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Glossary
Browse below for definitions. Click on a letter of the alphabet to jump to that section. Got a term not found here that you need defined? Tell us and we'll define it and add it to the glossary.
IRS Forms 1099 are used for reporting income other than wages, tips and salaries for one calendar year to the IRS; Form 1099-MISC as it relates to accounts payable activity most commonly reports payments for services, and payments to independent contractors. See these related articles: Form 1099-MISC, Request Forms for 1099 Reporting, 1099 Planning Calendar
Abatement Letter
A letter written to the IRS proposing that all penalties or interest be waived.
Accessorial Charges
Fees charged for additional services performed beyond regular pickup and delivery, e.g., inside delivery, storage, heating, etc.
Account
A collection of financial information grouped according to customer or purpose, including all a customer's purchases, payments, and debts. A written record of an account is called a statement.
Account Classification
The summation or grouping of like items into categories such as revenue accounts, liability accounts and expense accounts.
Accounting
The overall process of identifying, measuring, recording, interpreting, and communicating the results of economic activity; tracking business income and expenses and using these numbers to answer specific questions about the financial and tax status of the business.
Accounting Equation
The basic accounting equation is Assets = Liabilities + Owners' Equity
Accounting Period
A term covered by an income statement. A fiscal year is any 12-month accounting period that a business chooses to adopt as opposed to the calendar year, which runs from January 1 to December 31.
Accounts Payable
A type of short-term debt, accounts payable are amounts a business owes - bills from suppliers for goods or services purchased on credit. Accounts Payable is classified as a Current Liability because the obligation is generally due within 12 months from the initial transaction date.
Accounts Receivable
Amounts owed to a business that it expects to receive; includes sales made on credit.
Accrual
Accrual accounting has to do with the timing of recording income and expenses. In accrual accounting, income is recognized when a sale occurs and expenses are recognized when incurred (goods or services are received), rather than when cash is actually received or payment actually made (cash accounting). By recording income when it is truly earned and expenses when truly incurred, the income of a period is accurately matched to expenses of the period, giving a more accurate picture of net profits for the period than cash accounting.
Accrual Basis of Accounting
The opposite of cash basis of accounting; an accrual basis of accounting reports income when it is earned, rather than when it is actually received, and matches any related expenses to that same reporting timeframe.
ACFE
Association of Certified Fraud Examiners. A professional organization that provides anti-fraud training and education; more than 75,000 members worldwide. The ACFE certifies and governs Certified Fraud Examiners, which investigate business fraud around the world.
ACH
Automated Clearing House (ACH) is a secure payment transfer system that connects all U.S. financial institutions. The ACH network acts as the central clearing facility for all Electronic Fund Transfer (EFT) transactions that occur nationwide, representing a crucial link in the national banking system. ACH payment is a type of electronic funds transfer (EFT). ACH is faster than a check but slower than wire. ACH cost is typically between $0.10 - $0.25 per transaction (compared to typically $10.00 - $30.00 for wire).
Acid test ratio
An indicator of a company's short-term liquidity that measures a company's ability to meet its short term obligations. Also called quick ratio and quick assets ratio. Information obtained from a company's balance sheet is used to calculate the ratio. Subtract inventories from current assets and divide the number by current liabilities.
Activity-based management (ABM)
A system wide , integrated approach that focuses management's attention on activities by refining and expressing an organization's resources on the activities it supports - not on what it spends.
Additional Paid In Capital
An equity account classification in the stockholders' equity section of the balance sheet that represents a portion of contributed capital. It is the difference between the par value of the common stock issued to owners and the total cash or other consideration contributed in exchange for their ownership interest.
ADF
"After deducting freight" – in an early payment discount offer, ADF means apply the discount after deducting the freight charge, which is not discounted.
A percentage of the value of specific collateral for which a lender is willing to grant a loan.
Advanced Shipping Notice (ASN)
Notification of pending deliveries usually sent in an electronic format. It may also contain information about a shipment of goods, order information, product description, type of packaging, markings and carrier information.
Aging
The length of time a receivable has been outstanding after issuance of an invoice. An aging report sorts accounts into categories based on how long they have been outstanding, e.g., 1 to 30 days, 31 to 60 days, etc.
AICPA
The American Institute of Certified Public Accountants is a national association for the accounting industry where part of its mission is to provide accounting professionals with uniform certification and licensing standards, establishing professional standards, and enforcing current requirements. See www.aicpa.org for further information.
Allowance
An allocation of money between contractual partners as a reimbursement for expenses from one to the other.
American Banking Association (ABA)
Founded in 1875, the American Bankers Association represents banks of all sizes and charters and is the voice for the nation's $13 trillion banking industry and its 2 million employees. For more information see About the ABA.
American Bankruptcy Institute
An organization dedicated to research and education on matters related to insolvency.
American Institute of Certified Public Accountants (AICPA)
The American Institute of Certified Public Accountants is a national association for the accounting industry where part of its mission is to provide accounting professionals with uniform certification and licensing standards, establishing professional standards, and enforcing current requirements. See www.aicpa.org for further information.
American National Standards Institute (ANSI)
American National Standards Institute. A non-profit organization which coordinates the development and use of voluntary standards for products, services, processes, systems and personnel in the United States. ANSI developed the standards for EDI.
American SAP Users Group (ASUG)
A non-profit association of business and technology professionals who are SAP users. For more information see the Americas SAP Users Group
Amortization
The process of gradually reducing any amount in regular installments over a period of time, such as write-down of bond premium, the cost of intangible assets or periodic payment of mortgage or other debt.
Analogous Article
An article that is not found in freight classification but is comparable to an article that is in the classification.
Annotation
An attached note or graphic on an imaged document made after scanning.
ANSI
American National Standards Institute. A non-profit organization which coordinates the development and use of voluntary standards for products, services, processes, systems and personnel in the United States. ANSI developed the standards for EDI.
ANSI X12 Standards
The American National Standards Institute Accredited Standards Committee’s EDI standards for the United States.
AP On-Hold
APIC
A term used to reference Additional Paid In Capital.
APM
Accredited Payables Manager. Title awarded to accounts payable managers who have completed certification exams provided by Accounts Payable & Procure-to-Pay Network and The Institute of Management & Administration. Accredited Payables Managers certification demonstrates that the individual has mastered the basics of accounts payable and has the skills required to manage an AP department.
APS
Accredited Payables Specialist. Title awarded to accounts payable employees who have completed certification exams provided by Accounts Payable & Procure-to-Pay Network and The Institute of Management & Administration. Accredited Payables Specialist certification states that the individual has demonstrated the knowledge and skill to excel in accounts payable.
Archive
Imaged documents on magnetic or optical media in long-term storage for possible future access.
Arms Export Control Act (AECA) Debarred List
A list published by the State Department. It contains the names of individuals and entities convicted of violating or conspiring to violate the Arms Export Control Act (AECA). They are barred from directly or indirectly exporting defense articles, including technical data and defense services. Click here to access the AECA Debarred List
Arrival Notice
Notification by a carrier to the consignee of the arrival of a shipment.
ASCII
American Standard Code for Information Interchange. ASCII is character encoding technology based on the English Alphabet. ASCII is capable of understanding and communicating letters, numbers and some symbols between digital devices; it is a commonly used system in entering data into a computer system for accounting software, document management, audit and other purposes.
