The A to Z Super Glossary of ERP Definitions

     

 

the a-z super glossary of erp terms


New to enterprise resource planning (ERP) software? Can’t keep up with all the complicated jargon floated to you by a vendor or an IT personnel?

We’ve put together this neat glossary of over 300 common jargon used in the accounting and ERP world. Complete with short and simple ERP definitions, this should give you a quick view of some terms regularly tossed around in this industry.

Print it and frame it, or save it to your favourites whenever you need a refresher!

 

A

 

ABC Analysis – Refers to the classification of part IDs based on the item’s value and usage. Parts with higher costs and/or are frequently used are considered ‘A’ items. Likewise, parts on the other end of the spectrum i.e. lowest costs and/or lowest frequency of usage, are considered ‘C’ items. ‘B’ items refer to parts that fall in between the spectrum

Accounting Period – This is typically 12 months. It refers to the time span that contains all of an entity’s financial transactions

Accounting Software – As the name suggests, this is a computer program that is designed and based on standard accounting methodology to help end-users maintain consistency during the accounting process.

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Accounts Payable (AP) – A company’s current liability account that represent all owed and unpaid balances to its vendors

Accounts Receivable (AR) – A company’s current asset account that represent all outstanding and unpaid balances owed to it from their customers.

Accpac – An ERP software. See Sage 300.

Accrual – Refers to a financial account entry which indicates whether a good or service has been consumed, but not yet paid for. Once payment has been made, the accrual is reversed i.e. removed

Actual Cost – The true expense incurred to complete a task or job order, which could include materials, labour, or overhead. This may vary from the standard i.e. expected cost. The resulting difference is referred to as a variance

Ad Hoc Query – Literally a spur-of-the-moment question posed to an information system. In ERP, it refers to the ERP system’s ability to allow end-users to ask questions and quickly obtain accurate answers; in doing so, this greatly increases the users’ efficiency and the ERP system’s effectiveness

Advanced Planning and Scheduling (APS) – An approach that seeks to balance a company’s capacity and materials. The goal is to achieve an optimised manufacturing schedule. In ERP, this is sometimes managed through an Advanced Planning and Optimisation module (APO) in the system, in areas like capacity, costing optimisation, and bottleneck scheduling.

Advanced Shipping Notification (ASN) – This is a document sent to a customer to inform them that their order has shipped, and is en route to its destination. It is often sent via EDI, and includes information on the order’s estimated arrival, quantity, description, and carrier.

Aged Receivables – Refers to current assets that are at risk. A receivable account is considered aging if a customer owes money and is long overdue in payments. This presents the risk that the customer account will default completely on payment.

Aging – Refers to when certain groups of assets are organised according to their length of existence. The longer the inventory’ existence without movement, the greater a financial risk it presents

Allocation – The distribution of cost in a manufacturing operation e.g. from fixed overhead to a work centre. It could also refer to reserving materials for a specific job order.

Amortisation – The process of spreading costs over an asset’s useful lifespan. Typically, this refers to intangible assets, such as patents. On the other hand, the process for tangible assets e.g. machinery, is referred to as depreciation.

Application Programming Interface (API) – Any functionality in a software – such as ERP systems – that a developer can utilise to interface between the system and other solutions.

Assemble to Order (ATO) – A strategy that allows fast, customised production by combining limited subassemblies into a large number of possible finished items. This gives the company the ability to have many customisation options, yet with short lead times and relatively low inventory risks.

Assets – Anything with a positive value, that could be sold and converted into cash. These can range from the tangible e.g. equipment, to the intangible e.g intellectual property.

Available-to-Promise (ATP) – Refers to the calculated delivery date in which the product will be available to ship, despite finished inventory not being available. This takes into account materials, other orders, and capacity.

Average Cost – Attained by dividing total costs by total units. The purpose is to facilitate understanding in how fixed costs are amortised.

 

B

 

Backflush – Refers to the automatic issuing of raw materials to a work order as a result of inventory movement transactions or later production reporting e.g. relieve a quantity of raw material from inventory when production was reported. This should not be used when traceability or lot tracking is critical.

Backorder – Created when there is insufficient stock in inventory to fulfil a customer order, but will be fulfilled once the stock is received

Bad Debts – Amount due to the accounts receivable that is assessed to be unrecoverable. This is recorded as a cost.

Balance on Hand (BOH) – Refers to the available stock in inventory.

Balance Sheet – Demonstrates a company’s assets net value. It is one of the core documents in a standard financial statement.

Best of Breed – An overused term within the ERP industry. It simply refers to the best performing solution within a functional area.

