase order
- An order sent to a supplier or subcontractor that fixes the items, quantities and price before delivery. Purchase order guide
Q
- Quote
- A firm price for a clearly defined job that you commit to honor. Quote guide
R
- Receipt
- Proof that a payment was received, with the amount, date and method. Receipt guide
- Recurring invoice
- An invoice that sends itself on a schedule, such as monthly, for plans and retainers. Recurring billing
- Remittance
- The payment itself, or the details that say how and where to send it.
- Retainage
- A percentage of each payment, often 10 percent, that the owner holds back until the job is complete. It is released on the final draw. Progress invoice guide
S
- Scope of work
- A description of exactly what the job includes and, just as important, what it does not.
- Service report
- A record of a service call: the equipment, what was found, what was done and what is recommended. Service report guide
- Subcontractor
- A separate business you hire to do part of a job. They invoice you, and you bill the client.
- Subtotal
- The sum of all line items before discount and tax.
T
- Taxable line
- A line item that sales tax applies to. Labor, materials and fees can be set differently, depending on your state.
- Time and materials
- A job billed by the hours worked plus the cost of materials, instead of a fixed price.
U
- Unit price
- The price for one unit of something, such as one hour, one square foot or one fixture. Saved items
V
- Valid until
- The date an estimate or quote stops being honored, because prices and availability change. Estimate guide
- Void
- To cancel a document that was issued by mistake so it no longer counts. A credit note is the cleaner way to reverse a sent invoice. Credit note guide
W
- Warranty
- A written promise that you will fix defects in your work for a set time, covering what is and is not included. Completion certificate guide
- White-label
- Removing the software maker's branding so the documents and client links your clients see carry only your brand. On AeroInvoice this is a Business plan feature. White-label branding
- Work order
- A task checklist for a crew, with the site and notes but no prices, signed off by the customer when done. Work order guide
- Write-off
- An amount you stop expecting to collect, or a business cost you deduct on your taxes.
These definitions are general guidance for everyday business paperwork. Rules on liens, tax and contracts vary by state, so check with a professional for anything legal.
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