ASN
Advanced Shipping Notice. A notice of a pending delivery sent by the shipper of a supply to the recipient. The ASN is based on information in the purchase order or a contract. When using an ASN, the price of the goods has already been determined.
ASP
Application Service Provider. A business that provides computer-based services to customers over the Internet. Customers can access the services, which can include Web invoicing, automatic purchasing and expense management applications, online any time. ASPs are often referred to as on-demand software.
Asset
An economic resource belonging to a company or entity, an item owned by the company or entity; an asset has future economic benefit and is the result of past financial transaction.
Asset-Based Lending (ABL)
A loan that is secured by an organization's assets: inventory, accounts receivable, equipment, etc.
Association of Certified Fraud Examiners (ACFE)
A professional organization that provides anti-fraud training and education; more than 37,000 members worldwide. The ACFE certifies and governs Certified Fraud Examiners, which investigate business fraud around the world.
Audit
An internal or external examination of financial accounts and records in order to assure compliance with accounting rules and regulations, catch fraudulent activity and to review efficiency of financial operations.
Auditors Report
A report that provides an opinion and analysis of a company's financial state ; usually prepared by an outside or external auditor.
Authentication
A process of confirming a computer, system or program user's identity by validating it against a user database; usually requires a unique user name and password.
Authorization
The granting of access rights to a computer system's data based on a user's identity. Authorization generally follows immediately after authentication; together they comprise a two-part process.
Automated Clearing House (ACH)
An electronic method used to process transfers between banks via the Federal Reserve system and other AHC operators, such as automated payroll deposits and debit card purchases. ACH is more efficient and cost-effective than paper checks and transactions are usually processed and settled within one or two days.
Notification from the IRS that a payee name and TIN combination are incorrect. Backup withholding must be done on any further payments until a corrected Form W-9 from the payee or a TIN validation form from the IRS has been received.
B2B
A term used in reference to 'business-to-business'; generally used when referring to a business which sells its products or services to another business.
B2C
A term used in reference to 'business-to-consumer'; generally used when referring a business which sells its products or services to a consumer.
Back Office Conversion
The ability of retailers or billers to convert a physical check collected at a point-of-sale or manned bill payment location into a single-entry ACH debit.
Imaging invoices for archival purposes once they have been processed on paper, allowing for fast document retrieval and requiring no physical storage space.
Backup Withholding
A percentage that is withheld from any payment made to a payee that has not provided a correct TIN or where the IRS has issued a notice to backup withhold on payments to that individual. Backup withholding is also required on payments made to nonresident aliens without a signed Form W-8 or W-8BEN certifying foreign status.
Bad Debt
An account receivable, loan or note that is deemed uncollectible by the company and is written off. This usually occurs when a customer is unwilling to pay for services rendered to them.
Balance Sheet
The listing of assets (items owned), liabilities (obligations owed), and owners' equity (the difference between assets and liabilities), prepared at a specific point in time.
Bank Administration Institute (BAI)
An organization geared towards improving the functionality of financial service companies through the offering of solutions, education and training.
Bank Administration Institute (BAI) Standards
The quality standards to which most cash management service providers and banks are held . Each year, the survey done by the BAI researching the quality of processing by financial institutions, is often used to formulate the quality standards for the upcoming year.
Bank Guarantee
A commitment by a bank to be answerable for payment to a specified beneficiary (seller) in the event of the failure of the bank's client (the buyer) to pay.
Bank Routing Number
A nine-digit number printed across the bottom of a check that identifies the financial institution it is drawn upon.
Bankruptcy
A legal declaration of the inability of an individual or an organization to pay their creditors. An organization will request for the reorganization of its debts (under chapter 11) or a liquidation of its assets (under chapter 7). Bankruptcy can be initiated by the debtor or by the creditors, in an effort to recoup a portion of what is owed to them. Debts of an insolvent person or organization are liquidated after being satisfied to the greatest extent possible by debtor's assets.
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)
BAPCPA is a disclosure of rules regarding bankruptcy and debt counseling that apply to debtors, creditors, lawyers, debt relief agencies and petition preparers. This act helped to amend the 1968 Truth in Lending act .
Base Rating Table (BRT)
A rate table published by a carrier for LTL shipments.
Batch Processing
An operation where related transactions are grouped together and submitted for processing at least once a day; usually used by merchants who do not have a real time verification system.
Benchmarking
The process of improving performance by continuously identifying, understanding, and adapting best practices and processes found inside and outside your organization.
Best Practice
A business technique that has been proven most effective in producing desired results, including regulatory compliance.
BIC (Bank Identifier Code)
Codes assigned to identify banks in the Single Euro Payment Area (SEPA).
Bilateral contract
A contract where both parties have promised obligations to each other.
Bill Consolidator
In EIPP, a Bill Service Provider that consolidates bills from other Bill Service Providers or Billers and delivers them for presentment to the Customer Service Provider
Bill Detail
Information provided to a customer from a biller that includes specific billing information. Also called invoice detail.""
Bill of Lading (B/L)
A contractual document stating the terms between the shipper of goods and the transportation company. A bill of lading also serves as a receipt for goods.
Bill of Lading (BOL)
A document issued by a carrier to a shipper acknowledging receipt of goods for transport and specifying terms of delivery, the contract for transport services.
Bill of Sale
A written, legal document that transfers title to personal property.
Bill Summary
An invoice summary sent to the customer explaining what is owed. Information on the summary may include: Amount owed, due date, biller name and account number, etc.
Bill to Address
The address to which the freight bill is to be sent.
Bill/Invoice
A request for payment for products or services rendered, typically comprising an itemized list of charges, including prices, quantity, tax if applicable, and shipping charges.
Biller
A company or organization that issues a bill or invoice requesting payment for a product or service rendered to a customer or client.
Billing Quality Index (BQI)
A benchmark used to gauge the accuracy of invoices processed.
Blanket Purchase Order
Blockchain
A "distributed ledger" technology that is decentralized to a great number of computer nodes; transactions, financial or otherwise, must be validated by all the nodes to be authorized, making blockchain extremely secure. A group of transactions is created as a "block," which is then written to all the nodes and is unchangeable, thus forming the "blockchain" over time. Potential applications of the technology include cryptocurrencies that do not require banks (e.g. Bitcoin), and more efficient business transactions.
A group of individuals elected by a public corporation's or non-profit's shareholders; it is their responsibility to govern and set policy for the organization.
Bookkeeping
The task of recording amounts, dates and sources of all business revenue, gain, expense and loss transactions; the starting point of the accounting process.
Bottleneck
A resource that constrains the flow of production, inventory movement or data in a system.
BPO
Business Process Outsourcing - hiring a vendor to take responsibility for a business process.
BSP (Biller Service Provider)
An agent that provides an electronic payment service for the biller.
Call Center
An area within an organization that handles inbound and outbound customer service calls, technical support and many other customer-related responsibilities.
Capital Expenditure
A company's expense for long-term fixed assets like property or equipment. The expense is amortized or depreciated over the life of the asset, or "capitalized."
Capital Stock
The aggregate of a company's common and preferred stock authorized for issue by the corporate charter. It is reported on the balance sheet as "stockholder equity."
Carrier
A company that offers services to transport freight.
Carrier Discount
A reduction off the base rate that a carrier offers a shipper.
Cash Application
The process of applying payments, credit memos, and adjustments to customers' accounts.
Cash Basis Accounting
A method of accounting where expenses and revenue are recorded when cash is actually received or spent, as opposed to an accrual accounting basis.
