Glossary
Finance terms, in plain English.
The words your banker, surety, and CPA use, explained for construction and real estate owners. Each one links to a tool or an issue that goes deeper.
A
- Accounts payable (AP)
- Money your business owes vendors, suppliers, and subcontractors for work or materials you have already received.Related · Find Your Zero calculator →
- Accounts receivable (AR)
- Money customers owe you for work you have already billed. It isn't cash you can use until it's collected.Related · Issue 01 →
B
- Backlog
- Signed work you haven't finished yet, usually measured as the contract value still to be earned. Banks and sureties use it to judge what's ahead.
- Bonding capacity
- The amount of work a surety will bond for you, often set as a single-job limit and a total limit. It depends largely on your working capital, net worth, and track record.Related · Issue 06 →
- Break-even point
- The revenue you need to cover all of your costs, fixed and variable, before you make a dollar of profit.Related · Break-Even calculator →
C
- Cap rate
- Short for capitalization rate. A property's net operating income divided by its value or price. It's a quick way to compare income properties.Related · Deal Analyzer →
- Cash flow forecast
- A week-by-week or month-by-month projection of the cash coming in and going out. A 13-week forecast is the standard view for spotting tight weeks early.Related · Issue 07 →Free download · 13-Week Cash Flow template →
- Cash-on-cash return
- The yearly pre-tax cash flow from a property divided by the cash you invested in it. It shows what your actual dollars are earning.Related · Deal Analyzer →
- Change order
- A written change to a contract's scope, price, or schedule. Unsigned or unbilled change orders are one of the most common places contractors lose margin.Related · Change Order Leak calculator →
- Cost-to-cost method
- A way to measure how complete a job is by dividing costs to date by total estimated costs. It's the most common method behind a WIP schedule.Related · Over/Under Billing calculator →
D
- Debt service coverage ratio (DSCR)
- Net operating income, or the cash available to pay debt, divided by your loan payments. Many lenders want to see at least 1.20 to 1.25.Related · DSCR calculator →
- Draw
- A payment released from a construction loan or contract as work reaches set milestones, usually after an inspection.
F
- Fractional CFO
- An experienced chief financial officer who works with your business part-time on a monthly plan, for a fraction of the cost of a full-time hire.Related · CFO cost calculator →Free download · Fractional CFO Buyer's Guide →
G
- Gross margin
- Gross profit as a percent of revenue. Revenue minus the direct costs of the job or property, divided by revenue.Related · Markup vs. Margin calculator →
J
- Job costing
- Tracking every cost by job, and often by phase, so you can see each job's profit while the work is still happening.Related · True Cost of an Employee calculator →Free download · Job Cost Tracker →
L
- Line of credit
- A revolving loan you draw on as needed and pay back, usually reviewed and renewed each year. Your bank looks closely at your financials at renewal.Related · Bank Renewal Checklist →
M
- Markup
- The amount added to cost to set a price, figured as a percent of cost. A 20% markup gives you a 16.7% margin, not 20%.Related · Markup vs. Margin calculator →
N
- Net operating income (NOI)
- A property's income minus its operating expenses, before loan payments, depreciation, and income taxes.Related · DSCR calculator →
O
- Overbilling
- When you have billed more on a job than you have earned based on progress. It shows as a liability on your balance sheet, because the work is still owed.Related · Over/Under Billing calculator →
- Overhead
- The costs of running the business that aren't tied to one job or property, like office rent, admin staff, insurance, and software.Related · Break-Even calculator →
- Owner's draw
- Money an owner takes out of the business for personal use. Planning it ahead keeps your cash and your taxes predictable.Related · Financial Health Check →
P
- Pro forma
- A projection of a project's or property's costs, income, and returns, used to decide whether a deal makes sense and to raise financing.
R
- Retainage
- A percentage of each payment held back until a job is complete, often 5% to 10%. It's money you have earned but can't use yet.Related · Find Your Zero calculator →See it in action · Why cash disappears →
T
- Trust accounting
- Keeping money that belongs to others, like tenant security deposits or owner funds, in separate accounts with careful records, as many state rules require.
U
- Underbilling
- When you have earned more on a job than you have billed. It shows as an asset, but it's cash you haven't collected.Related · Over/Under Billing calculator →
W
- WIP schedule
- Short for work in progress. A report showing every open job's contract value, estimated costs, percent complete, billings, and over or under billing. Banks and sureties read it closely.Related · Issue 06 →Free download · WIP Schedule template →
- Working capital
- Current assets minus current liabilities. It's the cushion that funds daily operations, and sureties weigh it heavily.Related · Issue 03 →
No terms match that search. Ask Guillermo on a strategy call →
These definitions are general information, not advice for your situation.