Best Practices – Another overused term, this describes the most common business processes and ERP system configuration within the industry. As a result, an ERP software with built-in ‘best practices’ could be considered as one of the better solutions for that industry.

Bill of Lading (BOL) – A document that provides a detailed listing to the transport carrier of what is being shipped. The BOL must be signed by both the shipper and transporter when loading is completed, and signed again by the receiver upon receiving the goods

Bill of Material (BOM) – A list of the component types and quantity needed to build a subassembly or finished good. It can be one level or multi-level.

Blanket Order – This order is used to reduce risk for a manufacturer in situations when demand is highly variable. It is a legally binding order for a large quantity of material or components, in which the actual quantities and delivery dates will only be confirmed in the future

Book Value – Refers to the accounting value derived from compiling credit and debit entries against an asset. E.g. a printing equipment’s book value comprises its purchase price and depreciation

Bottleneck – Often refers to a production resource through which many items must flow, and whose limited capacity (especially when overloaded) results in a production process delays. This in turn reduces the entire production chain’s capacity

Breakeven Point – The exact point where revenue equals to cost, and there is zero profit or loss

Budgeting – Describes the process to estimate the required expenses to run a business in the future. It is often used as an input to forecasting income, and subsequently as a means to prioritise capital spending

Build to Stock (BTS) – A production approach to build items ahead based on assumptions derived from historical demand or sales forecast.

Business Intelligence (BI) – BI constitutes a set of tools or software that transforms data from applications (like ERP software) into actionable, easy-to-understand business information. The information is often presented in a graphical, easy-to-understand format to facilitate fast, accurate business decision making. E.g. presenting invoice transactions in a dashboard that makes it easy for a finance person to analyse revenue by product, customer, region, or salesperson.

 

Business Intelligence Tools vs Reporting Tools: What's the Difference? We Break Down the Differences for You. Click Here to Find Out

 

Business Processes – All activities that aggregate to a company’s business operations e.g. keying in a sales order, making a purchase order etc. A proper ERP system setup should be able to facilitate all business processes smoothly.

Business to Business (B2B) – A business model where the goods or services are sold to another business – not a consumer.

Business to Consumer (B2C) – A business model where the final end users of good and services exchange are consumers. The transactional conventions involved differ from B2B businesses.

 

C

 

Capacity Requirements Planning (CRP) – Refers to the calculation process of identifying and estimating the production capacity that a business needs to meet planned and actual demand

Capital – A general term referring to cash, equipment, land, inventory etc. that go into the production of goods and services. In the balance sheet, most tangible assets could be considered as capital.

Capital Equipment – In accounting, this usually refers to a single asset that costs more than $5000 and has a useful life of over a year.

Cash Flow – Refers to the net effect of cash coming in e.g. revenue, sales of assets etc., and cash going out e.g. raw material purchases, debt reduction etc.

Cash Flow Statement – A financial statement that quantifies available cash changes over a specific period of time. This is done by summarising all activities that add and reduce cash on hand.

Change Management – Describes the challenging process of communicating and explaining the impact of an upcoming organisational change to everyone in the company, to ensure overall performance improves after the transition. Change management is essential for successful ERP implementations because a new ERP system impacts people and processes in an organisation.

Chart of Accounts – Refers to a list of accounting codes and associated names. Income and expenses posted into these accounts are eventually transformed into financial statements, such as income statement or balance sheet.

Cloud Computing – Describes the approach of using a network of remote servers to host a system, such as ERP software. This allows users to connect to their ERP system over the internet, instead of through servers situated on their premises. This reduces the costs and efforts involved in maintaining onsite hardware infrastructure.

 

Deciding between Cloud ERP and On-Premise ERP Systems? We've Done the Groundwork. Check Out Our Comparison Here

Compatibility – The extent of the ease and efficiency in which different software applications can exchange data and complement each other’s functionalities, resulting in a seamless performance.

Compliance – The state of conforming with legal requirements or standard industry practices, such as generally accepted accounting principles (GAAP). Compliance is essential in building stockholder confidence and trust.

Configuration – Refers to the identification of options to be activated, according to customer requirements. These parameters will then followed in the day-to-day business.

Configure to Order (CTO) – A process which is a variation of Assemble to Order. Unlike the sub assemblies configurations in Assemble to Order, CTO include attributes such as colour or size. This is normally applied as variations to a standard base product.

Consignment – The process of placing items for sale in another organisation’s location without transferring the titles to the organisation. As such, the latter organisation bears little inventory risk. It also receives a small commission from the first organisation on any sales made from the items.

