The ERP and accounting glossary
Clear definitions for the terms you will encounter running a modern business. No jargon used to explain other jargon.
67 terms across 20 letters
A
Accounts Payable (AP)
Accounts payable is the total amount a business owes to its suppliers and vendors for goods or services received but not yet paid for. It appears as a current liability on the balance sheet. Managing AP well means paying suppliers on time to preserve credit terms while holding cash as long as reasonably possible.
Accounts Receivable (AR)
Accounts receivable is the money owed to a business by its customers for goods or services delivered but not yet collected. It is recorded as a current asset. A high AR balance relative to revenue can signal collection problems; businesses track it with aging reports to prioritise follow-ups.
Accrual Accounting
Accrual accounting recognises revenue when it is earned and expenses when they are incurred, regardless of when cash actually moves. This contrasts with cash-basis accounting, which records transactions only when money changes hands. Accrual accounting is required under IFRS and US GAAP for most businesses above a certain size.
Aging Report
An aging report groups outstanding invoices or bills by how long they have been unpaid, typically in buckets of 0-30, 31-60, 61-90, and 90+ days. Finance teams use it to identify overdue receivables for collection action or overdue payables that risk supplier penalties.
Asset Register
An asset register is a record of all fixed assets owned by a business, including purchase date, cost, location, condition, and accumulated depreciation. It serves as the authoritative source for insurance, audit, and financial reporting purposes. The register must be reconciled to the general ledger at period close.
Audit Trail
An audit trail is a chronological record of who made which changes to financial data, when, and from what system. It is a core requirement of any compliant accounting system and is reviewed by external auditors to verify the integrity of financial statements. Immutable audit trails cannot be edited or deleted after the fact.
B
Balance Sheet
The balance sheet is a financial statement showing a company's assets, liabilities, and shareholders' equity at a specific point in time. It must always balance: assets equal liabilities plus equity. It is one of the three core financial statements alongside the profit and loss statement and the cash flow statement.
Bank Reconciliation
Bank reconciliation is the process of matching transactions in a company's accounting records to the corresponding entries on its bank statement, explaining any differences. It is performed at least monthly to catch errors, identify fraud, and confirm the accuracy of cash balances before period close.
Bill of Materials (BOM)
A bill of materials is a structured list of all raw materials, components, and sub-assemblies needed to manufacture a finished product, along with the quantities required. It is the foundation of manufacturing planning, cost estimation, and stock replenishment. A multi-level BOM accounts for assemblies that themselves have sub-components.
Bookkeeping
Bookkeeping is the systematic recording of financial transactions in a consistent, accurate, and orderly way. It is the day-to-day function that feeds into accounting: every sale, purchase, payment, and receipt is entered into the books. Good bookkeeping makes period close, audits, and tax filings significantly faster.
Budget Variance
Budget variance is the difference between a budgeted figure and the actual result for the same period. A favourable variance means actual performance was better than planned; an unfavourable variance means it was worse. Finance teams investigate material variances to understand whether they reflect operational issues or planning errors.
C
Capital Expenditure (CapEx)
Capital expenditure is spending on assets that provide long-term value to a business, such as machinery, vehicles, buildings, or software licences. Unlike operating expenses, CapEx is not fully expensed in the period it occurs; it is capitalised on the balance sheet and depreciated over the asset's useful life.
Cash Flow Statement
The cash flow statement reports the actual movement of cash into and out of a business over a period, divided into operating, investing, and financing activities. A business can be profitable on a P&L yet still run out of cash; the cash flow statement reveals whether the business is generating or consuming cash.
Chart of Accounts
The chart of accounts is the complete, numbered list of all ledger accounts used by a business to record financial transactions. It organises accounts into categories: assets, liabilities, equity, income, and expenses. A well-structured chart of accounts makes financial reporting accurate and navigable.
