The numbers small businesses run on, defined

One precise sentence for each term, then the formula, a worked example and the mistakes that cost money — from cost of goods sold to no-show rate.

Average order value (AOV): Average order value (AOV) is the average amount customers spend per transaction over a period, calculated as total revenue ÷ number of orders.; Also: AOV, average transaction value, average sale, average ticket, average check, average spend
Cash float: A cash float is a fixed amount of cash in small notes and coins placed in the till at the start of a shift so the cashier can give change, which is counted out again before the shift’s cash takings are worked out.; Also: float, opening float, till float, change fund, opening cash
Cost of goods sold (COGS): Cost of goods sold (COGS) is the direct cost of the items a business actually sold in a period — the purchase price of stock it resold, or the ingredients, materials and direct labour that went into what it made — excluding overheads such as rent, utilities and marketing.; Also: COGS, cost of sales, cost of revenue
Dead stock: Dead stock is inventory that has not sold for a long period and is unlikely to sell at its normal price, tying up cash and shelf space that could be earning money elsewhere.; Also: dead inventory, obsolete stock, non-moving stock
Gross profit margin: Gross profit margin is the percentage of revenue left after subtracting the cost of goods sold, calculated as (revenue − COGS) ÷ revenue × 100.; Also: gross margin, gross margin percentage, GP margin
Inventory shrinkage: Inventory shrinkage is the stock a business’s records say it has but that is no longer there — lost to theft, damage, spoilage, waste or recording errors — measured as recorded inventory minus physically counted inventory.; Also: shrinkage, shrink, stock loss, shrinkage rate
Markup: Markup is the amount added to an item’s cost to arrive at its selling price, usually expressed as a percentage of that cost: (price − cost) ÷ cost × 100.; Also: markup percentage, mark-up, markup on cost
No-show rate: No-show rate is the percentage of booked appointments or reservations in a period for which the customer neither arrived nor cancelled in time, calculated as no-shows ÷ total bookings × 100.; Also: no-show percentage, missed appointment rate, DNA rate (did not attend)
Reorder point (ROP): The reorder point is the stock level at which a new order should be placed so that it arrives before the item runs out, calculated as average daily usage × supplier lead time in days + safety stock.; Also: ROP, reorder level, reorder threshold
Safety stock: Safety stock is the extra inventory held above the amount expected to sell during a supplier’s lead time, to cover demand that runs higher than usual or deliveries that arrive late.; Also: buffer stock, safety inventory, buffer inventory
Sell-through rate: Sell-through rate is the percentage of the stock received in a period that was sold within that period, calculated as units sold ÷ units received × 100.; Also: sell-through, sell-through percentage, STR
Z-report: A Z-report is the end-of-day summary a cash register or point-of-sale system produces when the trading day is closed — sales totals, payment-method totals, refunds, voids, discounts and taxes — after which the running totals reset to zero for the next day.; Also: Z report, Z-read, Z reading, end-of-day report, Z tape

Run your business from one screen

Free during early access: POS, inventory, booking, an online store and reports included. No credit card, no per-user fees, set up in minutes in your browser.

Create a free account See pricing