Knowledge base

Glossary of ERP, finance and trade terms

Short, plain-language explanations of the terms you meet when you choose a new ERP, from general ledger to go-live. Each term starts with a definition and then shows what it means in practice for an SME.

A–Z

Terms from A to Z

5

5S

A way of keeping a workplace in order in five steps: remove what you do not need, give everything a fixed place, clean, agree how it should be and keep that up. In the Japanese original each step starts with an S. Together they are called 5S.

A

Accounts payable

Everything you do to pay your suppliers correctly and on time. You receive their invoices, check them, keep an eye on the payment terms and track what you still owe. That way you pay neither too early nor too late. Accountants call this accounts payable.

Adjusting journal entry (memoriaal)

A booking that is not based on an invoice or bank statement but that you create yourself to put your figures right. Think of spreading an annual insurance cost over the months, a depreciation charge or the correction of a mistake. Accountants call such a manual correcting booking an adjusting journal entry.

API

An agreement that lets one program request or hand over data to another program, without anyone retyping it. For that, the program offers a fixed entry point, with rules for what you may ask and how. That entry point is called an API.

Assets

Everything your business owns that has value, now or later: the bank balance, the stock, what customers still owe you, but also machinery and the company van. They are the resources you work with and earn money from. On the balance sheet these possessions appear under the name assets.

Audit file (XAF)

A standard file in which a Dutch accounting package records the bookings, accounts and relations of a period, in a format other programs can read. You use it for checks by an accountant or the tax authority, and when you switch to another package. The file name ends in XAF; the format is called an audit file.

B

Bank connection

A standing link between your bank account and your accounting software, so that payments in and out appear in the books by themselves. Nobody has to download a statement, upload it or retype it, and you see sooner what has come in. In accounting that link is called a bank connection.

Bill of materials

The list of everything needed to make one product: the raw materials, the parts and the quantity of each. It tells everyone what goes into a product, what you must buy in and roughly what it costs. In production that list is called a bill of materials.

Business intelligence

Collecting, organising and showing data from your programs, so you can base decisions on figures instead of on a feeling. You see, for example, which customers bring in the most or where work gets stuck. This field is called business intelligence, shortened to BI.

C

Cloud ERP

Business software that does not run on a server in your own office but over the internet, hosted by the supplier. You sign in with a browser, at home or on the road, and updates arrive on their own. You pay a subscription instead of buying servers and licences yourself. The usual term for this is cloud ERP.

Cost centre

A part of the business for which you want to see the costs, such as a department, a branch or a team. By assigning each expense to such a unit, you can see where the money goes and who is responsible for it. Accountants call this a cost centre.

Cost object

Whatever you ultimately want costs attributed to, such as a product, an order, a project or a service. It answers the question of what the cost was incurred for. That way you can see what something truly costs and what it earns. Accountants call this a cost object.

Cost price

What a product really costs you before you earn anything on it: the purchase of the materials or the item, plus the labour and other costs that go with it. The amount you value your stock at and calculate your margin from is the cost price.

Credit note

A document that reverses an invoice you have already sent, in full or in part, for example after a return, a pricing error or a discount agreed later. The customer then pays less or is left with a balance in their favour. This corrects the books without altering the original invoice. Accountants call it a credit note.

CRM

A program in which you record everything about your customer contact: who the contact person is, what has been discussed, which quote is open and who takes the next step. Everyone in your team sees the same data, instead of loose lists and mailboxes. The abbreviation for this is CRM.

D

Dashboard

One screen on which you see the most important figures of your business at a glance, often as a chart, table or number. The figures come from your programs and are kept up to date, so you do not have to calculate them yourself. Such an overview screen is called a dashboard.

Data conversion

Turning the data from your old package into the structure of the new one. Account numbers, relations and items often do not fit one to one into the new system. They are first translated, checked and only then loaded. This turning and translating of the data is called data conversion.

Data migration

Moving your existing data, such as customers, items and open invoices, from your old package or your spreadsheets into the new system. That way you do not start with an empty administration, and the history you rely on stays available. This moving of data is called data migration.

Delivery note

The paper or file that travels with a shipment and shows what is in the box: which items, how many, and for whom. The recipient uses it to check the delivery, and it does not need to show prices. That document is called a delivery note.

