9. Customer documents and Financial terms

Estimate

Approximate price that may change after inspection or further information

Quote

Defined work for a stated price and conditions

Once accepted it can be a legally binding contract

Scope of work

Exactly what is included in the price

Normally included on the Quote

Exclusion

Something specifically not included

Variation

A change to the original agreed scope of work or price after the quote has been accepted.

Invoice

Formal Request for payment

Tax Invoice

GST-compliant invoice issued by a GST-registered business

receipt

Proof that a payment has been received

Statement

Summary of invoices, payments and outstanding money

Credit note

A document that reduces or cancels part or all of an invoice already issued.

Accounts payable

Money Bug Stomp owes suppliers (someone)

Payment terms

When and how payments must be done

Accounts receivable,

Money customers owe Bug Stomp

Bad Debt

money owed to the business that is unlikely to ever be collected.

A customer owes $500, but they have gone bankrupt or repeatedly failed to pay and the business writes it off.

Revenue

Total sales before expenses,

excluding GST if GST registered

Direct costs

Expense directly connected to completing jobs

examples include

• Fuel
  Chemicals
  Supplies used
  Labour

Overheads

Business costs not tied to one job

Examples include

• Insurance

• Software

• Vehicle registration

• advertising

• Accounting

Gross Profit

Gross Profit is Revenue after direct costs

Gross profit = Revenue = Direct Cost

Net Profit

Net profit is revenue after direct costs and overheads

Net Profit = Revenue - Direct cost - Overheads

Markup

Percentage added to cost to calculate selling price

Net Profit Margin

Net profit as a percentage of revenue.

Formula:
Net Profit Margin = Net Profit ÷ Revenue × 100

Cash Flow

The movement of money into and out of a business.

Break-even point

Sales required to cover all expenses without making a profit

At break-even:

Revenue = Total expenses
Profit = $0

Reconciliation

Matching bank transactions with invoices, payments and receipts

P & L

P&L = Profit and Loss Statement

Profit and loss report showing revenue, expenses and profit

Revenue − Expenses = Profit or Loss

Balance Sheet

Company assets, Liabilities and equity at a particular date