What is an order book in construction?
In construction, the order book is the value of contracts a company has won but not yet executed: the work still to be done, and so the revenue still to be earned, on its signed contracts.
Also called order backlog, unexecuted order book.
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Order book in plain words
An order book is stated as a rupee figure at a date, and often also as a multiple of the last year's revenue, which shows how many years of work are already secured. EPC companies, analysts and rating agencies report it to show how much future revenue is in hand.
How is order book calculated?
closing order book = opening order book + new orders won - revenue executed ± scope changes and cancellations
Read it with the execution rate. An order book that grows while execution slows can mean slow sites, slow clients or stalled projects.
Why does order book matter?
An order book is future revenue, not cash. Every order in it still has to be executed, measured, certified and paid, so a large order book with a slow bill-to-cash cycle can sit beside a working capital shortage.
Where does order book mislead?
There is no single standard definition: companies differ on when an order enters the book, at the letter of acceptance or at the signed agreement, and on how stalled projects and price variation are counted. Read the company's own basis before comparing two order books.
What do people get wrong about order book?
- Reading the order book as cash
- Orders turn into cash only through billing and collection. Revenue visibility and cash visibility are different questions.