Cash Discount
A deduction that a vendor allows on the invoice amount to encourage prompt payment. For example, terms of sale might include 2/10, n/30, meaning that the customer can pay 2% less than the invoice amount if the bill is paid within 10 days. The full amount must be paid within 30 days.
Cash Flow
The amount of cash that is coming into a company compared to how much is leaving the company. A healthy financial condition entails a higher inflow of cash than outflow.It's an analytical tool used to determine a company's short-term viability, including ability to pay bills. (Also known as statement of cash flows or funds flow statement.)
Cash Flow Statement
Summary of a company's cash receipts and cash disbursements over a period of time; Lists cash to and cash from operating, investing, and financing activities, along with the net increase or decrease in cash for the period.
Cash In Advance (CIA)
Companies often ask new customers or customers with little, no or poor credit histories to pay in advance.
Cash On Delivery (COD)
The shipper requests the carrier of the goods to collect the payment for the delivery from the consignee.
Cash Receipts
Money received by a business from its customers, such as payments on accounts receivable.
CCD
Cash Concentration or Disbursement. One of three formats used to make business-to-business automated clearing house payments. Since the CCD format cannot carry remittance data about the payment, it is often only used to pay a single invoice.
CCD+
Cash Concentration or Disbursement Plus. One of three formats used to make business-to-business automated clearing house payments. Unlike CCD, CCD+ can transmit up to 80 characters of remittance data entered in an ANSI ASC X12 data segment along with payments. CCD+ can also be used to pay multiple invoices.
CEBP
The Council for Electronic Billing and Payment (CEBP) promotes the adoption and usage of electronic consumer, business and government billing and payment programs and services across any delivery channel.
Certificate of Weight
A statement of authority of the weight of a shipment of freight prepared by a weigh master .
Certified Public Accountant
A designation (CPA) certifying that an accounting professional practicing in the United States has obtained a license to practice as a public accountant in their state.
Chapter 11
When an organization files bankruptcy and requests to reorganize its debts. See bankruptcy and Chapter 7.>
Chapter 7
When an organization files bankruptcy and requests to liquidate its assets. See bankruptcy and Chapter 11.>
Chargeback
Chart of Accounts
A listing of Accounts in a financial system generally using alpha numeric characters to designate the transactions that comprise the Balance Sheet and Income Statement. The chart of accounts is used as the basis for preparing financial reports from an accounting system.
Chartered Accountant
The equivalent designation in Canada and United Kingdom of an accounting professional who has obtained their CPA.
Chattel paper
A record or records that evidence both a monetary obligation and a security interest in specific goods.
Check Clearing for the 21st Century Act of 2004
Legislation that created a new negotiable instrument called a substitute check or image replacement document (IRD), which has the full legal force of the original check of which it is a copy. Also referred to as Check 21.
Check Kiting
A form of check fraud in which bank "float" is manipulated to fund bogus checks. This process can be perpetuated between bank accounts indefinitely, creating an interest-free loan: a bogus check is deposited into account A, and a check is written against that to deposit nonexistent funds into account B, which is then used to deposit nonexistent funds back into account A. However, many banks now place a hold on funds from check deposits until they clear, and float time is much less that it was previously, making this a less viable scam.
CHIPS
Clearing House Inter-Bank Payment System. The main privately held clearing house for large-value transactions in the United States. Along with government-owned Fedwire, CHIPS is the primary network for large-value domestic and international bank transactions.
COD Fees
A service charge made to the shipper ("prepaid") or consignee ("collect") by the carrier for collecting the consignee's payment for the goods delivered.
Collateral
An asset or property used as assurance that a debt will be repaid. The asset will be given to the creditor in the event of a default.
Collect
The consignee is responsible for payment for the freight or delivery charges.
Collect on Delivery(COD)
The shipper requests the carrier of the goods to collect the payment for the delivery from the consignee.
Collection
The act of pursuing debtors who are delinquent on payments due.
Collection Charges
Fees added to accounts receivable for outside collection efforts, including administration costs, penalties and interest.
Collection Intensity Matrix
A strategy where accounts receivables are segmented by balance size and collectors tailor approaches to manage each segment. For example, collectors would spend more time and effort on accounts with balances greater than $10,000 that control 67 percent of the portfolio than accounts with balances that range from $5,000 to $9,999 that contribute 28 percent to the AR portfolio.
Commercial Law League of America (CLLA)
An organization of attorneys and other experts in credit and finance actively engaged in the field of commercial law, bankruptcy and insolvency.
Commodity
Description of type of goods shipped, used to determine LTL classification.
Common Stock
A class of contributed capital in the equity section of the balance sheet that represents the residual ownership interest in a company by a person or organization. Often referred to as 'ordinary shares', common stock shares are ownership units issued in the form of a stock certificate(s) to a person in exchange for the certificate gave the company cash or other consideration.
Compliance
Conformity with legislation governing a particular practice or process; e.g., tax laws, unclaimed property laws, or such governing legislation as the Sarbanes-Oxley Act of 2002, which mandates transparency and ethics for public companies.
Computer Readable Data
Data in a format — such as ASCII — that a computer can understand.
Confirmed irrevocable letter of credit (L/C)
A letter of credit that may not be amended or cancelled without the consent of the issuing bank, the confirming bank, if any, and the beneficiary. The bank guarantees the payment if the beneficiary complies with credit terms and conditions.
Consignee
The receiver of the shipment.
Consignment
A transaction, in which a business delivers goods to a merchant for the purpose of sale and the transaction does not create a security interest that secures an obligation.
Consolidation (Freight)
Putting together several consignments that are headed in the same direction.
Consolidator
An interface between multiple buyers and sellers that simplifies invoice presentment allowing trading partners to interact through one party.
Contra-Accounts
A general ledger account that offsets the balance in a related account; e.g., an accumulated depreciation account that offsets the fixed asset account. Combined, they report the net value of the assets remaining. Another example of such a pair is allowance for doubtful accounts and accounts receivable.
Contributed Capital
Contributed Capital is the value of funds or other consideration contributed to a company in return for an ownership interest. For instance, contributed capital increases when a person invests money in a company and receives a stock certificate recognizing their right to share in the profits and losses of a company and increases or decreases in the equity value of the company. Owners of a company are often referred to as stockholders. Contributed capital is located in the stockholders equity section of the balance sheet.
Corporate Card
A credit card issued to an individual under a corporate account, used for business expenses; the individual cardholder is the liable party. A corporate card simplifies processing of expense reports, as most items are noted on the card statement. The statement can serve as the report and most cards offer online processing capabilities.
When the customer's parent company guarantees payment in the event the customer defaults.
Corporate Trade Payments (CTX)
An ACH format that allows B2B electronic payments that include remittance information, up to 9,999 addenda that contain trade payment details.
Corporation
A legal business entity that has its own rights, including issuance of freely transferable stock, perpetual life and limitation of owner's liability.
COSO
Committee of Sponsoring Organizations of the Treadway Commission, a joint initiative created to combat corporate fraud.
COST
: Council on State Taxation. A non-profit trade association of about 570 multi-state corporations active in interstate and international business. COST seeks to establish favorable state and local taxes for businesses that deal in multiple jurisdictions.
Cost of Goods Sold
The aggregate cost of materials, components, labor, distribution costs and overhead to produce goods sold by a company. COGS is reported on an income statement and is deducted from revenue to arrive at net income. Sometimes called "cost of sales."
