Definitions

Plain definitions of the accounts payable, expense and job costing terms that contractors and property managers run into. Each term links to a full article with examples.

A

Account reconciliation

Account reconciliation is the process of proving that an account balance in your books is right by comparing it with supporting evidence, such as a bank statement, a supplier's statement or a prepaid schedule backed by invoices, and then explaining or fixing every difference before the books for that period are closed.

Accounts payable

Accounts payable (AP) is the money a business owes its suppliers and vendors for goods or services it has already received but not yet paid for. Each unpaid bill is a short-term debt, so the total AP balance appears under current liabilities on the balance sheet until the bills are paid.

Accrued expenses

Accrued expenses are costs a business has incurred but has not yet been billed for or paid, such as wages since the last payday or work a subcontractor finished last week. They are recorded as an expense in the period the cost happened and as a short-term debt, called an accrued liability, until the bill arrives or you pay it.

ACH vs wire vs check

ACH, wire and check are three ways US businesses pay vendors: ACH (Automated Clearing House) transfers settle in batches within two business days, a domestic wire usually moves one payment within hours and is final once processed, and a check is a paper order to your bank to pay. The choice decides fees, speed and how easily mistakes are undone.

AIA billing

AIA billing is a way of requesting progress payments on a construction contract using two American Institute of Architects forms: the G702 Application and Certificate for Payment, a one-page summary, and the G703 Continuation Sheet, which breaks the contract into line items. Together they make up the pay application that the architect certifies.

AP aging report

An AP aging report is a financial document that lists every unpaid vendor invoice a business owes, grouped by how long each one has been outstanding, typically in 30-day buckets: current, 1-30, 31-60, 61-90, and 90-plus days past due. It shows accounts payable teams exactly what's overdue and to whom.

AP automation

AP automation is software that handles accounts payable, the bills a business owes its suppliers, with little manual work: it reads each invoice, codes it to an account or job, matches it to the order, routes it for approval, pays the vendor and records it in the books. That cuts data entry, late fees and duplicate payments.

AP vs AR

Accounts payable (AP) is the money a business owes its vendors for goods or services it has received but not yet paid for, while accounts receivable (AR) is the money customers owe the business for goods or services it has delivered but not yet been paid for. AP is a current liability, and AR is a current asset.

Audit trail

An audit trail is the chain of records that lets anyone trace a number in your books back to the document behind it, and see who entered, approved or changed it, when, and what it said before. For a business, that means receipts, invoices, approvals and change history tied to each transaction.

Automated bill pay

Automated bill pay is a system that pays a business's bills on schedule once they are approved, by ACH bank transfer, check, card or wire, without someone setting up each payment by hand. Bills are captured, coded and approved, then paid when due and synced to the books, which cuts late fees and leaves a record of every approval.

B

Bank reconciliation

A bank reconciliation compares the cash balance in your own books with the balance on your bank statement for the same date and explains every difference, such as checks that haven't cleared, deposits still on the way, bank fees and errors, until both sides show the same adjusted figure.

Billable expense income

Billable expense income is the income a business records when a client or property owner repays a cost the business already paid for them, such as materials, a permit, or a locksmith. In QuickBooks Online, that repayment posts to the Billable Expense Income account once the cost is added to an invoice.

Billable expenses

Billable expenses are costs a business pays while working for a client that it charges back to that client, such as job materials, permits, equipment rental or travel, at cost or with an agreed markup. The contract decides which costs qualify. A billable cost that never reaches an invoice comes straight out of the job's profit.

Bring your own card (BYOC)

Bring your own card (BYOC) is an expense management setup where a business keeps the credit and debit cards it already has, from any bank, and connects them to expense software instead of switching to cards issued by a spend platform. The company keeps its credit lines, rewards and bank relationships while capturing receipts and coding every charge.

Budget variance

A budget variance is the difference between what you planned to spend or earn and what actually happened, usually shown in dollars and as a percentage of the budget. Variance analysis is the process of measuring those gaps, finding out why they happened and deciding what to do about them.