Consumables – Items that are immediately expensed upon receiving; they are not counted in inventory as costs or items

Contribution – Refers to the difference between variable costs and revenue. Also known as variable margin.

Cost Accounting – Cost accounting is the result of combining direct costs with indirect costs. This creates a more realistic and consistent product cost.

Cost of Goods Sold (COGS) – Refers to the invested production expenses, or expenses from the purchase of materials that are subsequently sold. It includes direct costs and all factory overhead.

Cost Pool – The aggregation of multiple costs into a single, larger sum. In turn, this is divided and doled back to various cost centres in the organisation

Current Assets – Assets expected to be converted into cash within a year. This includes cash, accounts receivable, prepaid expenses etc.

Current Liabilities – Amounts owed that must be paid in a year or less. This includes accounts payable, short-term notes etc.

Customer Relationship Management (CRM) – A software aimed to help an organisation improve customer-facing processes, by capturing, tracking and analysing customer interactions across the entire customer lifecycle. Functions in the CRM will typically include lead management, salesforce automation, marketing, customer service and support, and analytics. In most ERP systems, CRM is included as a ‘lightweight’ module or add-on; however for companies expecting the full spectrum of functionalities, it is better to invest in a separate CRM system and integrate it with an ERP system.

Customisation – In ERP, this refers to the rewriting or addition to the standard code to accomplish some task that is unavailable in the standard ERP software version. Customisation comes with its own pros and cons; while it gives an organisation greater flexibility, every customised functionality potentially poses a problem during future software upgrades and integration.

Cycle Counting – Refers to the scheduled counting of a small subset of inventory. The purpose is to uncover and resolve any discrepancy; however it is more often used to replace quarterly or yearly inventories.

 

D

 

Dashboard – Dashboards are user-interfaces that integrate and display business information (like KPIs) in a graphical, easy-to-read format for faster decision making. They are usually role-defined and customisable, and readily available in modern ERP systems.

Data Cleansing – As the name suggests, this refers to the process of ensuring all data (customers, materials, etc.) are accurate and standardised to a consistent, uniform format.

Demand Planning – A method of examining external sales trends over a period of time, and using these trends to forecast future demand. From there, an organisation will be in a more informed position to plan production capacity and inventory levels.

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Demo (or Demonstration) – A live presentation of a software’s features and what it can do

Depreciation – An accounting process in which costs are assigned to tangible assets, to account for their use over time

Direct Costs – Refers to a category of costs that contribute solely to a product’s creation. This could include anything from raw materials to process labour

Discrete Manufacturing – Unlike process manufacturing, in which finished products cannot be disassembled into its component parts e.g. paint, finished products from discrete manufacturing can be disassembled back into its components e.g. bicycle.

Distribution Center – Refers to a warehouse which services a specific regional area.

Drill Down – In ERP systems, this refers to the ability to access details from the data you are viewing.

Drop Ship – Items which are purchased by the organisation, and are directly shipped to another vendor or customer

 

E

 

Earnings – In accounting terms, this technically holds the same meaning as profit. However, in reality earnings are revenue minus production costs over time, while profits refer to total revenue minus expenses.

E-Commerce – Refers to the process in which transactions for goods and services are carried out via the internet through virtual stores

Electronic Fund Transfer (EFT) – The electronic transference of money from one bank system to another.

Electronic Data Interchange (EDI) – The electronic exchange of data from one computer system to another in a standardised format.

Engineer to Order – Refers to a production method in which components are only designed, engineered and built after – not before – an order has been received

Enterprise Resource Planning (ERP) – An ERP system helps an organisation manage its processes more efficiently and effectively, by integrating crucial functions in the business together. Areas include finance, inventory, procurement, sales and so forth.

 

Accounting vs. ERP Software: What You Need to Know Before Jumping In

 

Estimate – A rough calculation to determine an item’s cost and selling price.

Expense – In accounting terms, this is a type of cost that has expired or was necessary to incur to earn revenue.

 

F

 

Financial Statements – These are a collection of documents that record an organisation’s financial activities and position. They usually abide by generally accepted accounting principles (GAAP) and include statements such as income statement, cash flow statements etc.

Finished Goods – A self-explanatory term, this refers to a fully produced good that is ready to be shipped out

First In First Out (FIFO) – An inventory approach in which the oldest inventory should always be consumed first. This reduces shelf life risk. However, FIFO sits on the assumption that prices will experience inflation over time; over time, it has a tendency to increase overall inventory value and in turn, reduces the recorded costs of goods sold.

Fiscal Year – A period of time defined by an organisation as the accounting year, for reporting and tax purposes. It does not have to conform to a January – December calendar year.