Cost Centre
A cost centre is an organisational unit, department, or project to which costs are assigned for management reporting purposes. Cost centres do not directly generate revenue but incur expenses. Allocating costs to cost centres lets management see where money is being spent across the business.
Cost of Goods Sold (COGS)
Cost of goods sold is the direct cost of producing or purchasing the goods a business sold during a period, including materials, direct labour, and manufacturing overhead. Gross profit is revenue minus COGS. COGS excludes operating expenses such as sales and administration costs.
Credit Note
A credit note is a document issued by a seller to a buyer that reduces the amount the buyer owes, typically because goods were returned, an overcharge occurred, or a discount was agreed after the original invoice. It is the reverse of an invoice and must be matched against the original transaction in the accounting records.
Currency Revaluation
Currency revaluation is the accounting process of restating foreign-currency balances at the current exchange rate at the end of a reporting period. The resulting gains or losses are recorded in the profit and loss statement or in equity, depending on the accounting standard applied. It is required whenever a business holds assets or liabilities denominated in a currency other than its functional currency.
D
Days Payable Outstanding (DPO)
Days payable outstanding measures the average number of days a company takes to pay its suppliers. It is calculated as accounts payable divided by cost of goods sold, multiplied by the number of days in the period. A higher DPO means the company is holding cash longer; a very high DPO can strain supplier relationships.
Days Sales Outstanding (DSO)
Days sales outstanding measures the average number of days it takes to collect payment after a sale is made. It is calculated as accounts receivable divided by revenue, multiplied by the number of days in the period. A rising DSO indicates customers are taking longer to pay, which puts pressure on cash flow.
Debit Note
A debit note is a document issued by a buyer to a seller, or by a seller to formally notify a buyer of an increase in the amount owed. Buyers typically issue debit notes when returning goods to a supplier or when they have been undercharged. It prompts the seller to issue a corresponding credit note.
Depreciation
Depreciation is the systematic allocation of a fixed asset's cost over its useful life. Common methods include straight-line (equal amounts each period) and reducing balance (a fixed percentage of the remaining book value each period). Depreciation reduces the asset's carrying value on the balance sheet and is recognised as an expense in the profit and loss statement.
Double-Entry Bookkeeping
Double-entry bookkeeping is the accounting method in which every transaction is recorded in at least two accounts, with total debits always equalling total credits. This system, developed in 15th-century Italy, makes it possible to detect errors and produces a self-balancing set of books. All modern accounting systems are built on double-entry principles.
E
E-invoicing
E-invoicing is the structured, electronic exchange of invoice data between buyer and seller systems in a standardised format, without human re-entry. It differs from sending a PDF by email: the invoice is machine-readable and can be processed automatically. Many governments now mandate e-invoicing for tax compliance, each with their own standard: Peppol in Europe, NRS MBS in Nigeria, ZATCA in Saudi Arabia, IRN in India.
ERP (Enterprise Resource Planning)
Enterprise resource planning is a category of business software that integrates core operational functions, including accounting, inventory, purchasing, sales, manufacturing, HR, and payroll, into a single system with a shared database. Integration eliminates the need to re-enter data between systems and gives management a single version of the truth. Modern ERP systems are cloud-based and modular.
Expense Claim
An expense claim is a request by an employee to be reimbursed for costs they incurred on behalf of the business, such as travel, meals, or office supplies. The claim is typically submitted with receipts, reviewed and approved by a manager, then processed through payroll or accounts payable. Expense policies govern what is reimbursable and at what limits.
F
Financial Period
A financial period is a defined interval of time for which financial results are prepared and reported. Most businesses report monthly internally and annually for statutory purposes. The financial year does not have to align with the calendar year; many businesses choose a year-end that avoids their busiest trading period.
Fixed Assets
Fixed assets are long-term physical or intangible resources owned by a business and used in its operations, such as machinery, vehicles, buildings, and software. They appear on the balance sheet at cost less accumulated depreciation. Fixed assets are not bought and sold in the ordinary course of business, which distinguishes them from inventory.
