Common Product Business Terms Explained

 

When you’re starting a new business, there can be a lot to set up and become familiar with. One of the things you may need to brush up on in the early days is the language used within the trade. Here we explain some of the jargon and acronyms used by product businesses and suppliers.

3PL
3PL is Third-Party Logistics and refers to when a third-party is used to outsource certain parts of the logistics process, such as distribution and warehousing.

AOV
AOV stands for Average Order Value, which is self-explanatory – it’s the average total value of every order placed with a business or supplier over a specified amount of time.

Bill of Materials
Similar to a product specification sheet, a bill of materials specifies everything that should be in a package or product shipped from a manufacturer. This helps mitigate problems should an order arrive that doesn’t live up to what you expected.

Credit Lines
A credit line is a type of finance used to manage cash flow. An example of this is an agreement with your bank, who will pay your suppliers immediately, while giving you time to pay back the amount over an agreed period. This means suppliers are paid on time and you can manage your cash flow better, helping you to keep growing your business.

EAN
EAN is European Article Number and is a system of barcodes and numbers used in global trade.

EOL
A product that’s EOL is at the end of its life and is no longer being sold or supported.

Escrow
If you are worried about paying suppliers upfront without receiving what you’ve paid for, one way to mitigate this is to use an Escrow account. This means you’ll give the money to a third party, who will only pass the money onto the supplier when you have received and checked your goods. You’ll be happy that the supplier won’t take your money without delivering, and the supplier will rest assured you have paid and the cash is there ready to be sent to them once the transaction has been completed.

GTIN
GTIN is Global Trade Item Number and it’s an identifying number given to a product so its information can be checked within databases.

MOQ
MOQ is short for Minimum Order Quantity and it’s used to state the lowest quantity a product can be sold in.

OOS
OOS stands for Out of Stock.

SKU
A SKU is the unique identifying code for a product and it’s short for Stock Keeping Unit. These product codes help you to keep track of inventory and they are usually set by a supplier but you can also use your own internal coding system

Unit Price
This is the price for each for each unit, which may be an individual item or a pack of several items sold together. Unit prices may be lower the more you order.

Wiring Cash
You can pay overseas suppliers by wiring cash, using their bank’s international account number and SWIFT code. This is similar to transferring money between bank accounts in the UK, but there are usually fees involved.

Getting to grips with this terminology can help you to communicate within your new product business environment. If you’re just getting started, Paramount Company Formations can help you to set up your company, register your company name, register for VAT, claim an EORI number, set up business banking and more. View our company formations packages or call us on 0800 0198 698.

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