Understanding bookings

Definition

Bookings are the contract value signed in a period, whether or not an invoice has gone out. On the books, this is a signed-work total, not a ledger account and not this period's earned revenue.

A custom home builder who signs a $400,000 house has booked $400,000 that day. The first progress invoice and the first stud wall can both come later.

The Income Statement still waits on revenue recognition rules. Bookings record the promise, not the earned month.

This figure is signed value. It is not cash in the bank.

Where it shows up

Balance Sheet: Related to deferred cash once a signed contract is billed.

P&L: Related to future earned sales, not this period's revenue.

See also: Billings · Backlog · Sales Order

When you look at your P&L, you will not see a line titled bookings. You will see construction income only in the months the work is earned.

When bookings are high, the builder signed more contract value this period. When they are low, fewer houses or change orders were signed, even if old jobs are being billed.

The Balance Sheet does not hold this total as a permanent account. A deposit collected on a newly signed house sits in deferred revenue or customer deposits until the work is earned.

On the Statement of Cash Flows, collecting that deposit is an operating inflow. Signing the contract, by itself, does not move cash.

Some teams put bookings on a Key Metrics Dashboard beside backlog. That pairing is a management view, not an account in the chart of accounts.

How it works

A buyer signs a construction contract, or a change order, at an agreed price. The full signed value is bookings in the period the signature lands.

The invoice can wait. Billings start only when the builder actually invoices a draw, a deposit, or a completed stage.

The work can wait too. Earned sales follow the recognition rules as the house is built, not as the pen hits the paper.

A one-year house and a two-year house both book their signed value when they are signed. The longer job does not drip into bookings a little each month.

Change orders add bookings when the owner signs the extra work. A cancelled contract reverses the signed value that will not be delivered.

Do not treat a handshake tour as this figure. The signed contract, or the confirmed sales order behind it, is what counts.

Do not dump the signed total onto the P&L the day it is signed. Revenue waits on the work, and this total only records the promise.

Annual recurring revenue is a different idea used by subscription shops. A builder's signed house is a job total, not a repeating monthly book restated as a year.

Stay with the signed value when you read the month. The invoice file explains what was billed, and this figure explains what was committed.

Keep a contract file that supports the period total. Anyone should be able to see which houses and change orders were signed, and for how much.

Example

A custom home builder signs a $400,000 house on March 4. March bookings include that $400,000 even though groundbreaking is in May.

The owners also sign a $40,000 garage change order on March 20. March bookings are now $440,000.

The builder collects an $80,000 deposit on March 10. That cash is a liability until it is earned, and it is not a second $80,000 of bookings.

If the first draw invoice does not go out until May, March still holds the $440,000 of signed value. May will hold the billings, not a replay of the March signatures.

A $12,000 one-off fence job signed and finished the same week is also bookings. It happens to be billed and earned quickly, which is why the three numbers can match on a short job.

Common mix-ups

Bookings are not billings. Billings are the amount actually invoiced, and this figure is the amount signed.

Bookings are not revenue. Revenue is the earned slice as the house is built, and this figure is the promise on the day of the signature.

Bookings are not the deposit in the bank. Cash collected early sits as deferred revenue, and the signed total can be much larger than that cash.

Related terms

• Billings: The amount actually invoiced to customers in a period.
• Backlog: Signed work that has not yet been delivered or recognized as revenue.
• Revenue: The total value of goods and services the business earned in a period.
• Sales Order: The internal record of a customer's confirmed order.
• Deferred Revenue: Cash collected from customers before the work is delivered.
• Annual Recurring Revenue: Monthly recurring revenue expressed on a yearly basis.
• Contract: The binding agreement that sets what will be delivered and what will be paid.
• Revenue Recognition: The rules for deciding when earned revenue may be recorded.