ERP Glossary: 40 Essential Terms Explained
A comprehensive guide to the terminology behind enterprise resource planning, from accounting fundamentals to AI-powered automation.
ABC Analysis
ABC analysis is an inventory categorization method that divides products into three groups based on their value contribution.
Accounts Payable
Accounts payable (AP) represents the money a business owes to its suppliers and vendors for goods and services received but not yet paid for.
Accounts Receivable
Accounts receivable (AR) represents the outstanding invoices a company has sent to customers for products or services delivered but not yet paid for.
Accrual Accounting
Accrual accounting is an accounting method that records revenue when it is earned and expenses when they are incurred, regardless of when cash actually changes hands.
AI Agent
An AI agent is an autonomous software program that uses artificial intelligence to perceive its environment, make decisions, and take actions to achieve specific goals.
AI-Native ERP
An AI-native ERP is an enterprise resource planning system designed from the ground up with artificial intelligence as a core capability rather than an add-on.
API (Application Programming Interface)
An Application Programming Interface (API) is a set of defined rules and protocols that allows different software applications to communicate with each other.
Asset Management
Asset management in an ERP system involves tracking physical and intangible assets throughout their entire lifecycle, from acquisition through maintenance, depreciation, and eventual disposal or retirement.
Bank Reconciliation
Bank reconciliation is the process of comparing a company's internal financial records against the bank statement to identify and resolve discrepancies.
Barcode Scanning
Barcode scanning in an ERP context uses printed or digital barcodes to identify products, locations, assets, and documents for fast, accurate data capture in warehouse, inventory, manufacturing, and retail operations.
Bill of Lading
A bill of lading (BOL or B/L) is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of goods being transported.
BOM (Bill of Materials)
A Bill of Materials (BOM) is a comprehensive list of raw materials, components, sub-assemblies, and quantities needed to manufacture a finished product.
Business Intelligence
Business intelligence (BI) encompasses the strategies, technologies, and tools used to collect, integrate, analyze, and present business data for better decision-making.
Chart of Accounts
A chart of accounts (COA) is a structured list of every account used by an organization to record financial transactions.
Cost Center
A cost center is a department, team, or business unit within an organization that incurs costs but does not directly generate revenue.
CRM (Customer Relationship Management)
Customer Relationship Management (CRM) is both a strategy and a software system for managing all interactions and relationships with current and potential customers.
Customer Lifetime Value
Customer Lifetime Value (CLV or LTV) is a prediction of the total net profit a business will earn from its entire relationship with a customer.
Customer Portal
A customer portal is a secure, self-service web interface that gives customers direct access to their account information, order history, invoices, support tickets, and other relevant data from your ERP system.
Data Migration
Data migration is the process of selecting, extracting, transforming, and loading data from one system into another during an ERP implementation or system upgrade.
Demand Planning
Demand planning is the process of forecasting customer demand for products or services to optimize inventory levels, production schedules, and procurement activities.
Depreciation
Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life.
Double-Entry Bookkeeping
Double-entry bookkeeping is an accounting method where every financial transaction is recorded in at least two accounts: a debit in one account and an equal credit in another.
Dropshipping
Dropshipping is a fulfillment model where the retailer does not hold inventory.
E-Invoicing
E-invoicing (electronic invoicing) is the exchange of invoice documents between suppliers and buyers in a structured digital format that allows automatic processing without manual data entry.
ERP (Enterprise Resource Planning)
Enterprise Resource Planning (ERP) is a type of software that organizations use to manage and integrate core business processes.
Landed Cost
Landed cost is the total cost of a product once it has arrived at the buyer's warehouse, including the original purchase price plus all expenses incurred during shipping, handling, customs duties, taxes, insurance, currency conversion, and any other charges required to get the product from the supplier to its final destination.
Lead Scoring
Lead scoring is a methodology for ranking prospects based on their perceived likelihood to convert into customers.
Lead Time
Lead time is the total elapsed time between the initiation and completion of a process.
Lot Tracking
Lot tracking (also called batch tracking) is the practice of assigning unique identifiers to batches of products or materials so they can be traced through the entire supply chain.
MRP (Material Requirements Planning)
Material Requirements Planning (MRP) is a production planning and inventory control system that calculates what materials are needed, how much is needed, and when they are needed to fulfill production orders.
Multi-Currency
Multi-currency capability in an ERP system allows businesses to conduct transactions, maintain accounts, and generate reports in multiple currencies simultaneously.
OEE (Overall Equipment Effectiveness)
Overall Equipment Effectiveness (OEE) is a manufacturing metric that measures how effectively a piece of equipment or production line is utilized.
Onboarding
Employee onboarding is the structured process of integrating a new hire into an organization.
Open Source Software
Open source software is software whose source code is publicly available and can be freely used, modified, and distributed by anyone under the terms of its license.
Payroll Processing
Payroll processing is the administrative function of calculating employee compensation, withholding taxes and deductions, and distributing payments.
Performance Management
Performance management is the ongoing process of setting expectations, monitoring progress, providing feedback, and evaluating employee performance.
Pick Pack Ship
Pick, pack, and ship refers to the three-step warehouse fulfillment process for outbound orders.
Point of Sale Terminal
A point of sale (POS) terminal is the hardware and software system used to process retail transactions at the location where a customer makes a purchase.
Profit Center
A profit center is an organizational unit, department, product line, or business segment that is tracked independently for both revenue and expenses, allowing management to evaluate its profitability.
Purchase Requisition
A purchase requisition is an internal document used by employees to formally request the procurement of goods or services.
Quality Control
Quality control (QC) is a set of procedures and activities that ensure products and processes meet defined standards and specifications.
Quote-to-Cash
Quote-to-cash (QTC or Q2C) describes the end-to-end business process from creating a customer quote through order fulfillment to collecting payment.
Reorder Point
The reorder point (ROP) is the inventory level at which a new purchase order or production order should be placed to replenish stock before it runs out.
Return Merchandise Authorization
Return merchandise authorization (RMA) is a structured process for managing product returns from customers.
SaaS (Software as a Service)
Software as a Service (SaaS) is a software delivery model where applications are hosted by a provider and accessed by customers over the internet via a web browser.
Safety Stock
Safety stock is extra inventory held beyond expected demand to protect against uncertainty in both supply and demand.
Sales Forecasting
Sales forecasting is the process of estimating future sales revenue over a defined period.
Sales Pipeline
A sales pipeline is a visual representation of where prospects are in the buying process.
Service Level Agreement
A service level agreement (SLA) is a formal commitment that defines the expected level of service between a provider and a customer.
SKU (Stock Keeping Unit)
A Stock Keeping Unit (SKU) is a unique alphanumeric identifier assigned to each distinct product or product variant in a company's inventory.
Subscription Management
Subscription management is the process of handling recurring billing relationships, including plan creation, customer sign-ups, billing cycle management, payment processing, renewals, upgrades, downgrades, cancellations, and revenue recognition for subscription-based products and services.
Supply Chain Management
Supply chain management (SCM) is the coordination and oversight of all activities involved in sourcing, procurement, production, and delivery of products from raw material suppliers through to end customers.