ERP Dictionary

Your Essential Guide to ERP Terminology

In the dynamic world of Enterprise Resource Planning (ERP), staying abreast of terminology is not just about knowledge – it’s about empowerment. As finance and accounting professionals, understanding these terms is crucial in navigating and leveraging ERP systems effectively, especially when it comes to specialized software like Sage 300.

Why this dictionary? Our ERP Terminology Guide is designed with you in mind – CFOs, controllers, and finance professionals. We know how challenging it can be to decipher the jargon and technicalities that come with ERP systems. That’s why we’ve developed this resource: to demystify ERP language and make it accessible.

What will you find here? This page offers concise, clear definitions of key ERP terms. Whether you’re implementing a new system, managing an existing one, or simply looking to expand your knowledge, this guide is your one-stop resource. From ‘General Ledger’ to ‘Workflow Automation’, we’ve covered essential terms that will deepen your understanding and enhance your proficiency in the ERP landscape.

Let’s Dive in!

A

Accounts Payable: Money owed by a business to its suppliers or creditors, representing short-term debts for goods or services purchased on credit.

Accounts Receivable: Outstanding invoices a company has or the money it is owed by others, signifying an asset on the balance sheet.

Accrual Accounting: An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur. This approach contrasts with cash accounting, where transactions are recorded only when cash changes hands.

Automated Clearing House (ACH): Automated Clearing House (ACH) is a network used for electronic money transfers and payment services, primarily in the United States. ACH facilitates the processing of large volumes of credit and debit transactions, including payroll, vendor payments, and bill payments. The benefits are its cost-effectiveness, reduced processing times, and enhanced transaction security. ACH is integral for businesses looking to streamline their financial operations, offering a reliable and efficient alternative to traditional paper-based methods like checks.

API: An API (Application Programming Interface) is a set of rules and protocols for building and interacting with software applications. APIs allow different software systems to communicate with each other, enabling data exchange and integration of disparate systems. In the context of ERP, APIs are used for integrating other business applications such as CRM and e-commerce platforms.

B

Balance Sheet: A financial statement that provides a snapshot of a company’s financial position at a specific point in time. It details the company’s assets, liabilities, and shareholders’ equity, offering insights into its financial strength and capabilities.

Business Intelligence: The use of technologies and practices to collect, integrate, analyze, and present business information, supporting better decision-making.

Business Analysis: Business Analysis in the context of ERP, involves the  examination of an organization’s business needs and the identification of solutions to business problems. This process plays a pivotal role in the ERP implementation phase, guiding the customization and configuration of systems like Sage ERPs to align with specific business objectives. It encompasses understanding current processes, identifying inefficiencies, and proposing improvements, ensuring that the overall solution delivers optimal performance and value. Business Analysis is critical for ensuring that the ERP system not only meets current business requirements but is also scalable to adapt to future challenges and opportunities.

Business Requirements: Detailed descriptions of what a new or altered product, service, or project must do to meet the needs of the organization and its users.

C

Cash accounting: A financial management method where transactions are recorded only when cash is exchanged. In this system, revenues are recognized when cash is received, and expenses are recognized when cash is paid out.

Cash Flow: The total amount of money being transferred in and out of a business, particularly affecting liquidity. In ERP systems, cash flow analysis is crucial for understanding the financial health of the organization.

Change Management: Change Management in the context of ERP, refers to the structured approach to transitioning individuals, teams, and organizations from a current state to a desired future state. This strategic approach prioritizes step-by-step implementation, continuous training, and support, essential for minimizing disruption and fostering user acceptance. Effective Change Management aligns technological changes with business goals.

Cloud Computing: The delivery of various services through the internet, including storage, servers, databases, networking, and software.

Configuration: Setting up software using available options and tools to align it with business processes, without altering the core code.

CRM (Customer Relationship Management): A technology for managing all your company’s relationships and interactions with customers and potential customers.

Customization: Making changes to the software’s code to meet specific business requirements, often involving more complex alterations than configuration.

D

Data Migration: The process of transferring data between storage types, formats, or computer systems, often involving moving data to a new ERP solution.

Demand Planning: The process of forecasting demand to ensure products can be reliably delivered and meet customer demand.

Depreciation: An accounting method of allocating the cost of a tangible asset over its useful life. In ERP systems, depreciation is used to account for the decrease in value of assets like equipment, vehicles, and buildings.

DNS (Domain Name System): The Internet’s system for converting website names into IP addresses. For example, when a web address (URL) is typed into a browser, DNS servers return the IP address of the web server associated with that name. While not directly related to ERP, understanding DNS is important for professionals dealing with ERP systems hosted or accessed via the Internet.

DSN (Data Source Name): A data structure used to describe a connection to a database. A DSN contains information such as the name of the driver, the directory, the database name, and specific login information. In ERP, it is essential for setting up connections to databases within ERP systems, allowing it to communicate with databases.