FX Gain/Loss
An FX gain or loss arises when the exchange rate between two currencies changes between the date a foreign-currency transaction is recorded and the date it is settled or revalued. If the rate moves in the company's favour, a gain is recognised; if it moves against the company, a loss is recognised. Both are included in the profit and loss statement.
G
General Ledger (GL)
The general ledger is the central accounting record containing all financial transactions posted to every account in the chart of accounts. Every subsidiary ledger, such as accounts payable or accounts receivable, ultimately feeds into the general ledger. Financial statements are prepared directly from the general ledger.
Goods Receipt Note (GRN)
A goods receipt note is a document that confirms goods have been received from a supplier in the quantity and condition specified on the purchase order. It is a key document in the three-way match process, which compares the purchase order, GRN, and supplier invoice before approving payment.
Gross Margin
Gross margin is gross profit expressed as a percentage of revenue. It measures how much of each naira or dollar of revenue remains after covering the direct cost of goods sold. Gross margin varies widely by industry and is a key indicator of pricing power and production efficiency.
Gross Profit
Gross profit is revenue minus the cost of goods sold. It represents the profit a business makes from its core trading activity before deducting operating expenses such as salaries, rent, and marketing. A declining gross profit over time can indicate rising input costs, pricing pressure, or product mix changes.
I
Intercompany Transaction
An intercompany transaction is a financial transaction between two entities within the same group, such as a loan, a sale of goods, or a service fee. These transactions must be eliminated when preparing consolidated financial statements so that the group's results reflect only transactions with external parties.
Inventory Valuation
Inventory valuation is the method used to assign a cost to the stock held at period end. Common methods include FIFO (first in, first out), LIFO (last in, first out, not permitted under IFRS), and weighted average cost. The chosen method affects both the balance sheet value of stock and the cost of goods sold recognised in the period.
Invoice Reference Number (IRN)
In the context of Indian e-invoicing, the Invoice Reference Number is a unique identifier generated by the government's Invoice Registration Portal (IRP) when a business uploads a B2B invoice for validation. The IRN and a QR code must appear on every e-invoice issued to another registered business. India mandated IRN-based e-invoicing in phases from 2020 onward.
J
Journal Entry
A journal entry is a record of a financial transaction in the general ledger, specifying the accounts to be debited and credited, the amounts, the date, and a description. Manual journal entries are used for adjustments, accruals, prepayments, and corrections that do not flow automatically from a business document such as an invoice or payment.
L
Landed Cost
Landed cost is the total cost of a purchased item once it arrives at the destination, including the purchase price, shipping freight, customs duties, insurance, and any other charges incurred to get the goods into the warehouse. Calculating accurate landed costs is essential for correct inventory valuation and margin analysis.
Ledger
A ledger is a collection of accounts that records all transactions related to a specific type of financial activity. The general ledger contains all accounts; subsidiary ledgers, such as the accounts receivable ledger or payroll ledger, hold detailed records that summarise into the general ledger. The term is also used informally to mean any accounting record.
M
Managed ERP
Managed ERP is a delivery model in which the ERP vendor or a specialist provider handles all infrastructure, hosting, updates, backups, and compliance configuration on behalf of the customer. The customer pays a subscription and gets a production-ready system without needing to maintain servers or manage upgrades. It differs from self-hosted ERP, where the customer is responsible for all of that.
Multi-Currency Accounting
Multi-currency accounting is the capability to record transactions in multiple currencies within a single accounting system, with automatic conversion to the company's functional currency for reporting. It is required by any business that buys, sells, or holds assets in more than one currency, and involves tracking exchange rates and booking FX gains or losses.
Multi-Entity Consolidation
Multi-entity consolidation is the process of combining the financial statements of a parent company and all its subsidiaries into a single set of consolidated statements, eliminating intercompany balances and transactions. It is required for group financial reporting under IFRS and US GAAP and is one of the most complex tasks in corporate accounting.