Cost of Sales
See "Cost of Goods Sold."
Course of conduct
Refers to a proven and accepted history or performance and actions that transpired between two parties, which allegedly created a verbal contract.
Credit Balance
A balance that represents a liability or income to the company. In accounts payable general ledger account, a credit balance represents money owed to the company's vendors.
Credit bid
When a secured lender uses the value of their assets in lieu of cash to bid for their collateral in a bankruptcy sale.
Credit Bureau
An agency that collects information from collection agencies and creditors and reports that to a consumer reporting organization, which in turns supplies quantifiable information to banks, lenders and financing companies about borrowing and payment behaviors.
Credit Group
A gathering of credit managers within an industry who meet periodically to share information about customers' credit status and credit worthiness .
Credit Memo
A credit memo is a document issued by a company to a customer to offset all or part of an invoice, to correct accounts receivable and make good to the customer for such issues as damaged or return goods, lack of delivery, incorrect prices or freight charges, or other such problems. The company usually applies the credit memo against the customer’s outstanding balance, or issues a check to the customer.
Credit Score
A numerical expression calculated to determine the creditworthiness of a company or person. Credit departments use credit scores to ascertain how much credit to extend a new customer.
Creditor
An individual or organization to whom money is owed.
Cross-Aging
In accounts receivable, deeming an entire account to be delinquent when a certain percentage of receivables become overdue, typically 10 percent.
Cryptocurrency
A strictly digital currency in which cryptography is used to record and control transactions; e.g., bitcoin, ethereum .
CTX
Corporate Trade Exchange. One of three formats used to make business-to-business automated clearing house payments. Unlike CCD and CCD+, CTX is capable of transmitting extensive remittance data along with transactions. CTX payments can include up to 9,999 individual records made up of up to 80 characters each formatted either as an ANSI ASC X12 data segment or as a payment-related UN/EDIFACT transaction.
Cubic Capacity Rule
If an LTL shipment exceeds a designated number of cubic feet in a trailer (typically 750 cubic feet), it triggers a rate increase.
Current Asset
An asset expected to provide an economic benefit to the company within 12 months from the date of the initial transaction that generated the asset.
Current Liability
An amount owed by a company as an obligation expected to be settled within 12 months from the date of the initial transaction that resulted in the liability.
Current Ratio
A ratio calculated by dividing a company's current assets by its current liabilities. The ratio indicates whether a company has the ability to pay off its short-term liabilities with its short-term assets. (Also known as liquidity ratio, cash asset ratio and cash ratio.).
Customer Master File
A central database that contains all pertinent information about customers, such as names (legal entity and DBA name); tax ID; billing address; delivery address; contract terms; credit limit; contact information; order.
Cwt
Abbreviation for "per 100 pounds weight"
Cycle Billing
An accounting method where invoices are prepared and divided into cycles and dispatched throughout the accounting period, rather than billing all customers on the same day each month, thus spreading work evenly over time.
A reporting tool that organizes and presents key information or metrics to provide the status or condition of a project, process or business.
Data Encryption
Converting important information into scrambled text to prevent unauthorized use and to protect confidentiality of the information. This process makes the data unreadable until it is decrypted.
Days Payable Outstanding
(DPO) A number representing the number of days on average that a business takes to settle its trade payables.
DBA
Abbreviation for “Doing Business As” when using a trade name, i.e. a name that is less or other than the full legal business name. Typically, the DBA name is the name seen by the public. In the U.S., a company must register its DBA at the county or sometimes state level. In the U.K., the similar term is T/A - trading as.
De Minimis
Any benefit given to an employee that is so low in value that accounting for it would be unreasonable. Cash benefits are never excludable as a de minimis benefit. Benefits that may be excluded as de minimis include: transportation fare, meals, copy machine use, holiday gifts with a low fair market value, occasional parties and entertainment.
Debit Balance
A balance that represents an asset or an expense of the company. In accounts payable general ledger account, a debit balance represents an amount owed by the vendor to the company; it can occur as a result of product returns, allowances, rebates, and chargebacks.
Debit Transaction
An electronic payment transaction that results in a debit to a cardholder's account and a credit to the merchant account.
Debt Buyer
A purchaser of accounts receivable or portfolios. Unlike a factor, if collection attempts are unsuccessful, a debt buyer will either place receivables with an external collection agency or resell all or portions of the receivables to other debt buyers. Defined as a collection agency" under the Fair Debt Collection Practices Act. Also called "bad debt buyers.""
Debt Collection Improvement Act of 1996 (DCIA)
The U.S government's response to the increasing amount of delinquent non-tax debt owed to the U.S. The act centralized the collection of debts to the Treasury and the Financial Management Service (FMS). Also under the act, federal agencies are required to turn over all non-tax debt to FMS for collection. Collection of delinquent tax debt was added in 1999. For more on this act, click here.
Debt to Equity Ratio
Total debt divided by total equity. A high debt-to-equity ratio may indicate that a company might not be able to generate sufficient cash to satisfy its obligations.
Debtor
A party that owes a creditor and has the obligation to pay off the debt.
Deficit Weight
Delivery Note
A written document from the seller to the buyer that accompanies a delivery of goods and specifies type of goods and quantity.
Delivery Receipt
Document dated and signed by consignee or its agent at the time of delivery stating the condition of the goods at delivery.
Denied Persons List
A list published by the Department of Commerce’s Bureau of Industry and Security. It contains the names, addresses and countries of individuals and companies whose export and re-export privileges were revoked by the U.S. government. Click here to access the Denied Persons List
Depreciation
A reduction in the value of a tangible asset over time due to wear, age or obsolescence; the allocation of the cost of an asset over time for accounting and tax purposes - an annual depreciation charge in accounts represents the amount of capital assets used up in the accounting period; also, a decrease in the value of a currency in relation to the value of another.
Direct Payment
A method of collection where a debtor authorizes a creditor to debit their account to collect payment.
Disbursement
Paying out in the discharge of a debt or expense; actual payment made for product or service to a contractor or vendor.
Disputed Stop Payment
A stop payment initiated by the writer of a check due to a dispute over goods or services.
Dividends
Dividends are generally payments made to owners of a company. These payments can be in the form of cash or the issuance of additional Stock. Dividends are generally used as a way to allow the owners to participate in the profits generated by the company.
Document
Generic term for any piece of paper with important data such as an invoice, inventory sheet, application, etc.
Dodd-Frank Act
The Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into law in 2010 as a response to the financial crisis of 2008. It places regulation of the financial industry in the hands of the federal government.
DPO
Days payable outstanding. A number representing the number of days on average that a business takes to settle its trade payables.
Drop shipping
When one company makes the sale and is in charge of the accounts receivable, but a separate wholesale or manufacturing company actually fulfills the order and ships it to the customer.
DSO
DSO is Days Sales Outstanding, a measurement of the average number of days that a company takes to collect revenue after a sale has been made. DSO = [(Total Receivables / Total Credit Sales for the Period) X (# Days in Period)]. For more information see Understanding Your DSO.
DSO, Countback
Countback DSO is a method of calculating DSO that seeks to provide a more precise figure than the standard DSO calculation, by accounting for month-to-month changes in sales and past due receivables, and using actual number of days in the month. The calculation gives more weight to the current month’s sales, since most of the AR balance should be from current rather than previous sales.