C

CapEx

CapEx, short for capital expenditure, is money spent to buy, build or improve a long-term asset, such as a truck, equipment or a building, that the business will use for more than a year. It is recorded as an asset, and anything that wears out is depreciated over its useful life rather than expensed at once.

CapEx vs OpEx

CapEx vs OpEx is the split between capital expenditures, spending on assets that last more than a year such as trucks and equipment, and operating expenses, the day-to-day costs of running the business such as rent, payroll and fuel. OpEx hits profit when incurred. CapEx is recorded as an asset and, except land, expensed gradually through depreciation.

Change order

A change order is a written amendment to a construction contract, signed by the owner and the contractor (and often the architect), that changes the scope of work, the price, the schedule or several of these after signing. Extra work done without one is hard to get paid for and often ends in a dispute.

Chart of accounts

A chart of accounts is the full list of accounts a business uses to sort its transactions, usually numbered and grouped into assets, liabilities, equity, income and expenses. Every sale, bill and card charge is recorded in these accounts, and their totals become the balance sheet and the profit and loss statement.

Corporate card

A corporate card is a payment card a business gives its employees for work spending, billed through a company card program instead of the employee's own account. Depending on the program, the company, the employee or both are legally responsible for the bill, and the company sets limits on what each card can buy.

Cost center

A cost center is a part of a business, such as an office, shop, fleet or department, whose manager answers for what it spends rather than what it earns. Its costs are tracked separately so the owner can see what each part costs to run and compare that with its budget.

Cost codes

Construction cost codes are numbered labels that sort every job cost by type of work, such as concrete, framing or electrical, and often by cost type: labor, materials, equipment or subcontract. Many are based on CSI MasterFormat divisions. Coding each cost to its budget line shows which part of a job is running over in time to act.

Credit card reconciliation

Credit card reconciliation is the process of matching every charge on a business credit card statement to its receipt and to the entry recorded in the accounting system, then confirming that the totals agree. It catches missing receipts, duplicate or fraudulent charges and expenses coded to the wrong account before the month's books are closed.

Credit memo

A credit memo, short for credit memorandum, is a document a seller issues to reduce what a customer owes, usually after a return, a pricing error or damaged goods. The seller records it against the customer's unpaid balance, and the buyer records it as a vendor credit that lowers what it owes or comes back as a refund.

D

Duty of care

Duty of care is the obligation to take reasonable steps to prevent foreseeable harm to others; for an employer, it means protecting employees' health and safety at work, on job sites and while traveling. In the US, the OSH Act requires a workplace free of recognized serious hazards, and gaps can lead to injuries and OSHA citations.

E

Expense management

Expense management is the process a company uses to track, approve, and pay for the money employees and vendors spend on its behalf, covering everything from receipt capture and coding through approval and reimbursement or payment. It covers everything that happens between an expense occurring and that expense landing correctly on the books.

Expense report

An expense report is a form an employee submits to list business costs they paid or charged, with the date, vendor, amount, purpose and receipt for each. The company uses it to approve the spending, repay what the employee covered and record each cost in the right account and job. It also proves each cost was for business.

F

Fixed vs variable expenses

Fixed vs variable expenses is the split between costs that stay about the same each month whatever your sales, like rent, insurance and salaried pay, and costs that rise and fall with the work, like materials, fuel and hourly labor. Some, like utilities, mix both. The split sets your break-even point, the sales you need to cover every cost.

Fleet card

A fleet card, also called a fuel card, is a company payment card for buying fuel, and often maintenance, for business vehicles. It is usually tied to a vehicle rather than a person, and at the pump it records details a normal card statement doesn't show, such as the driver's ID, the odometer reading and the gallons pumped.

G

G&A

G&A meaning, short for general and administrative expenses, covers the day-to-day costs of running a business that are not tied to producing a specific product or service. That includes accounting, HR, legal, IT, and executive management. These costs form a distinct line on the income statement, separate from cost of goods sold and sales expenses.