E

Electronic Funds Transfer (EFT): Electronic Funds Transfer (EFT) is a digital method for moving funds from one bank account to another, either within the same financial institution or across different ones. In ERP systems like Sage, EFT streamlines payment processes, enabling automated, efficient, and error-free transactions that are essential for finance and accounting professionals. This automation not only reduces processing costs but also enhances cash flow management and improves payment accuracy. EFT encompasses various transaction types, including direct deposits, wire transfers, and electronic checks, offering versatile solutions for diverse business financial needs.

Enterprise Asset Management (EAM): The management of a company’s physical assets (like buildings, equipment, and infrastructure) to maximize their use and value over time.

ERP (Enterprise Resource Planning): Software that helps organizations manage and integrate important parts of their businesses, such as finance, HR, and supply chain.

F

Financial Consolidation: The process of combining financial data from different departments or business entities within an organization for reporting purposes.

Fixed Assets: Long-term tangible assets that a business uses in its operations and is not expected to consume or convert into cash within a year. ERP systems typically manage fixed assets to track their depreciation, maintenance, and valuation.

G

General Ledger: The primary accounting record in double-entry bookkeeping, providing a complete record of all financial transactions.

Go-Live: The point in time when an ERP system becomes operational and users start to perform their job functions within the new system. It marks the culmination of the implementation phase and the beginning of active usage.

I

Integration: Connecting various IT systems within and outside an organization to ensure consistent and coordinated functionality.

Inventory Management: The supervision of non-capitalized assets (inventory) and stock items, specifically overseeing the flow of goods from manufacturers to warehouses and from these facilities to point of sale.

L

Legacy Systems: Outdated computing software or systems that are still in use, despite newer alternatives being available. ERP implementations often involve migrating data from legacy systems to modern, integrated ERP solutions.

M

Material Requirements Planning (MRP): A system for calculating the materials and components needed to manufacture a product.

Migration: The process of moving data from one system to another, typically during the implementation of a new ERP system or an upgrade. This involves transferring various types of data such as financial records, customer information, employee details, and transaction histories.

Module (in context of ERP software): A distinct unit in an ERP system, responsible for a specific function like accounts receivables or payroll.

O

ODBC: ODBC stands for Open Database Connectivity, a standard API (Application Programming Interface) used for accessing database management systems (DBMS). It allows different client applications to communicate with various database systems without needing to understand specifics about the DBMS. In ERP systems, ODBC is often used to facilitate data exchange between the ERP software and databases.

OEM: Stands for Original Equipment Manufacturer. Usually referred to in the context of parts and components that are made by the original manufacturer of a product. This is often perceived as ensuring compatibility and quality.

On Premise: Refers to the model of software deployment where the software application is installed and runs on computers on the premises of the person or organization using the software, rather than being hosted remotely (like in SaaS).

Order to Cash: A business process in ERP that encompasses everything from order creation to revenue recognition, tracking all stages from a customer order to your receipt of payment.

P

Parallel Run Testing: Parallel Run Testing in the context of ERP systems, is a method where the new system runs simultaneously with the old system for a period of time. This approach allows businesses to compare the outputs of the new ERP system against the existing system, ensuring accuracy and functionality. It’s an essential phase in ERP implementation, providing a safety net by identifying discrepancies and issues before fully transitioning to the new system. This testing phase is critical for minimizing operational risk and ensuring a seamless switch-over for organizations, thereby safeguarding business continuity and data integrity.

Procure to Pay: A process in ERP starting from the requisition of goods/services to the processing and payment of the supplier invoice.

Project Management: Project Management within the context of ERP implementations, is the discipline of planning, organizing, securing, managing, leading, and controlling resources to achieve specific goals. It’s a crucial element in ERP projects, ensuring that all aspects, from software customization to staff training, are executed within the set timeframe and budget. Effective Project Management involves clear communication, stakeholder engagement, and risk management to navigate the complexities of ERP deployment. This ensures that the ERP system is implemented smoothly, delivering the desired business improvements and return on investment.

R

Real-Time Analytics: Using, analyzing, and reporting data as soon as it enters the system, allowing for immediate decision-making in ERP systems.

S

SaaS (Software as a Service): A software distribution model in which applications are hosted by a service provider or vendor and made available to customers over the internet. This model contrasts with traditional on-premise software installations.

T

Trial Balance: A bookkeeping report that lists the balances in each of an organization’s general ledger accounts. The total of debit balances should equal the total of credit balances, signaling that the ledger is balanced. It’s often used to prepare financial statements and as a checkpoint in the accounting cycle.

U

User Acceptance Testing (UAT): The process of verifying that a solution (software, a system) works for the user and meets all the requirements and specifications.

W

Workflow Automation: Automating processes based on workflow rules, where tasks, information, or documents are passed for action according to procedural rules.

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