DSO, Sales Weighted
Sales Weighted DSO is a method of calculating DSO that takes into account credit sales and terms of sale. Sales Weighted DSO = [($ in Current Age Bucket / Credit Sales of Current Period) + ($ in 1-30 Day Age Bucket / Credit Sales one month prior) + ($ in 31-60 Day Age Bucket / Credit Sales two months prior) + (etc.)] x 30.
Due Diligence
In AP, typically refers to efforts made by a business to find the owner of unclaimed property. Performing due diligence usually includes sending a search letter to the owner’s last known address within 60 to 120 days before the end of the dormancy period. However, rules tend to vary by state. Due diligence can also refer to efforts to verify vendor legitimacy when doing business with a new vendor.
Dunning Letter
A collection letter with defined language sent to a customer with an outstanding account, and part of a series of escalating collection letters.
Dunning Letter Service
A service that distributes dunning letters.
Duplicate Invoice
More than one invoice issued for the same transaction. Duplicate invoices can result in duplicate payments, and may be issued as a method of fraud, or may be due to inadequate internal controls, such as duplicate vendors within the vendor master file.
Earnings is the sum of all revenues, gains, expenses and losses during a specified period of time. It most often referred to when a company makes a profit and, therefore, the sum of all revenues and gains exceeds the sum of all expenses and losses.
EBITDA
Earnings before interest, taxes, depreciation and amortization. This measurement provides insight into a company's operating profitability, although it is not regulated by GAAP.
EBPP
Electronic Bill Presentment and Payment generally refers to the billing and payment process for consumers or B2C applications.
EBT
Electronic Benefit Transfer. A form of electronic funds transfer in which state governments credit money to a pseudo account belonging to a low-income individual, who is given a plastic EBT debit card. EBT funds can only be used to purchase specific items, such as food and other necessities.
EDI
Electronic Data Interchange - computer-to-computer transmission of information between two companies, including such documents as purchase orders and invoices.
Electronic Document Management refers to software that allows specific imaged documents to be retrieved based on queries about data on the images.
EFT
Electronic Funds Transfer: Any process of electronically transferring funds to or from an account; EFT does not involve the exchanging of hard currency. A Federal law to allow the transfer of funds electronically was passed in the United States in 1978. In the U.S., common forms of EFT are ACH and Wire transactions.
EIN
Employer Identification Number: A nine digit number assigned to all business entities by the IRS for taxation purposes. An EIN is required on all business tax returns, documents and statements.
EIPP
Electronic Invoice Presentment and Payment (EIPP). EIPP refers to the invoicing and payment process between businesses, or B2B applications, over the Internet and typically via a third-party EIPP vendor. See EIPP under Technology in the Main Topics section.
Electronic Banking
The use of computers and other technology to handle banking transactions and to access bank accounts. Financial institutions usually issue a PIN (Personal Identification Number) and/or ATM or debit cards for this purpose.
Electronic Bill Delivery
A system that sends customer bills via computer or telephone.
Electronic Bill Presentment and Payment (EBPP)
A system that sends bills and other information electronically to customers and provides a way for them to make the payment.
Electronic Check Clearing House Organization (ECCHO)
A non-profit organization that is a national clearinghouse for its member institutions. It provides the rules for check image exchange for member financial institutions that exchange and settle check payments. For more information visit the homepage: ECCHO
Electronic Data Interchange (EDI)
A system that makes possible the electronic exchange of documents such as purchase orders, invoices and other business transactions.
Electronic Funds Transfer (EFT)
A computerized system that electronically transfers funds from one account to another. EFT eliminates the need for paper checks.
Electronic Invoice Presentment and Payment (EIPP)
EIPP refers to the invoicing and payment process between businesses, or B2B applications, over the Internet and typically via a third-party EIPP vendor.
Electronic Payment
An alternative payment method to the paper check that is made electronically via computer, telephone or ATM.
Electronic Signatures in Global and National Commerce Act (ESIGN)
A federal law designed to facilitate the use of electronic records and signatures in interstate and foreign commerce.
Embezzlement
Financial fraud involving misappropriation of funds placed in one's care. Similar to larceny, except in the case of embezzlement, the criminal gains access to the funds rightfully before appropriating them wrongfully.
Encryption
A process by which readable text is translated into unreadable code during Internet transmission from one trading partner to another, and then retranslated into readable text according to an encryption key.
Enterprise Resource Plan (ERP)
Software that integrates departments and functions across a company into one computer system. ERP runs off a single database, enabling various departments to share information and communicate with each other.
Entity List
A list published by the Department of Commerce’s Bureau of Industry and Security. It contains the names of foreign nationals, businesses and organizations subject to special licensing requirements or policies for the export, re-export or transfer of selected items. Click here to view Frequently Asked Questions About the Entity List
Equity
The ownership interest in the assets of a company or entity; funds from owners or creditors provided for acquiring assets; the difference between the amount owned (Asset) and the amount owed (Liability) by a company or entity.
ERM
Electronic Records Management. A company's strategy for maintaining digital copies of important documents and information. An ERM might include scanning and indexing invoices, receipts and purchase orders into a computer system.
ERP
Enterprise Resource Plan - software that integrates departments and functions across a company into one computer system. ERP runs off a single database, enabling various departments to share information and communicate with each other. ERP systems comprise function-specific modules designed to interact with the other modules, e.g. Accounts Receivable, Accounts Payable, Purchasing, etc.
ERS
Evaluated Receipt Settlement. ERS eliminates the supplier invoice from the procurement and disbursement process. It determines disbursement based on Purchase Orders and Receiving information. Price information is found in the PO, and quantity information in the Receipt.
Escheatment
Remittance of unclaimed property to the state in compliance with unclaimed property law. Abandoned or unclaimed property (of all kinds) becomes the property of the state, which protects the property on behalf of the owner. For AP departments, this would be, for instance, a check never cashed. Unclaimed property laws in each state set dormancy periods, requirements for due diligence in seeking the owner, and reporting and escheat requirements for the state. Owners can claim escheated property held by the state, though only a small percentage ultimately do.
Escheatment priority rules
Rules that determine which state is entitled to abandoned property in the event of disputes. First priority is given to the state of the last known address of the owner - i.e. the customer to whom the credit belongs; if the customer's address is unknown, the state of incorporation of the holder of the credit takes precedence. (See Texas v. New Jersey.)
Ethics Resource Center
America's oldest nonprofit organization devoted to independent research and the advancement of high ethical standards.
Evergreen
An automatic renewal/extension clause in a contract that keeps it in force until either party formally cancels it.
Exchange Rate
The price of the currency of one nation in terms of that of another nation; the rate at which one currency is traded for another.
Excise Tax
A tax levied on the manufacture, sale, or consumption of certain (particular) non-essential goods or services, e.g. airline tickets, gasoline, alcohol, tobacco, etc. An excise tax is levied on a particular product in contrast to sales and use taxes, which are levied because sales occurred, rather than on the product purchased.
Exercise
A term often referred to when a person decides to purchase their company's stock through the contractual right granted to them in a stock option. A person 'exercises' their right to purchase company stock from the right granted in a stock option.
Exercise Price
Generally refers to the fixed price documented in a stock option from which a person can exercise their right to purchase a company's stock.
Expenses
Decreases in economic resources or assets resulting from activities undertaken to generate revenue. Expenses decrease Equity.