N
Net Profit
Net profit is the amount remaining from revenue after all costs have been deducted, including cost of goods sold, operating expenses, interest, depreciation, and taxes. It is the bottom line of the profit and loss statement. Net profit margin, net profit as a percentage of revenue, is a primary measure of a business's overall profitability.
NRS MBS (Nigeria Revenue Service Mandatory Billing System)
The NRS Mandatory Billing System is Nigeria's government-mandated e-invoicing framework operated by the Nigeria Revenue Service. Businesses above specified revenue thresholds must issue invoices through the MBS platform, which assigns a validation code to each invoice. The system is designed to reduce VAT leakage and improve tax collection. NRS is Nigeria's primary tax authority.
O
Opening Balance
An opening balance is the amount in an account at the start of a new accounting period, which equals the closing balance from the prior period. When a business migrates to a new ERP or accounting system, entering accurate opening balances for all accounts is the critical first step before any transactions can be recorded correctly.
Operating Expenditure (OpEx)
Operating expenditure is spending on the day-to-day costs of running a business, such as salaries, rent, utilities, and marketing. Unlike capital expenditure, OpEx is fully expensed in the period it is incurred and reduces profit immediately. Businesses often seek to shift spending from CapEx to OpEx, which is part of the appeal of subscription-based software.
Order-to-Cash
Order-to-cash is the end-to-end business process from receiving a customer order through to collecting payment. It spans sales order creation, fulfilment and delivery, invoicing, and cash collection. Shortening the order-to-cash cycle reduces DSO and improves cash flow.
P
PAYE (Pay As You Earn)
PAYE is a system through which employers deduct income tax from employee salaries before payment and remit it directly to the tax authority on the employee's behalf. The employer acts as a tax collection agent. In Nigeria, PAYE is administered by state inland revenue services; in the UK, it is administered by HMRC.
Payroll Run
A payroll run is the process of calculating and disbursing employee salaries for a given period, accounting for gross pay, all statutory deductions such as tax and pension contributions, and any voluntary deductions. After the run, payslips are generated and the net amounts are transferred to employee bank accounts. The payroll journal is then posted to the general ledger.
Peppol
Peppol (Pan-European Public Procurement Online) is an international network and set of open standards for the secure electronic exchange of business documents, including invoices, orders, and credit notes. Businesses connect to the Peppol network via certified Access Points. It is the mandatory e-invoicing standard for public sector procurement across much of Europe and is being adopted globally.
Period Close
Period close is the sequence of tasks performed at the end of an accounting period, typically a month or year, to finalise the financial records. It includes reconciling bank accounts, posting accruals and prepayments, running depreciation, reviewing the trial balance, and locking the period to prevent further entries. A clean close process produces reliable, timely financial statements.
Profit and Loss Statement (P&L)
The profit and loss statement, also called the income statement, summarises a company's revenue, costs, and profit or loss over a specific period. It starts with revenue, deducts cost of goods sold to arrive at gross profit, then deducts operating expenses to show operating profit, and finally accounts for interest and tax to show net profit.
Purchase Order (PO)
A purchase order is a formal document issued by a buyer to a supplier authorising the purchase of specified goods or services at agreed prices and terms. It creates a legally binding commitment once accepted by the supplier. POs are used to control spending, track open commitments, and support the three-way match process before approving supplier invoices.
R
Reconciliation
Reconciliation is the process of comparing two sets of records to confirm they agree, identifying and explaining any differences. In accounting, the most common reconciliations are bank reconciliation, accounts receivable reconciliation, and intercompany reconciliation. Unresolved reconciling items are a key indicator of errors or fraud in financial records.
Retained Earnings
Retained earnings is the cumulative net profit of a business that has not been distributed to shareholders as dividends. It appears in the equity section of the balance sheet and represents the portion of profit reinvested in the business over its history. A company with consistently positive retained earnings is building its financial strength.