Fixed Assets – These are assets necessary for production, but are not going to convert into cash within a year or less e.g. computer equipment and buildings.

Fixed Costs – Refers to a cost category in which costs remain constant in the short term, regardless of how much items are produced e.g. equipment depreciation, salary etc.

Fixed Order Quantity – Once an item in the inventory falls below its reorder point, a predetermined quantity is ordered.

Flexibility – The ease in which a software system, such as an ERP system, can accommodate a changing business environment or business model.

Forecasting – A method to drive demand by using historical data to predict future outcome and demand

Forecast Error – The variance between actual value and forecasted value.

Functionality – Describe the spectrum of tasks that a software application, such as an ERP system, can perform.

 

G

 

Generally Accepted Accounting Practices (GAAP) – Most popular and widely accepted accounting standards. Companies that do not comply with GAAP are often perceived as questionable by auditors and the public

General Ledger (GL) – An ongoing record that contains all of the financial transactions within an organisation, and utilise double entry bookkeeping for accuracy and integrity

Goodwill – A monetary value assigned to a company’s accumulated reputation. It is difficult to assess in accounting, and can only be evaluated in a company sale

Gross Profit – The calculated difference between a company’s cost of goods sold and revenue. It is usually larger than net profit, because it does not include non-manufacturing fixed costs

 

H

 

Hardware – A general term to describe all the physical components that constitute a computer network e.g. computers, servers, routers, printers etc.

Help Desk – Call centre support that is dedicated to addressing a specific set of problems e.g. ERP help desk manned by qualified ERP consultants, for ERP software issues

Human Capital Management (HCM) – This refers to the process of managing employees as human assets. It involves performance measurements, setting expectations for deliverables and duties and so forth.

Human Resource Management (HRM) – In ERP this usually refers to an ERP software module and covers areas like payroll, benefits etc, but is largely stand alone in terms of functionality. As a software, it covers a much wider range of functions, including training and retention etc.

 

I

 

Implementation – More than just software installation, implementation describes the large-scale process of configuring, testing, training, and preparing an organisation for adopting a new software system – like ERP software.

Income Statement – A document that summarises revenue and expenses. It indicates the company’s profit or loss over a given timeframe

Installation – This is the first step in an ERP software implementation process. The implementer gets the ERP software on the server and client machines by examining the installation prerequisites and ensuring the software application is ready to use

Integrated Software – Refers to two or more software functions in an ERP software that share common data across functional boundaries e.g. inventory control or order processing. In an integrated software, one common set of master data and transactional history is shared across functions. This provides consistency and improves data reliability across the organisation

Interface – The point of data exchange between two stand-alone programs. Unlike integrated software, interfaced systems independently maintain separate master data and only share a few key data fields across the interface.

Inventory – A list of items that are considered as part of a company’s assets for sale. This includes raw materials, goods that are work-in-progress, and finished goods

Inventory Control – Refers to the method of determining an organisation’s inventory upper and lower limits, and taking the appropriate steps to adjust inflow and outflow.

Invoice – A document that lists specified goods and services, and the expected amount of money to be paid by the customer in exchange for the goods and services stated in the document.

Item – Refers to a single article kept in stock.

 

J

 

Job Costing – Describes an approach where a project’s costs are recorded in a cost ledger over time and totaled at the end. The actual and planned costs are then compared and its variance assessed at the end of the project.

Job Shop – This refers to a manufacturing facility that focuses on discrete, specialised, and small manufacturing runs. The volumes are low, and runs are typically not repeated.

Just-in-Time (JIT) – The goal of this strategy is to provide component inventory right at the time when it is needed for consumption, thus minimising inventory costs and speeding up work flow.

 

K

 

Key Performance Indicator (KPI) – Any measurable metric that indicates how well a company is progressing towards its business goals. The approach is for an organisation to develop agreed upon performance targets, and then measure how their resources are progressing towards those targets on a regular basis

Kitting – This is an assembly process where different products are combined together and packaged. This enables organisations to increase product offerings without having increasing their manufacturing complexity.

Knowledge Management – Refers to the approach of capturing and organising an organisation’s collective knowledge, and then making it available for easy retrieval by anyone within the organisation.

 

L

 

Last In First Out (LIFO) – An inventory approach in which the newest inventory should always be shipped or consumed first. This presumes that raw materials can be stored indefinitely, without deterioration. However, due to inflationary pressures, it also means that the financial value tends to be reduced over time – older materials become cheaper than newer raw materials.

Lead Time – Describes the total time between an order and delivery of materials for use. It also refers to the total time between the start and completion of an item’s production.