Extensible Mark-up Language (XML)
A flexible language standard, administered by the World Wide Web Consortium (W3C), which provides a set of grammatical rules for exchanging information and eliminates rigid format standards.
Extranet
A private system that is part of an organization's internal computer network that is made available to outside users such as suppliers, vendors, partners or other businesses. The system allows the organization to share information through various levels of accessibility.
A clear, readily perceived indication that a payee is exempt from Form 1099 reporting. Such indications can be: an incorporated entity ("Corp." "Inc.") as seen on an invoice, a signed W-9 stating the company is a domestic corporation or the payee is a government organization.
"Free on Board," a term of sale which in general means the seller provides for loading goods onto the shipment vessel (shipping point), at which ownership transfers to the buyer; sellerdoes not cover cost of shipment unless otherwise specified (see below).
F.O.B. Delivered/ Freight Collect
A term of sale in which the buyer takes ownership of the goods on delivery and pays the freight charges, and the seller files any claims.
F.O.B. Delivered/ Freight Collect and Allowed
A term of sale in which the buyer takes ownership of the goods on delivery and pays the freight charges but then deducts them from the seller's invoice, and the seller files any claims.
F.O.B. Delivered/ Freight Prepaid
A term of sale in which the buyer takes ownership of the goods on delivery, and the seller pays the freight charges and files any claims.
F.O.B. Origin/ Freight Collect
A term of sale in which the buyer takes ownership of the goods at the shipping point, pays the freight charges, and files any claims.
F.O.B. Origin/ Freight Prepaid
A term of sale in which the buyer takes ownership of the goods at the shipping point and seller pays the freight charges and files any claims.
F.O.B. Origin/ Freight Prepaid and Add
A term of sale in which the buyer takes ownership of the goods at the shipping point and files any claims, and the seller pays the freight charges but is then reimbursed by the buyer.
Factor
A company that purchases accounts receivable from a client, then collects payment for the invoices.
Factor, factoring
A factor is one who acts or transacts business for another. Typically, a factor buys a company's accounts receivable at a percentage of face value. Recourse factoring means the bad debt risk remains with the company. Non-recourse factoring is when the bad debt risk is transferred to the factor, protecting you from companies that don't pay. Non-recourse factoring fees are therefore higher than recourse factoring.
Factoring
A financial transaction whereby a business sells its accounts receivable at a discount. The purchasing organization assumes the responsibility of collecting the invoices
Factoring Rate
Percentage of invoice amount a factor charges for advancing on an invoice.
Fair and Accurate Credit Transactions Act (FACTA)
A federal law enacted in December 2003 to reduce identity theft and help victim recovery by providing ways for consumers to obtain their credit report and credit score. For more information on this act, click here
An act that helped amend the 1968 Truth in Lending Act and applies to open end" credit accounts
Fair Credit Reporting Act (FCRA)
A federal consumer protection law that ensures that credit reporting agencies act fairly and establishes procedures on how to correct mistakes that appear on credit reports. To read the full act, click here.
Fair Debt Collection Practices Act (FDCPA)
A federal consumer protection law that ensures that collection agencies do not use abusive or deceptive debt collection practices. To read the full act, click here.
FASB
Financial Accounting Standards Board. A private, non-profit organization whose primary purpose is to develop Generally Accepted Accounting Principles (GAAP) in the United States. The standards established by FASB are intended to educate issuers, auditors and users of financial information as well as the general public.
An interagency body established in March 1979 to prescribe uniform principles, standards, and report forms to promote uniformity in the supervision of financial institutions.
Federal Reserve
The central banking system in the United States. Twelve banks belong to the Federal Reserve and serve twelve districts. The functions of the Federal Reserve include enforcing good banking practices, ensuring compliance with federal regulations, providing loans and money to banks and determining interest rates.
FIFO
"First-in, first-out." A method of inventory costing in which the oldest inventory items are considered to be sold first. Generally used when selling perishable items, but may also figure into tax liability. See "LIFO."
Financial Electronic Data Interchange (FEDI)
The electronic exchange of payment and related information from one computer application to another in a standardized, structured format.
Fixed Asset
An asset, usually tangible, that is not intended to be consumed or sold for at least a year, and is needed to conduct business, e.g., land, buildings, machinery and equipment, vehicles, etc.
Tangible, relatively long-lived resources. The business has acquired these assets ordinarily in order to use them in the production of other goods and services. These assets will wear out and be replaced over the long run; therefore, each year they are depreciated (a paper loss in the value of fixed assets).
Fixed Costs
Sometimes known as overhead costs, these costs are part of the operating expense of a business and not dependent on the amount of goods or services produced.
Float
A period of time in which the same funds appear on the books of two different financial institutions due to inefficiencies in the clearing system, e.g., "check float." Also refers to the time between issuance of a check and the time that the check clears the bank account on which it is drawn.
Flowchart
A diagram that illustrates the flow of data, processes and operations within an organization or business management system.
FLSA
Fair Labor Standards Act. Enacted by Congress in 1938, the act established rules in the United States governing workplace practices, including establishing a national minimum wage, guaranteed time-and-a-half overtime pay for certain jobs and outlawed most child labor. In addition, the FLSA also protects employees' rights to make workplace complaints without fear of reprisal.
A clause that appears in many supplier contracts that excuses non-performance for forces beyond the suppliers' control, like acts of God, wars, riots, etc.
Foreclosure
A legal forced sale of a property due to failure of a mortgager to comply with the terms and conditions of the mortgage. The property is sold to pay off the debt of the defaulting borrower.
Foreign Corrupt Practices Act of 1977 (FPCA)
A federal law with key provisions that address anti-bribery and accounting transparency.
Forgery
The act of deliberately altering or creating a fraudulent document or financial instrument, such as a check, to falsely authorize or change it.
Forms Processing
The ability for software to "read" a scanned document and extract the data into computer-readable format, eliminating the need to enter the data manually.
Any dishonest and illegal activity perpetrated in the course of business to give an advantage to an individual or company.
Freight All Kinds (FAK)
When shipped products are classified as single freight class despite comprising various commodities.
Front-end Imaging
Imaging invoices once they arrive in accounts payable and using an automated workflow solution to process. It eliminates the need for paper documents at the start of the process.
Full Cost Accounting
An accounting method that seeks to identify, quantify and allocate all costs associated with a process or product, including environmental and other social costs. It typically includes direct costs, hidden costs, contingent liability costs and less tangible costs. The term may be used to refer to full private or bottom line costs to an enterprise, which is common, or include the full social costs including externalities that are difficult to quantify.
Full-Service Collections
A third party collection service that uses several collection tactics throughout the collection cycle. Tactics include written debtor contacts and calls from professional collectors.
Functional Group
A collection of EDI transaction sets of the same type transmitted together (e.g., a group of invoices).
Fungible Goods
Goods, like nails, where each unit is the equivalent of any other like unit.
Generally Accepted Accounting Principles are accounting guidelines accepted by accounting professionals and businesses on a set of practices that provide guidance for preparing and reporting financial information. There are also two other sources that provide the basis for establishing accounting standards: 1) APB Opinions are accounting guidelines issued by the AICPA Accounting Principles Board and 2) ETIF abstracts are issued by FASB Emerging Task Force for guidance on new accounting issues. GAAP helps to create conformity when reporting financial results across all businesses and industries in the United States. Financial Reporting methodologies in accordance with GAAP provides comparable data and common principles when a company prepares and reports financial information.