I

IRS receipt requirements

IRS receipt requirements are the federal rules for proving business expenses. Every deduction needs supporting records, such as receipts or paid invoices, or it can be disallowed. Travel, gift and car costs face a stricter test: a receipt for all lodging and for other items of $75 or more, with exceptions for per diem and some transportation.

Itemized receipt

An itemized receipt is a receipt that lists each item or service bought on its own line, with a description, quantity and price, plus the tax and total. Unlike a card slip, it proves what you bought, not just what you paid, which expense policies, job cost tracking and IRS rules for hotel bills depend on.

J

Job costing vs process costing

Job costing tracks labor, materials and overhead for each job or customer order, while process costing totals a period's production costs and spreads them over identical units. Contractors and field service firms use job costing because every job differs; makers of uniform products such as paint use process costing. Each shows true cost per job or unit.

M

Mileage vs actual expenses

The actual expense method is a way to deduct business vehicle costs by adding up what the vehicle cost to run (gas, oil, repairs, insurance, registration, lease payments or depreciation) and multiplying by the business-use percentage. The standard mileage method multiplies business miles by an IRS rate instead. The choice changes the deduction and the records you keep.

Month-end close

Month-end close is the set of accounting tasks a business completes after each month ends to make that month's books final: entering every transaction, reconciling bank and card accounts, recording costs incurred but not yet billed, and reviewing the financial statements. A clean close gives owners accurate monthly numbers for pricing, cash planning, taxes and lenders.

O

Open invoice

An open invoice is an invoice that has been issued but not yet paid in full, so a balance is still owed on it until payments or credits bring it to zero. The seller carries it in accounts receivable, the money customers owe, and the buyer carries it in accounts payable, the money owed to vendors.

Operating expenses (OpEx)

Operating expenses (OpEx) are the recurring costs a business incurs to run day-to-day operations, separate from the cost of producing goods (COGS) or one-time capital investments. Common examples include rent, salaries, utilities, insurance, and software subscriptions. Tracking OpEx separately matters because it shows how efficiently a company runs its core operations, independent of production costs or asset purchases.

P

Payment terms

Payment terms are the conditions a seller and buyer agree on for paying an invoice: when it's due, any discount for paying early, any deposit up front, and the charge for paying late. "Net 30", meaning the full amount is due 30 days after the invoice date, is a common example.

P-card

A p-card (purchasing card) is a company-paid payment card that employees use to buy approved supplies and services directly from vendors, inside limits the company sets. The business, not the employee, gets the bill and pays it, and each charge is later matched to a receipt and coded to the right account.

Per diem

Per diem is a fixed daily allowance an employer pays to cover an employee's lodging, meals and incidental expenses while traveling away from home for work. Instead of reimbursing every receipt, the company pays a set amount for each day of the trip, often based on federal rates published for each city and county.

Per diem (calculation)

Per diem is a daily allowance for a traveling employee's lodging, meals and incidental expenses, often set at the destination's GSA rate. To calculate it, multiply nights by the lodging rate and days by the meals rate, counting first and last days at 75% under federal rules. Under an accountable plan, amounts up to the federal rate are tax-free.

Petty cash

Petty cash is a small, fixed amount of cash a business keeps on site to pay for minor expenses, such as postage, parking or a few supplies, when a check or card isn't practical. One person, the custodian, looks after it, and every payment out of the fund is backed by a slip and a receipt.

PO number

A PO number is the unique reference number a buyer gives each purchase order so both sides can track that order. The buyer assigns it, the vendor repeats it on the order confirmation, packing slip and invoice, and the buyer's accounts payable team uses it to match each bill to an approved order before paying.

Positive pay

Positive pay is a bank fraud-control service that compares every check presented for payment on your account with the list of checks you issued, matching the check number, amount and, in payee positive pay, the payee's name. Any check that doesn't match is held as an exception for you to pay or return.

Proof of purchase

Proof of purchase is any record that shows a specific purchase happened and was paid for, such as a receipt, a paid invoice, an order confirmation or a card statement paired with the bill. Businesses need it for returns, warranty claims, reimbursements and taxes, and IRS guidance says proof of payment alone does not establish a deduction.