Revenue Recognition
Revenue recognition is the accounting principle that determines when and how revenue is recorded. Under IFRS 15 and ASC 606, revenue is recognised when a performance obligation to a customer is satisfied, which may be at a point in time or over a period. The timing of recognition can significantly affect reported profit and requires judgement for complex contracts.
S
Sales Invoice
A sales invoice is a document issued by a seller to a buyer requesting payment for goods or services delivered, stating the amount owed, due date, payment terms, and itemised details of the transaction. It creates an entry in accounts receivable for the seller and an entry in accounts payable for the buyer. Invoices that must comply with e-invoicing mandates are submitted to the relevant government system.
Stock Keeping Unit (SKU)
A stock keeping unit is a unique alphanumeric code assigned to a specific product or product variant to track inventory. Each distinct combination of product, size, colour, or other attribute typically gets its own SKU. SKUs enable precise stock tracking, reorder management, and sales reporting at the individual item level.
Stock Valuation
Stock valuation is the monetary value assigned to the inventory held by a business at a given point in time. The valuation method, whether FIFO, weighted average, or standard cost, determines both the balance sheet carrying value and the cost of goods sold recognised when items are sold. Accurate stock valuation is critical for gross margin reporting and financial statement accuracy.
T
Three-Way Match
The three-way match is an accounts payable control that compares three documents before approving a supplier invoice for payment: the purchase order, the goods receipt note, and the supplier invoice. All three must agree on quantity, price, and supplier details. Discrepancies are flagged for resolution, which prevents overpayment and fraud.
Trial Balance
A trial balance is a report listing all accounts in the general ledger with their debit or credit balances at a specific date. Its purpose is to verify that total debits equal total credits, confirming the mathematical integrity of the ledger. An unbalanced trial balance indicates a recording error that must be found and corrected before financial statements can be prepared.
V
VAT (Value Added Tax)
Value added tax is a consumption tax levied on the value added at each stage of production and distribution. Businesses collect VAT from customers on their sales (output tax) and recover VAT paid to suppliers on their purchases (input tax), remitting only the net difference to the tax authority. VAT rates and rules vary by country and product type.
Variance Analysis
Variance analysis is the process of investigating the difference between planned and actual financial performance. It identifies whether variances are caused by price, volume, or mix factors, and whether they are favourable or unfavourable. Management use variance analysis to hold departments accountable and to refine future budgets and forecasts.
W
Work in Progress (WIP)
Work in progress refers to partially completed goods or projects that have incurred costs but are not yet ready for sale or delivery. In manufacturing, WIP is the inventory on the factory floor between raw materials and finished goods. In project accounting, WIP represents revenue earned but not yet billed to the client.
Work Order
A work order is an authorisation to produce a specified quantity of a finished good, triggering the reservation of raw materials and the scheduling of production capacity. It links the bill of materials to the production run and tracks actual material consumption and labour time against the plan. Completed work orders update inventory and feed into cost of goods sold.
Z
ZATCA (Zakat, Tax and Customs Authority)
ZATCA is Saudi Arabia's tax and customs authority and the body responsible for the kingdom's e-invoicing mandate, known as FATOORAH. Phase 1, which required the generation of structured electronic invoices, became mandatory in December 2021. Phase 2, which requires real-time integration with ZATCA's platform for clearance and reporting, has been rolled out in waves by business size since 2023.
Zero-Based Budgeting
Zero-based budgeting is a budgeting method in which every expense must be justified from scratch for each new period, starting from a base of zero rather than using the prior period's budget as a starting point. It forces a rigorous review of all spending and is often used during cost-reduction programmes or in businesses with significant discretionary expenditure.
See these in action in Zinye.
Every term in this glossary maps to a real workflow inside Zinye. Accounting, inventory, payroll, manufacturing, e-invoicing and more, set up and running from day one.