Gain
Increase in equity as a result of business activities not a part of normal operations (e.g. a cruise company selling an asset such as its dining room chairs); reported on a net basis.
General Ledger (G/L)
A record of business transactions by account.
A list of numbered accounts with an organization used to prepare financial statements. The GL contains a credit and corresponding debit for every transaction, called a "double entry accounting system."
Generally Accepted Accounting Principles (GAAP)
Accounting guidelines accepted by accounting professionals and businesses on a set of practices that provide guidance for preparing and reporting financial information. There are also two other sources that provide the basis for establishing accounting standards: 1) APB Opinions are accounting guidelines issued by the AICPA Accounting Principles Board and 2) ETIF abstracts are issued by FASB Emerging Task Force for guidance on new accounting issues. GAAP helps to create conformity when reporting financial results across all businesses and industries in the United States. Financial Reporting methodologies in accordance with GAAP provides comparable data and common principles when a company prepares and reports financial information.
Ghost Card or Supplier Card
The ghost card refers to a single account number that is assigned to an entity and typically resides with the entity's vendor for high volume purchases. The ghost "card" can be used by multiple users, typically for a single vendor or limited number of specific vendors. No actual card is produced. Responsibility for monitoring and reconciliation of the account usually rests with the department using the account, rather than with AP or p-card administrator. A ghost card account resembles a charge account.
A value-added tax (VAT) imposed in some countries for goods and services. The items taxed and the amounts vary by type and nation.
GR or Goods Receipt
Confirmation documentation by receiving department or requisitioner that ordered goods were received. Used, along with a purchase order (PO) in the "three-way match" to authorize invoice payment.
A number calculated or arbitrarily assigned to verify records or documents; for example, the check numbers of a batch may be added together to produce a value that may be used later to ensure that all were deposited. It is not a significant number in and of itself, but rather a verification method.
Hazardous Material (HazMat)
Any substance that represents a health or safety risk to people, property or the environment as determined by the U.S. Department of Transportation; a HazMat shipment requires special handling and documentation.
Health Insurance Portability & Accountability Act (HIPAA)
A federal act that protects American workers by improving portability and continuity of health insurance coverage. To see the full act, click here.
A clause in a contract, usually a lease, that says the lessee must make payments during the contract's life come hell or high water
Determining a customer's credit worthiness using intuition, educated guesses, common sense, industry trends, etc.
HIPAA
Health Insurance Portability and Accountability Act. Enacted by Congress in 1996, the act protects health insurance coverage for workers and their families when they change or lose their jobs and creates standards for health care transactions. The law also protects patient privacy records.
Household Goods Carriers Bureau (HGCB or HGB)
Part of the American Moving and Storage Association and the authority behind tariffs and The Official Transportation Mileage Guide (published by Rand McNally).
Intelligent Character Recognition refers to the ability of software to recognize hand-printed characters from a scanned document and turn them into computer-readable data.
IFX
Interactive Financial Exchange - A standard for the exchange of financial data and instructions independent of a particular platform or technology. See http://www.ifxforum.org
IFX (Interactive Financial Exchange)
A standard set for the exchange of financial data and instructions.
Image Cash Letter (ICL)
An electronic file that is the standard for formatting and transmitting remotely deposited checks. ICL's contain check images and MICR data. Also known as an X file.
Imaging
Turning human-readable images — documents, invoices, photos, etc. — into computer-readable images such as TIFF, JPG or MPEG files.
A collection of hardware and software that work together to capture, store and retrieve images. A sample system includes a scanner, management software and a storage device such as a CD, hard drive, etc.
Inbound Freight
Income
A term used to refer to the calculated result of adding the revenue, gain, expense and loss transactions generated by a company. If revenue plus gains less expenses and losses results in a positive number, then the company has generated income during the specified period.
Income Statement
Also Statement of Earnings or Statement of Operations - Listing of sources and monetary amounts of a company's revenues and expenses, gains and losses for a particular period, e.g. quarter or year. A company's profitability is calculated from revenues and gains less expenses and losses.
Standard definitions and rules for common commercial terms clarifying buyer and seller tasks, costs and risks in international trade; created and maintained by the International Chamber of Commerce (ICC).
Indemnification
A clause contained with a legal contract in which one party agrees to assume liability and compensate the other for issues related to the contract. For example, if a manufacturing company supplied faulty products to its customer and the customer were sued, the manufacturer might contractually indemnify its customer by assuming costs issuing from the lawsuit.
Index
A descriptive piece of data associated with an image for retrieving that specific image from storage.
Insolvency
A situation in which an organization can no longer meet its financial obligations.
Institute of Internal Auditors (IIA)
The internal audit profession's recognized authority, acknowledged leader, chief advocate, and principal educator.
A non-physical asset, including intellectual property, trademarks and patents, brand recognition, etc.
Intangible Assets
Two examples of intangible assets are goodwill and the value of patents.
Intangible Property
Property that a person or company can own, but has no physical substance. Intangibleproperty represents value, but is not itself valuable. Examples include stocks, bonds andcopyrights .
Interactive Voice Response (IVR)
A system to automatically manage incoming calls, IVR can link phone callers (voice and/or touchtone) with a computer database. It can accept a question, access the company's database and provide a caller with the information they are seeking. It can also take information from the caller, convert it to data and input that data to the database.
Interactive Web Response (IWR)
Similar to IVR, IWR is a Web-based system that allows customers or vendors to find information online, such as invoice status or scheduled payment date. It also can allow data input to a database, or send e-mail via the site.
A fee paid for the privilege of borrowing money, usually a percentage of the loaned amount (principal).
Intermediate-term liabilities
Claims of outsiders that come due in one to ten years.
A professional association for government administrators of business organization and secured transaction record systems at the state, provincial, territorial, and national level.
International Standby Practices 1998 (ISP98)
Rules that incorporate generally accepted practices, customs and uses of standby letters of credit maintained and published by the International Chamber of Commerce.
Interval measure
A calculation used to estimate the number of days a company could operate with its cash on hand. Like the current ratio and quick ratio, it shows how quickly a company could cover its obligations.
Finished goods, work-in-progress and raw materials that comprise a sizeable portion of a business's assets.
Investment-to-value Ratio
A measurement of a creditor's position and the likelihood that a foreclosure would occur.
Invoice
A formal request for payment; a written record of a transaction submitted to customer or client when requesting payment for services or goods delivered; includes taxes where applicable; also called bill, and sometimes statement, though the term "statement" has a different meaning that does not include a formal request for payment.
Intelligent Optical Character Recognition. The ability, like standard OCR, of software to recognize machine-printed (or typed) alphanumerics and turn them into computer-readable data. IOCR software, however, can recognize most common text fonts without needing to be trained to read them.
Image Replacement Document. Also referred to as substitute checks, IRDs are paper copies of checks that have been scanned to produce digital images (truncated) to facilitate electronic transmission between banks. An IRD is produced when a party involved in the transaction requires physical documentation. The image of the paper check in an IRD is smaller than the original check and contains some different information.
IRD: Image Replacement Document
Also referred to as substitute checks, IRDs are paper copies of checks that have been scanned to produce digital images (truncated) to facilitate electronic transmission between banks. An IRD is produced when a party involved in the transaction requires physical documentation. The image of the paper check in an IRD is smaller than the original check and contains some different information (See Check 21)
IRS
Internal Revenue Service. The United States government agency that collects taxes and enforces internal revenue laws. The IRS is a bureau of the Department of Treasury.
