Essential ERP Terms — 20 Key Concepts Every ERP Beginner Must Know

1. ERP (Enterprise Resource Planning)

Definition: An integrated business management system that combines every business process — accounting, inventory, HR, budget — into a single platform with all data interconnected. No need for multiple separate programs.

Example in ERP: When the procurement team creates a Purchase Order, the system automatically deducts the budget. When goods are received, inventory updates immediately, and when payment is made, the accounting entries are recorded — all connected without re-keying. Read more at What Is ERP?

2. Module

Definition: A sub-component of an ERP system. Each module handles a specific functional area — such as GL (General Ledger), AP (Accounts Payable), AR (Accounts Receivable), HR (Human Resources), and Inventory. Organizations can choose to use only the modules they need.

Example in ERP: Saeree ERP offers a complete set of modules, from Budget, Procurement, Accounting, Inventory, Fixed Assets, HR, all the way to executive Dashboards.

3. Master Data

Definition: Foundational data shared across the entire system — such as Vendor Master, Material Master, Chart of Accounts, and Employee Master. Master Data must be set up correctly before the system can be used.

Example in ERP: Before Go-Live, you must import all Master Data — e.g., 500 vendor records, 10,000 material items, 200 chart of account codes. If Master Data is wrong, every transaction that references it will be affected.

4. Business Process

Definition: A defined sequence of work steps with clear start and end points — such as the Procure-to-Pay process: Purchase Request → Approval → Purchase Order → Goods Receipt → Inspection → Payment.

Example in ERP: ERP systems are designed so each Business Process connects to the next. Once one step completes, the system automatically generates the document for the next step — reducing duplicate data entry and errors.

5. Workflow

Definition: An automated approval routing system based on predefined organizational hierarchy — e.g., Purchase Request: Officer → Supervisor → Director. The system automatically routes the document to the next approver.

Example in ERP: When an officer creates a 50,000 THB Purchase Request, the system routes it to the supervisor for approval. If it exceeds 100,000 THB, additional Director approval is required. Read more at Automated Approval Workflows.

6. MRP (Material Requirements Planning)

Definition: A material requirements planning system that calculates what raw materials to order, in what quantities, and when — based on production plans, sales orders, and current stock balances.

Example in ERP: If you need to produce 100 units of Product A, the MRP system checks the BOM, calculates required raw materials, deducts current stock, and automatically creates Purchase Requests for missing materials. Read more at What Is MRP?

7. BOM (Bill of Materials)

Definition: A complete list of raw materials and components required to produce one unit of a finished product, including the quantity needed per unit. Think of it as a "recipe" for the product.

Example in ERP: A BOM for one table might consist of: 1 wooden top, 4 table legs, 16 screws, 0.5 liters of finishing coat — the system uses BOM to calculate cost and plan material requirements. Read more at How to Find the True Cost of Manufacturing.

8. WIP (Work in Progress)

Definition: Goods in the production process that are not yet complete. They have accounting value that must be tracked because raw materials have been consumed but the product cannot yet be sold.

Example in ERP: A furniture factory's WIP = tables that have been assembled but not yet painted. The system tracks WIP value and transfers it to finished goods upon production completion.

9. Go-Live

Definition: The official launch day of an ERP system after testing (UAT), Data Migration, and user training are complete. It is the most important milestone of an ERP project.

Example in ERP: On Go-Live day, everyone stops using legacy systems (Excel, paper) and switches to the ERP system entirely. Typically scheduled at the start of a new fiscal year (e.g., October 1). Read more at What to Do When Your Organization Wants to Adopt ERP.

10. UAT (User Acceptance Testing)

Definition: Testing performed by actual end users (not the development team) to confirm that the system works as required before Go-Live. Any issues found must be resolved before going live.

Example in ERP: The accounting team tests recording invoices → verifies GL is correct → closes period → generates reports. If every step works as designed, they Sign-off and approve Go-Live.

11. Data Migration

Definition: The process of moving data from legacy systems (Excel, Access, Legacy systems) into a new ERP system, including data cleansing and format conversion to fit the new system.

Example in ERP: Migrating 500 vendor records from Excel into the system requires checking for no duplicate names, valid tax IDs, and complete addresses before importing into the ERP system.

12. Configuration vs Customization

Definition: Configuration is setting up the system using available built-in options (e.g., toggling features, defining permissions, configuring workflows). Customization is writing additional code to make the system do things beyond its original design.

Example in ERP: Setting POs over 100,000 THB to require 3-tier approval = Configuration (can be set directly). But requiring a special report format the system doesn't have = Customization (requires additional coding).

13. On-Premise vs Cloud

Definition: On-Premise means installing the ERP system on the organization's own servers — managed entirely in-house. Cloud means using the system via the internet with the provider managing the infrastructure. Each has its trade-offs.

Example in ERP: Many government agencies choose On-Premise because data stays inside the organization's network with full security control. SMEs may choose Cloud to avoid investing in server hardware.

14. Dashboard

Definition: A real-time visual summary screen using charts, tables, and figures that gives executives an instant overview — without having to open multiple reports.

Example in ERP: An executive Dashboard might show: remaining budget, number of POs awaiting approval, payables due, stock below reorder points — all on a single screen.

15. KPI (Key Performance Indicator)

Definition: Measurable indicators of organizational success — used to evaluate whether operations are achieving defined goals. KPIs are clear, quantifiable numbers.

Example in ERP: Common ERP KPIs include: budget utilization rate (target 90%), average days payable outstanding (target ≤30 days), inventory variance rate (target <1%).

16. Integration / API

Definition: Connecting the ERP system with external systems for automatic data exchange, using APIs (Application Programming Interfaces) as the communication channel between systems.

Example in ERP: Saeree ERP integrates with banking systems (auto-importing Bank Statements), e-Tax Invoice systems (sending electronic tax invoices), and GFMIS (for government agencies).

17. Audit Trail

Definition: A complete history record of every data change in the system — who did what, when, and what changed from/to. Allows full backward auditing.

Example in ERP: If a Purchase Order amount appears modified, an auditor can view the Audit Trail to see who changed it, when, and from what amount to what amount. Read more at Data Security in ERP Systems.

18. RBAC (Role-Based Access Control)

Definition: Access permission management based on job roles rather than individual users. For example, a "Procurement Officer" role sees only procurement menus — not accounting or payroll.

Example in ERP: Define a "Finance" role = access to GL, AP, AR, financial reports. Define a "Procurement" role = access to Purchase Requests, Purchase Orders, Goods Receipts, Inventory — but no access to payroll data.

19. Batch Processing vs Real-time

Definition: Batch Processing executes jobs in scheduled groups (e.g., monthly payroll calculation). Real-time processes data immediately as it arrives (e.g., instant inventory deduction upon material withdrawal).

Example in ERP: Material withdrawals are Real-time (stock is deducted immediately), while fixed asset depreciation is typically Batch (run at month-end).

20. TCO (Total Cost of Ownership)

Definition: The total cost of owning an ERP system — not just software cost, but also hardware, implementation, training, annual maintenance, upgrades, and IT staff costs.

Example in ERP: When choosing an ERP system, don't look only at License cost. Calculate TCO over 5–10 years. System A may have a cheaper License but expensive annual maintenance — totaling more than System B which has a higher License but easier ongoing operations.

Summary Table: 20 Essential ERP Terms

References

• Gartner — ERP Glossary
• ASCM (formerly APICS) — Supply Chain & Operations Standards
• ISO/IEC 29110 — Software Engineering Standards for Small Entities