Lean Manufacturing – A well-known manufacturing approach that helps determine the right value combination for the customer and producing that value in an effective, efficient manner. The objective is to eliminate wastage within a manufacturing system (hence ‘lean’ manufacturing).

Legacy System – A generic description of applications that were designed for a specific organisational function, long before the days of modern integrated software. These are usually highly customised, and were somewhat troublesome to maintain. Data interfaces (though limited) are necessary for different legacy systems to exchange data.

Line of Business (LOB) – Functionalities or applications within a system, like ERP software, that are designed for a specific business need.

Liquidity – This refers to the extent in which assets can be quickly converted into cash. For example, inventory can be converted to cash in a few days. In contrast, raw materials may need several weeks to do so, making it less liquid than inventory.

List Price – Refers to the published price of a good or service that is made publicly available.

Lot Number – The number or alphanumeric name that is used to identify a given quantity or specific lot of material from a manufacturer, that was processed within the same manufacturing run.

Lot Size – This refers to a production run’s quantity, and can be for several factors – cost, requirements for equipment, quality, raw material availability.

 

M

 

Machine Hour Rate – This is the cost of running a machine for one hour, presumably under normal conditions. This usually factors in labor, energy, depreciation and repairs, and so forth.

Machine Learning – This term has gained popularity over the last few years, and is often confused with the broader term artificial intelligence. Basically a type of artificial intelligence that relies on pattern recognition to improve results over time, without being specifically programmed to do so. The ‘learning’ is based on whether one has achieved the desired results.

Maintenance Repair and Overhaul (MRO) – Either an ERP software module or a third party-software that helps companies in areas of preventive maintenance and equipment failure.

Make-To-Order (MTO) – A manufacturing strategy where production and resource assignment start only when an actual customer order exists. The advantages are reduced inventory costs and risks; however, this only works when lead time will not pose a problem

Make-to-Stock (MTS) – A manufacturing strategy based on the premise that a company should produce goods ahead of an actual external customer order, to reduce lead time between purchasing and invoicing. Companies that adopt this approach run the risk of increased inventory costs and obsolescence.

Master Production Schedule (MPS) – A manufacturing and planning schedule used for ‘what-if’ scenarios. The company plans the number of items within a specific time frame by taking into account forecasts, demand, potential bottlenecks and raw material requirements.

Material – Items used in goods production.

Material Control Management – Refers to activities such as moving, storing, and evaluating materials consumed during the manufacturing process. The majority of material master data and inventory movements come under this category, with the goal of ensuring that there is enough material available for manufacturing

Material Handling – This describe the physical movement of materials between operations or warehouses

Material Requirements Planning (MRP) – Describes a system for production planning, scheduling, and inventory planning. It ensures there will be sufficient materials for production and sufficient finished products for customers. It also ensures there will be the lowest possible amount of products and materials available on hand.

Material Requirements Planning II (MRP II) – The precursor to, and core of most ERP systems, MRP II is a generic description of software applications that combine functions like planning, inventory control, and purchasing, into a single package.

Microsoft Dynamics NAV – An ERP software from Microsoft that is designed for small and midsized enterprises, as well as subsidiaries of multinational corporations. Formerly known as Navision, Microsoft Dynamics NAV covers finance, supply chain management, manufacturing, customer relationship management, e-commerce, and analytics.

Microsoft Azure – A cloud computing service by Microsoft that provides software as a service, platform as a service, and infrastructure as a service. It also supports multiple programming languages, frameworks, and Microsoft and non-Microsoft software applications.

Min/Max Inventory – Refill inventory whenever levels reach or fall below a pre-determined minimum level. It also disallows stock refills beyond a pre-determined maximum level.

Mobile Application Development – Refers to the creation of applications for mobile devices such as phones, tablets, or bar code scanners.

Mobile Data Collection – Refers to the ability to collect transactions, such as labour or materials, on a mobile device. In ERP, this lets users deploy bar-code enabled mobile devices, which feeds data back into the system.

Module – A subset of an ERP system, designed to serve a specific function.

 

N

 

Network Administrator– Describes the individual responsible for the data integrity, security, and overall performance of computer network in an organisation

Net Income – In accounting, this is also known as net profit. It refers to the bottom-line difference between revenue and expenses, and factors in deductions for depreciation, interest, and taxes.

Non-Disclosure Agreement (NDA) – In ERP, it is a binding legal document for ERP consultants and salespeople that prohibits the release of private information gained from a non-public ERP project.

 

O

 

Off the Shelf – Also known as ‘out-of-the-box’. This refers to using a software system’s functionalities as it was intended, without customisation. Since most ERP systems do not perfectly match a company’s business processes, there will always be a debate on how much to customise, and how much to conform the business processes to fit the off-the-shelf system.