Depreciation

You buy a machine or a van once, but you use it for years. So rather than treating the whole price as a cost in the year of purchase, you spread the amount over the years the item lasts. That way one year does not carry the entire expense. Accountants call this depreciation.

E

E-invoicing (UBL)

An invoice that a computer can read as well as a person: amounts, lines, dates and customer details sit in fixed fields inside a file. Nobody has to retype them, and the accounts software can pick them up straight away. Sending and receiving invoices this way is called e-invoicing.

EAN code

The barcode on a product, carrying a number of usually thirteen digits that identifies the product in the same way everywhere, for you, your supplier and your customer. Scan it and the system immediately knows which item it is. That number is called an EAN code.

EC Sales List (ICP return)

A list you give to the tax authority of the goods and services you sold to businesses in other EU countries, showing for each customer the VAT number and the amount. It lets the authorities check that the receiving side treated the VAT correctly. The official name of that report is the EC Sales List.

ERP

One software system in which a company keeps its accounts, sales, purchasing, stock and projects, so everyone works from the same data. You enter an order once and the rest of the business builds on it, instead of retyping it into separate spreadsheets and programs. In business software this is called ERP.

F

Fixed assets

Things a company buys to use over many years, such as a machine, a delivery van or a set of servers. Instead of treating the whole price as a cost at once, the business records the item on the balance sheet and spreads its cost over the years it is used. Accountants call these fixed assets.

Flow

A calm, uninterrupted movement of work or goods through a process, without them lying around on the way or having to go back. An order that is received, collected, packed and dispatched without waiting moves smoothly. In lean language that smooth movement is called flow.

G

General ledger

The record in which every amount your business receives or spends is placed in the right category, such as revenue, purchases, rent, bank and debts. All invoices, payments and corrections come together here, so you can always trace where a figure comes from. In bookkeeping this is called the general ledger.

Go-live

The moment you start using the new system for your daily work and let the old way of working go. From then on you book, invoice and order in the new system, with real customers and real figures. That moment is called go-live.

H

Historical data

The data of closed periods in your old package: bookings from earlier years, orders long since completed, old quotes and price history. You no longer need it to work today, but you may still need it for checks, insight or the legal retention obligation. That kind of data is called historical data.

I

IBAN

An account number built the same way across Europe: a country code, a check number, the bank and your own account. It tells the receiving bank exactly which account is meant, even across a border, and a single wrong character is usually rejected at once. That number is called an IBAN.

Intra-community supply

A sale of goods to a business in another EU country, where the goods really do cross the border. Separate VAT rules apply to such a business sale, and you must be able to show details of the customer. Formally it is called an intra-community supply.

Item number

The unique code you give a product or service yourself, so that quotations, orders, stock and invoices always refer to the same article, even when its description changes. It makes searching and matching quick. That code is called an item number.

J

Journal entry

A single booking that records that something has happened to money or value in your business, such as a payment, a sales invoice or a correction. Every booking has two sides that agree: where the amount comes from and where it goes. In bookkeeping such a booking is called a journal entry.

K

KPI

A figure that measures whether you are reaching a goal, for example the share of quotes that become an order or the time in which a customer question is answered. You choose a few that matter and follow them the same way every time. Such a key figure is called a KPI.

L

Ledger account

One category in your books for one kind of money, such as revenue, rent, fuel or the business bank account. Every invoice and payment is booked to such a category, so that later you can see per type what came in and what went out. An accountant calls such a category a ledger account.

M

Month-end close

The fixed routine you follow after every period to make sure every posting is in, the bank agrees and the figures add up. Afterwards you lock the period so that nothing in it changes. In accounting that locking and checking is called the month-end close.

MRP

A planning method that uses expected demand, current stock and orders already placed to work out what you must buy or make, and by when, so you do not hold too much or too little. It shows in advance which raw materials and parts the planned orders need. In manufacturing this is called MRP.

O

Opening balance

The starting position of your administration on the day you begin in a new package. Each balance sheet account carries the balance as it was on the last day in your old system, plus all items still open with customers and suppliers. That starting position is called the opening balance.

Order confirmation

The message in which you tell a customer what they ordered, at what price and on which terms, and when you will deliver. That way both sides know where they stand before anything is sent. That message is called an order confirmation.

