Backlog

Backlog, also called order book or remaining performance obligations in some reporting, shows how much work a company already has lined up. It is especially important in industries with long production or delivery times, such as aircraft manufacturing, shipbuilding, defence, construction and heavy engineering.

For example, an aircraft maker with orders for 500 aircraft not yet delivered might report a backlog worth many years of production. A construction company might report a backlog of 120,000,000 in signed contracts not yet completed.

A growing backlog generally signals strong demand and gives visibility over future revenue. A shrinking backlog can warn of slowing business.

Backlog has limitations. Orders can be cancelled or delayed, customers can run into financial difficulty and costs may rise, making some contracts less profitable than expected. Companies also define backlog differently. Under current revenue standards, companies disclose remaining performance obligations, which provides a more consistent measure of contracted future revenue.