Order Management – Describes the processes of creating, tracking, and fulfilling customer orders

Outsourcing – The widely-adopted approach of purchasing a semi-finished item or service from a third party organisation instead of doing so as part of a company’s internal resources.

Outlier – Any data point that falls so beyond the norm due to exceptional causes or circumstances. When implementing an ERP system, it is important to design it around what is considered the norm within an organisation; outliers should be taken as rare exceptions and not included

Overhead – Also known as fixed costs, this is any cost that does not directly contribute to a good or service’s production and delivery. Legal costs is an example of fixed costs

Overrun – Refers to the practice of introducing excess raw material into manufacturing process to complete the job order in anticipation of potential wastage or loss. The excess finished products at the end of the production run is considered the overrun.

 

P

 

Packing Slip – The detailed list of what is included in a shipment to the customer, and physically accompanies the goods.

Parallel – In the context of ERP, this refers to running two systems simultaneously to see whether they produce similar results. This is usually done in the final stages of implementation to test the new ERP system.

Part Numbers – Sometimes referred to as material numbers, these are unique identifiers that identify every SKU by giving them an alphanumeric name

Pick List – The detailed set of instructions on the quantity and type of goods to be retrieved from a warehouse, and then brought to a staging area or delivery transport. When designed for efficiency, this can significantly improve speed and performance.

Point of Sale (POS) – Refers to the time and location where a sales transaction occurred. In ERP systems, this describes the ability of the ERP system to handle retail sales. With the right ERP setup, this can be used to communicate, in real-time, the actual demand to the rest of the supply chain

Pricing – This term refers to the process of deciding how much to charge for various quantities of a good or service. Depending on sales agreement, the pricing structure can range from simple to complicated. ERP systems are highly effective in administrating rules-based pricing.

Process Manufacturing – The opposite of discreet manufacturing, the finished product in process manufacturing - like paint, or bread – cannot be disassembled into its component parts.

Process Re-engineering – The exercise of systematically studying a process, and determining if there is a more efficient or higher quality method of achieving the intended process result.

Production Control – All activities involved in controlling the production process.

Production Planning – This is sometimes used interchangeably with production scheduling, and sometimes is used to convey a broader and longer term set of tasks including capacity planning, raw material procurement, and hours of operation planning. Much of the nuance of production planning depends on how formal or informal the Sales& Operations Planning process is.

Progress Payment – An approach to reduce risk before production is complete, by making payments to a vendor according to deliverable milestones. Payments can be withheld if deliverables are not met

Purchase Order – A document that authorises a vendor to deliver goods or provide services at a specified price, by a specified date.

Purchase Requisition – A document which requests for approval to purchase a material or service. This ensures that no one in the company has the sole authority to make purchases without due diligence being done

Purchasing – Refers to the process of acquiring raw materials or finished goods or services from a vendor.

 

Q

 

Quality Control – This describes the process of ensuring a finished product or delivered service complies with established standards of performance. This could be quantitative i.e. lab tests, or qualitative i.e. appearance, texture etc.

Quotation – A list of goods or services and their related prices.

Quote to Cash – Refers to the entire process from quotation creation right through to cash receival from an invoiced material, finished product, or service. Having accurate information on the quote to cash cycle is crucial for financial forecasting.

 

R

 

Radio Frequency Automatic Identification (RFID) – This is a small electronic chip that comes with antennae. It stores information read with radio waves. From a technical perspective, these are far superior to the standard bar codes, because RFID chips can be read from a distance. However, it costs much more than a bar code.

Raw Materials – Refers to items used in the production of a finished good or subassembly.

Receiving – Describes the process of bringing in goods from a supplier.

Reorder Level – The predetermined inventory limit that triggers either an internal job order or an external purchase order for more supply

Replenishment – Refers to replacing items that have been used into stock

Requirements Definition – This is a list detailing all the business functions and processes for a project, such as an ERP software implementation.

Request for Proposal (RFP) – A request used to elicit bids and proposals from various vendors when an organisation seeks to purchase a new solution e.g. ERP software.

Retained Earnings – In accounting, this refers to an organisation’s profits that have not been distributed as dividends.

Return Merchandise Authorisation (RMA) – A document with an identifying number that gives a customer permission to return goods to a vendor.

Return on Investment (ROI) – A quantified measurement to calculate how profitable an investment is, calculated by dividing expected profit by the cost.

Return on Sales – Refers to the percentage calculated by dividing net income by revenue

Revenue – In accounting, this describes the inflow of cash or accounts receivable from the sales of a service or product.

