Backlog: Definition and Meaning

Definition

Backlog is the value of contracted work that has not yet been completed or recognized as revenue.

Why It Matters

For construction companies, backlog can provide a useful view of expected future activity. It should be considered with staffing capacity, project timing, expected margins, customer concentration, working-capital requirements, and the quality of the underlying contracts.

Backlog is not the same as revenue or profit. A large backlog does not guarantee future profitability or cash flow because project conditions, costs, schedules, change orders, and other factors can change.

Example

A contractor has signed contracts totaling $4 million for work scheduled to begin or continue during future periods. That remaining contracted work is backlog.

Related Terms

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TYS provides accounting, tax, construction-accounting, and business-advisory support to closely held businesses, contractors, individuals, and families. With offices in Fairport, New York, and Walnut Creek, California, TYS helps clients better understand their financial information and prepare for important decisions.

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The information on this page is provided for general educational purposes only and is not accounting, tax, legal, financial, insurance, bonding, or business advice. Consult qualified professionals regarding your particular circumstances.

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