ERP glossary

B

Bank reconciliationAccountsBank reconciliation is the process of matching the bank balance in a company's books with the bank's own statement and explaining any differences. Batch trackingInventoryBatch tracking records which lot of material or product an item belongs to, with details such as manufacturing date, expiry date and supplier. Bill of materials (BOM)ManufacturingA bill of materials is the complete list of raw materials, parts and sub-assemblies, with quantities, needed to make one unit of a product. Bin managementInventoryBin management tracks exactly where stock sits inside a warehouse, down to the rack, shelf or bin.

C

Credit noteAccountsA credit note is a document a seller issues to reduce the amount a customer owes, for example after a return, a price correction or a discount. Customer credit limitSalesA customer credit limit is the maximum unpaid amount a business allows a customer to owe at any time.

D

Debit noteAccountsA debit note is a document a buyer sends a supplier to reduce the amount payable, for example for returned or rejected goods, or an extra charge a seller adds to an earlier invoice.

E

E-invoiceAccountsAn e-invoice is a GST invoice whose details are registered on the government's Invoice Registration Portal, which returns an Invoice Reference Number (IRN). E-way billAccountsAn e-way bill is an electronic document under GST that must be generated before goods worth more than a set value are moved by road. Economic order quantity (EOQ)InventoryEconomic order quantity is the order size that minimises the combined cost of placing orders and holding stock. Enterprise resource planning (ERP)GeneralEnterprise resource planning is software that runs a company's sales, purchase, stock, production and accounts in one system with one set of data.

F

Finished goodsManufacturingFinished goods are products that have completed production and quality checks and are ready to be sold. First in, first out (FIFO)InventoryFirst in, first out is a stock method in which the oldest stock is assumed to be used or sold first, so issues are valued at the oldest purchase cost.

G

General ledgerAccountsThe general ledger is the master record of all of a company's accounts, where every sale, purchase, payment and adjustment is posted. Goods and Services Tax (GST)AccountsGoods and Services Tax is India's indirect tax on the supply of goods and services, charged at each step of the supply chain with credit for tax already paid. Goods receipt note (GRN)PurchaseA goods receipt note is the document a store raises when material arrives from a supplier, recording what was received, how much and in what condition.

H

HSN codeAccountsAn HSN code is the Harmonised System of Nomenclature number that classifies a product for GST and decides its tax rate.

I

In-process quality checkManufacturingAn in-process quality check inspects work at stages during production, rather than only at the end, so defects are caught before more effort is spent on them. Input tax credit (ITC)AccountsInput tax credit lets a business reduce the GST it owes by the GST it has already paid on purchases used for its business.

J

Job workManufacturingJob work is when a manufacturer sends material to an outside processor, such as a plater or heat treater, who works on it and sends it back.

L

Landed costPurchaseLanded cost is the total cost of getting an item to your door: the purchase price plus freight, insurance, customs duty, handling and other charges.

M

Maker-checkerSales and purchaseMaker-checker is a control where one person creates a transaction and a second person must approve it before it takes effect. Material requirements planning (MRP)ManufacturingMaterial requirements planning works out which materials to buy or make, how many and by when, from open orders, BOMs and current stock.

O

Overall equipment effectiveness (OEE)ManufacturingOverall equipment effectiveness is a measure of how well a machine is used, calculated as availability × performance × quality.

P

Payable ageingAccountsPayable ageing is a report that groups the amounts a business owes suppliers by how long they have been outstanding, such as 0-30, 31-60 and 61-90 days. Petty cashAccountsPetty cash is a small amount of cash kept in the office to pay minor day-to-day expenses such as courier charges, tea and local travel. Preventive maintenanceManufacturingPreventive maintenance is servicing equipment on a fixed schedule or usage count to prevent breakdowns, instead of waiting for it to fail. Production jobManufacturingA production job, also called a work order or job order, is an instruction to make a set quantity of a product using a bill of materials, by a due date. Purchase order (PO)PurchaseA purchase order is a document a buyer sends a supplier to confirm what is being bought, in what quantity, at what price and by when. Purchase requisitionPurchaseA purchase requisition is an internal request from a department or store asking the purchase team to buy specific items.

Q

QuotationSalesA quotation is a price offer sent to a customer before they order, stating items, quantities, prices, taxes and how long the offer is valid.

R

Raw materialManufacturingRaw material is the basic input bought to make a product, such as steel, resin, fabric or chemicals, before any processing. Receivable ageingAccountsReceivable ageing groups unpaid customer invoices by how long they have been outstanding, such as 0-30, 31-60, 61-90 and over 90 days. Reorder levelInventoryThe reorder level is the stock quantity at which a new purchase or production order should be raised so the item does not run out. Request for quotation (RFQ)PurchaseA request for quotation is a document a buyer sends to several suppliers asking them to quote prices and terms for the same items. Reverse charge mechanism (RCM)AccountsUnder the reverse charge mechanism, the buyer, not the seller, pays the GST to the government on certain notified supplies. RoutingManufacturingA routing is the sequence of operations, work centres and times needed to turn materials into a finished product.

S

Safety stockInventorySafety stock is extra inventory held as a buffer against uncertain demand or late deliveries from suppliers. Sales orderSalesA sales order is a document that records a customer's confirmed request for goods or services, with quantities, prices and delivery dates. Serial number trackingInventorySerial number tracking gives every individual unit a unique number so its history, from receipt to sale and warranty service, can be followed. Stock adjustmentInventoryA stock adjustment is an entry that corrects the quantity in the system to match what was actually counted, for example after damage, loss or a physical stock count. Stock keeping unit (SKU)InventoryA stock keeping unit is a unique code that identifies one specific item in inventory, including its variant such as size, colour or pack.

T

Tax collected at source (TCS)AccountsTax collected at source is tax that a seller collects from the buyer at the time of sale for certain notified goods and deposits with the government. Tax deducted at source (TDS)AccountsTax deducted at source is income tax that a payer deducts from certain payments, such as contractor fees, rent or professional charges, and deposits with the government. Tax invoiceAccountsA tax invoice is the bill a seller issues for goods or services, showing the buyer, items, values, GST charged and the invoice number and date. Three-way matchingPurchaseThree-way matching checks that the purchase order, the goods receipt note and the supplier's invoice agree before the invoice is paid. Trial balanceAccountsA trial balance is a list of all ledger balances at a point in time, used to check that total debits equal total credits.

W

Weighted average costInventoryWeighted average cost values stock at the average price of all units on hand, recalculated each time new stock is received. Work in progress (WIP)ManufacturingWork in progress is material that has been issued to production but is not yet a finished product.

Y

Yield and scrapManufacturingYield is the share of input material that becomes good finished product. Scrap is the material lost or rejected along the way.