Routing – The sequence of manufacturing steps materials go through to produce a part, sub-assembly, or finished product

 

S

 

Safety Stock – Refers to an organisation’s reserve of materials. This is to cover for any unforeseen circumstances.

Sage 300 – An ERP software by Sage Software that is designed for small and midsized enterprises. Formerly known as Accpac, Sage 300 covers finance, project management, production planning and inventory control, purchasing and supply chain management, reporting etc. It is a module-based software, so customers only need to pay for the modules they need.

Sales Forecasting – The method of predicting the amount of revenue and quantity of materials or goods or services that will be sold in a specified future timeframe.

Sales History – A data set of all sales records. It usually includes invoice and line item detail.

Sales Order – A detailed list of goods or services which has been authorised by a customer, at an agreed upon date and price.

SAP Business One – An ERP software by SAP designed specifically for small and midsized enterprises, as well as subsidiaries of multinational corporations. It covers financial management, sales and opportunity management, purchasing and supply chain management, production planning and inventory control, project management, reporting and analytics and business intelligence (when run on SAP HANA). SAP Business One is available as an on-premise application, as well as in the Cloud.

SAP HANA – The proprietary in-memory database technology from SAP. It is less commonly used than Microsoft SQL (MSSQL), but boasts far superior performance and capabilities.


Have You Heard? SAP Business One Runs Differently on SAP HANA vs. Microsoft SQL. Click to Find Out How

 

SAP S/4HANA – Also known as SAP Business Suite 4 SAP HANA. A complete ERP business suite designed for large enterprises, and runs exclusively on SAP HANA. It integrates functions ranging from lines of business to industry solutions, as well as re-integrates parts of SAP Business Suite. Examples of functionalities include finance, procurement, sales, controlling, manufacturing, project system, plant maintenance, and product lifecycle management. SAP S/4HANA has two editions – the on-premise and the Cloud.

Scalability – Often used among ERP consultants, this refers to a software’s ability to accommodate growth within a business process. Usually automated processes are easier to scale than complicated or labour intensive processes.

Scheduling – Refers to the process of planning and arranging orders, in an effort to achieve maximum productivity and delivery efficiency while minimising costs.

Self-Service Portal – Refers to a portal that gives an organisation’s customers or employees access to a system e.g. ERP system on their own initiative. Access is usually role-based, and for a specified section within the system.

Setup – In ERP, this describes the process of setting up data and understanding how to group this data to meet the customer’s requirements, including chart of accounts, customers, vendors, and items.

Shelf Life – An expected set of time for a material to remain in storage, yet still comply to certain specifications and perform as it is supposed to. In ERP, shelf life control is usually a control item within the system.

Shop Calendar – This is a factory’s expected work schedule. The purpose of this is to estimate work centre capacity, by calculating dates (in business days) when time has elapsed. In a system, it also prevents sales or purchase orders being made on invalid dates.

Shipping – The processes involved in arranging for a product’s physical transportation, and ensuring it is loaded on a right carrier in compliance to legal and financial regulations. In ERP, this involves the creation of the necessary documents in the system so the products can be transferred to the customer

Six Sigma – This is a term that was borrowed from statistics, and now often used in manufacturing. It is a methodology that aims to improve quality while reducing defects. To control variance, this approach aims for six standard deviations between the mean and the next nearest specification limit in any process.

Stock Keeping Unit (SKU) – The unique identifier for a manufactured or purchased good. It is usually a specific item in a commercial sales transaction.

Software as a Service (SAAS) – Refers to a subscription-based licensing and distribution model in which a provider hosts software applications over the internet and makes them available to customers to access. It falls under the category of Cloud computing.

Software License – Refers to a software provider’s authorisation for multiple people to gain access and use their intellectual property i.e. software application. This is done by having each user or individual pay a fee. In ERP, an organisation can choose to pay a fee for named (individual) or concurrent users to access the ERP software

Source Code – Refers to the intellectual property given by a software provider for an application or program.

Spare Parts – These are items kept in stock as potential replacements for machinery, equipment etc.

Supply Chain – The system of activities and/or organisations in which a product moves through in the sales cycle. This begins at the initial suppliers and ends at the final customers.

Supply Chain Management (SCM) – Refers to the management and control of the Supply Chain.

Synchronise – In ERP, this describes the process that takes place when the system goes live. At this point, all of the customer’s business processes e.g. customer orders, existing inventory, accounts receivables, etc. must be correctly captured and recreated. This could be done manually or with the help of load programs.