P

Payment matching

Linking a payment to the invoice it belongs to, so that it is clear what has been paid and what is still open. Without that link you cannot tell whether a customer or supplier still owes anything. It applies to money coming in and going out. Accountants call this payment matching.

Post-calculation

Working out afterwards what a project or job really cost and earned, based on the hours, materials and costs actually spent on it. You then compare that with what you expected and agreed beforehand. That comparison with the expectation is called post-calculation.

Price list

An overview of the prices you charge for your items, often different per customer group, per country or per agreement. It means nobody has to work out again on every order what an item costs. Such an overview is called a price list.

Pro forma invoice

A preliminary statement of what a customer would have to pay, issued before the delivery or the service is complete. It is not a real bill and creates no debt. Customers use it to pay in advance or for customs. In trade it is known as a pro forma invoice.

Profit and loss account

The overview that shows whether your business made a profit or a loss over a given period. On one side is what you earned, on the other what it cost you to earn it. What is left is your result. On paper this is called the profit and loss account.

Purchase invoice

The bill a supplier sends you for goods or services you have taken. It shows what you have to pay, when, and into which bank account. For you it is a debt, and for your bookkeeping a cost or a stock movement. Accountants call this document a purchase invoice.

Q

Quotation

A written proposal to a customer stating what you will supply, at what price and on which terms, and how long the proposal stays valid. If the customer accepts, you have an agreement to fall back on. Such a proposal is called a quotation.

R

Reference chart of accounts (RGS)

A national standard for the numbering and naming of the accounts in your books. When companies use the same codes, bookkeeping software, accountants and public bodies can read and compare each other's figures more easily. The abbreviation RGS stands for reference chart of accounts.

Relationship management

Recording and maintaining everything you know about your customers and other business contacts: who they are, what you have agreed and when you contact them again. You do it so that nothing that is going on depends on one person. That is relationship management.

Reverse-charge VAT

An arrangement where the buyer, not the seller, accounts for the sales tax. The invoice shows no tax but does state that the charge has shifted to the customer, who includes the amount in their own return. In practice this is called reverse-charge VAT.

S

SaaS

Software that you use over the internet and pay for with a subscription. The vendor runs the servers, the updates and the security. You sign in through the browser or an app and install nothing yourself. You use the software as a service, in full software as a service, shortened to SaaS.

Sales invoice

The bill you send a customer for goods or services you have delivered. It shows what the customer has to pay, by when, and into which bank account. For you it is money owed by the customer until payment arrives. Accountants call this document a sales invoice.

Switch date

The day from which you book in the new package and stop using the old one. On that day the starting balances, the open items and the running orders move across. What happens before that day sits in the old system, what happens after it in the new one. That day is called the switch date.

T

Trial balance

A list of all the accounts in your books side by side, showing for each account what has been booked and what the balance is. It is the quickest way to check that everything adds up before you prepare the annual accounts: the debit and credit totals must be equal. Accountants call this list a trial balance.

V

Value stream mapping

A drawing of all the steps that a product and the related information go through, from arrival to delivery to the customer, with at each step the time the work takes and the time it waits. That shows where the time goes. This method is called value stream mapping.

VAT return

The periodic report to the tax authority of the sales tax you charged your customers and the tax you paid your suppliers. The difference is paid over or refunded to you. The figures come straight from your books, and the report is called the VAT return.

W

Warehouse layout

The way the space of a warehouse is divided: where goods arrive, where they are stored, where orders are collected and packed, and which routes people and vehicles follow. A good layout keeps the path of product and employee short. The whole of these choices is the warehouse layout.

Waste (muda)

Everything in a work process that costs time, money or effort without making things better for the customer, such as waiting, searching, double work and needless walking. Removing it is the core of working lean. In lean it is called muda in Japanese and waste in English.

Workflow

The fixed order of steps along which work moves through an organisation, from request to completion, with someone at each step who knows what is expected. In software you record that order, so the steps are created automatically. Such a series of steps is called a workflow.

Warehouse terms are explained at BizBloqs

We do not define warehouse terms such as WMS, EDI or picking here. They are in the BizBloqs glossary. Go to the BizBloqs glossary.

A term you cannot find?

Tell us which term is still unclear. We will add it to the list or explain it in a conversation.