Purchase order

A purchase order (PO) is a document a buyer sends a vendor to order goods or services, listing the items, quantities, agreed prices, delivery date and payment terms. Once the vendor accepts it, the PO becomes a binding contract, and the buyer later checks the vendor's invoice against it before paying.

R

Real-time accounting

Real-time accounting is the practice of recording transactions in the books as they happen, or within a day, rather than in batches at month-end, using bank and card feeds, digital receipt capture and automatic coding. It gives owners current figures for cash, costs and profit, so they can act mid-month instead of weeks after the month closes.

Receipt

A receipt is a document a vendor gives a buyer as proof of purchase, showing what was bought, how much it cost, and when the transaction happened. A valid receipt for expense reporting also lists the vendor name, an itemized breakdown of charges, the payment method, and the total paid.

Reimbursable expense

A reimbursable expense is a cost an employee pays out of pocket while doing their job that the employer agrees to pay back, such as mileage, travel, client meals, or supplies bought for a project. It only qualifies as reimbursable if the purchase is business-related, properly documented, and allowed under the company's written expense policy.

Remittance advice

A remittance advice is a document a business sends to a supplier with, just before or just after a payment, listing which invoices the payment covers, how much went to each, and any discounts, credits or deductions taken. The supplier uses it to apply the money to the right invoices in its books.

Retainage

Retainage is the part of each progress payment on a construction project that the owner holds back until the work is substantially complete, usually a set percentage such as 5% or 10%. It is money the contractor has earned but not yet been paid, and general contractors often hold it back the same way from their subcontractors.

S

Segregation of duties

Segregation of duties is an internal control that splits a money task among different people, so no one person can approve a transaction, handle the cash or asset, record it in the books and check the records afterward. Because each step is seen by someone else, theft and honest errors are much harder to hide.

SG&A

SG&A stands for selling, general, and administrative expenses: the costs of running a business that aren't tied directly to producing a product or delivering a service. It covers sales salaries, marketing, rent, office supplies, and admin staff pay. SG&A shows up as its own line on the income statement, separate from cost of goods sold.

Spend management

Spend management is the practice of controlling all company spending, including vendor bills, purchase orders, subscriptions and card spend, before and while money goes out, through budgets, approvals and policies. Expense management is narrower: it handles employee purchases after they happen by collecting receipts, approving, reimbursing and coding them. Spend management prevents overspending; expense management records spending accurately.

T

T&E

T&E stands for travel and expense, the costs employees incur while traveling for work and the process companies use to track, approve, and reimburse them. T&E covers airfare, hotels, meals, mileage, and client entertainment, along with the policies and software that keep those costs organized and compliant.

Telecom expense management

Telecom expense management (TEM) is the process of tracking, auditing and controlling what a business spends on phone, internet, wireless and data services: keeping an inventory of lines and devices, checking carrier invoices against contracts and charging costs to the right departments or jobs. Unused lines, billing errors and outdated plans push up a recurring bill without anyone noticing.

Three-way match

Three-way match is an accounts payable check that compares a vendor's invoice with the purchase order and the receiving report before the bill is paid, confirming that items, quantities and prices agree. Two-way matching compares only the invoice and purchase order; four-way matching adds an inspection record. The match blocks payment for goods never ordered, never delivered or overbilled.

V

Virtual card

A virtual card is a card number, expiration date and security code issued digitally with no plastic, used for online, phone and recurring payments. A physical card is the plastic version for counters and pumps. Virtual cards can be created per vendor or purchase with their own limit, so a stolen number exposes only that limit.

W

WIP report

A WIP report (work-in-progress report) is a job-by-job schedule that compares each open contract's costs to date, percent complete, revenue earned and amount billed, showing whether each job is overbilled or underbilled. It helps contractors catch money-losing jobs and cash gaps before a job ends, and lenders and bonding companies often ask to see it.