Systems Administrator – The person or persons who are held responsible for the configuration, deployment, and maintenance of an organisation’s software system, such as an ERP system.

 

T

 

Technical Support – The term refers to what a technology vendor provides to a customer when an application or program fails to perform as expected. This usually involves an assessment followed by corrective actions taken. In ERP, it can take place through several avenues – email, Help Desk, or a visit to the customer’s premises.

 

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Total Cost of Ownership (TCO) – A concept where there are additional costs in a software purchase on top of the initial purchase price. These include annual maintenance and licensing fees, add-on purchases, hardware costs, consultation etc. It is therefore useful to calculate the costs that will accumulate over the software’s lifespan to ensure a fair comparison e.g. Cloud-based ERP software tend to have lower upfront costs, but in the long-term may equal or even exceed on-premise ERP software purchases due to the annual recurring subscription fees.

Time and Attendance – A process of documenting an individual’s length and frequency of work. This is usually used to calculate wages, overtime compensation etc.

Transfer Pricing – Refers to the internal price that an organisation charges when it product is shipped between business units, entities etc.

Third-Party Application – Also known as 3rd Party Applications, this term refers to software or applications that are developed by an external organisation, and sold through a vendor.

Total Quality Management (TQM) – An approach that focuses on enhancing product and service quality across the entire operation span. This includes everything from the factory floor right through leadership practices and supplier quality.

 

U

 

Unit of Measure (UOM) – A term that defines how an item will be counted in the system e.g. inch, grams etc.

Upgrade – This refers to replacing the existing software version with a new and improved one.

User – Any individual that has the access rights to log into a system, such as an ERP system.

User Defined Field (UDF) – This is a field in a software system (like ERP) which is used to capture data defined by an end-user.

User Interface (UI) – Usually a specific screen, this is the part of an application or program in which a user is able to interact with the system e.g. entering data etc. In ERP software, it is important that these screens are ‘friendly’ to the user i.e. intuitive to navigate and easy to comprehend.

 

V

 

Value-Added Reseller (VAR) – Refers to a middleman organisation that goes beyond just reselling a software product, by adding value through additional features or services. Typically, large software organisations like SAP and Microsoft will work through VARs to service midsized to smaller customers. A VAR will help such customers by installing, configuring, training, and supporting their ERP system after it goes live.

Visual scheduling – The real–time database of shop floor activity. As work progresses through the plant, a user is able to make quick adjustments to the job order based on real-time feedback. This ensures that the organisation is able to deliver as scheduled. Visual scheduling usually includes new jobs, current work–in–progress, and job completions.

Vendors – These are individuals or organisations who supply materials or services at a specified quality in exchange for a specified amount of cash

Vendor Managed Inventory (VMI) – A vendor-centric approach where a vendor controls their raw material supply, to ensure their customer’s inventory is neither excessively high or low. This is often a value-added service offered by a vendor; by taking responsibility for stock levels, a vendor helps their customer reduce their inventory risk.

Version – An application’s or program’s generation. They are usually listed as numbers to indicate its manufacturing generation.

 

W

 

Warehouse – Refers to any locations where an organisation’s items are held in.

Warehouse Management System (WMS) – In ERP, this refers to a module or system that is dedicated to warehousing and distribution centre processes, transactions, and activities. These could be either third-party or a stand-alone application integrated with the ERP software. WMS strengths lie in areas such as picking strategies, unit handling management, bin storage and load control etc.

Workflow Management – A process of controlling and following up on a human approval chain. The goal is to make the workflow more efficient in an organisation. A robust ERP software will have, among other aspects, strong workflow management built into its system.

Work-in-Progress Inventory (WIP) – These are items that have begun their production cycles, but have yet to be completed.

Work Orders – In ERP, this is also known as Job Orders. These are documented requests that specify the type and quantity of materials and labour operations needed for the product to be manufactured by a certain date. Just as customer sales orders are to external financial accounting, work or job orders are to internal cost accounting.

Work Order Cost – In ERP, this is also known as Job Cost. This calculates the costs that went into a work or job order e.g. material value, labour etc.

 

X

 

X12 – This is the ANSI standard for business transactions done via electronic interchange

 

Y

 

Year-to-date – In ERP reporting, it refers to a period that begins at the start of the current year and continues to the present day

 

Z

 

Zero Inventory – A term often used in Just-in-Time (JIT) philosophy. This simply means reducing an company’s inventory to minimal levels in order to boost organisational and cost effectiveness.

 

About The Author

Alythea is the Marketing Manager at AFON, where she covers marketing strategy and communications. Alythea also writes on workplace productivity, and is a certified solutions focused coach.