ITIN
Individual Taxpayer Identification Number. A nine digit taxpayer identification number given to nonresident aliens who are not eligible for a social security number. This includes nonresident spouses and dependents listed on a U.S. tax return.
A chronological record of daily transactions of a business. For each transaction, the journal shows the debits and credits to be entered in specific ledger accounts and a description of the transaction.
Japanese for continuous improvement. A business methodology that developed in Japan after World War II. Every employee is encouraged to regularly offer improvement suggestions. Ideas are shared, discussed and frequently implemented.
Key Performance Indicators (KPI)
A short list of important financial or operational metrics that provide a measurement forresults .
Knocked Down(KD)
Indicates a disassembled article, which facilitates packing and shipping.
A form of payment fraud facilitated by inadequate separation of duties. An employee steals a payment, then diverts a second payment to cover up the theft of the first, then a third to cover the misapplication of the second, and so on, often continuing until the perpetrator is caught.
LC
Letter of Credit. A document issued by a bank or other financial institution on behalf of one of its clients, called the "applicant." The letter is effectively a guarantee of payment to another party, called the "beneficiary," which is named in the LC.
Ledger
A collection of related financial information such as revenues, expenses, accounts receivable and accounts payable.
A shipment that does not qualify for full (lower) truckload rate because it does not require the full use of a trailer; a shipment that weighs less than the full truckload weight, typically 10,000 lbs.
Letter of Credit (LOC)
A document issued by a bank or other financial institution on behalf of one of its clients, called the applicant." The letter is effectively a guarantee of payment to another party
Letter of Credit, Standby
A document that assures payment will occur for a transaction, such as the timely construction of a building. Standby letters of credit are not limited to the sale of goods, but are used to guarantee performance or repayment of a financial obligation.
Leverage
The ability to control property of greater value than the amount of capital invested, in an effort to increase return on equity.
Liability
An amount owed; an obligation of a company or entity that must be settled in the future by transfer of assets, provision of services, or assignment of future economic benefit, it is the result of a past transaction.
Lien
A legal claim by one person on the real or personal property of another as security for a debt; a lien blocks the sale of the property until the lien is paid.
LIFO
"Last-in, first-out." A method of inventory valuation where the last goods purchased are assumed to be the first sold or used. The choice of whether to use this method or FIFO is a decision generally made to control tax liability, since the cost of the inventory may vary over time, and thus may be higher or lower relative to the selling price and will affect taxable income.
Limited Liability Company
A form of business structure designed to combine the best of corporate and partnership attributes into one entity; members have limited liability and are taxed like a partnership, avoiding double taxation. Rules vary by state.
Limited Partnership
If an LTL shipment exceeds a designated number of floor feet in a trailer, it triggers a rate increase.
Liquidation
When a company becomes insolvent and its assets are divided among creditors and shareholders, per Chapter 7 of the U.S. Bankruptcy Code.
Liquidity
The ability of assets to meet liabilities. Also refers to an organization's ability to quickly access cash.
Liquidity Ratio
The relationship of cash and marketable assets to outstanding debt. A high ratio indicates a company unlikely to default on its obligations.
Loan-to-value Ratio
The ratio of the money borrowed on a property to the property's fair market value.
A third party collection service, often a bank, to which clients have customers send payment. This provides the client with faster deposits and better control of cash.
Long-term liabilities
Mortgages and other liabilities that are expected to be held on the books for more than ten years.
Loss
A business transaction conducted by using a mobile electronic device, such as a cell phone.
Manifest Bill of Lading
A summary list of the bills of lading for goods being transported by a LTL or parcel services carrier.
A summary list of bills of lading aggregated for a multiple-stopoff truckload carrier.
Matched Payment
When the amount paid matches" or equals the amount owed. Also called a "full payment.""
MCC
Merchant Category Code. A universal four-digit classification code describing whether a particular business predominantly provides goods or predominantly provides services. P-card providers furnish these codes to businesses as a way to help them know which p-card purchases should be reported on a 1099 . Purchases made to vendors with MCCs labeling them service providers are reportable while purchases made to goods providers are not.
MICR
Magnetic Ink Character Recognition. A technology developed by the American banking industry to facilitate timely processing of checks. MICR characters on the bottoms of checks are made with specially designed ink with a magnetic signature that makes it easy for quick scanning and processing.
MICR (Magnetic Ink Character Recognition)
A character recognition technology adopted by the banking industry to facilitate check processing, includes magnetic ink or toner and unique fonts on the bottom of checks. The encoding contains the account number, the routing number, the serial number and the amount of the check.
A procedure that authorizes a check using the bank routing number, the account number and the check number located at the bottom of the check.
MICR Reader
An instrument used to read the encoded information in the magnetic ink on the check.
Mode
Method of transportation, e.g., rail, highway, air, and water.
A not-for-profit association that represents more than 11,000 financial institutions through memberships, a network of regional payments associations and 585 organizations through its industry councils and establishes standards and procedures that enable the exchange of ACH payments on a national basis.
NAICS
North American Industry Classification System. A numbering system used by businesses and governments to measure economic activity in Mexico, Canada and the United States. Knowing a vendor's NAICS code can help AP departments verify that business' authenticity in their own vendor master file. NAICS is replacing the Standard Industry Classification (SIC) system that was initially established in the 1930s.
National Association of Unclaimed Property Administrators (NAUPA)
A non-profit organization whose members administer state unclaimed property and compliance laws.
National Automated Clearing House Association (NACHA)
A non-profit organization that creates rules for moving electronic payments through the ACH (Automated Clearing House) network.
A publication that categorizes goods into freight classifications used along with weight and distance to determine shipping charge.
Net (income, loss, profit, sales, worth)
The amount that remains after related items have been deducted. E.g., net income is revenue minus the costs of doing business.
Sales tax term describing a seller’s physical connection to a particular state. If a seller has nexus in a particular state, then they must collect sales taxes from all purchases made from buyers in that state. Examples of common activities creating sufficient nexus are physicalpresence , established bank accounts, collection activities, trade show attendance, certain drop shipment arrangements, consigned inventory, and contracted service agents. In fact, having a single salesperson located in a state constitutes nexus.
Non-exempt
Under the Fair Labor Standards Act (FLSA), employees who are not exempt from earning overtime pay.
Unpaid expenses for goods and services that have already been received and were purchased without a purchase order. See Accrual for further definition.
Non-recourse Factoring
A factoring agreement where the factor assumes all the debt risks and all rights to pursue a customer for payment. The client is not responsible for refunding the advance if the debt is not paid.
NSF (Non-Sufficient Funds)
Indicates that a demand for payment (a check) cannot be honored because there are not enough funds to cover the check.
Optical Character Recognition refers to the ability of software to recognize machine-printed (or typed) alphanumeric characters from a scanned document and turn them into computer-readable data.
OCR (Optical Character Recognition)
Software that electronically converts scanned images into text.
The Treasury Department's Office of Foreign Assets Control. OFAC publishes the Specially Designated Nationals and Blocked Persons List (SDN). U.S. businesses are prohibited from doing business with individuals and countries contained on the list.
OFX
Open Financial Exchange - Open Financial Exchange is a specification for the electronic exchange of financial data between financial institutions, business and consumers via the Internet. Created by CheckFree, Intuit and Microsoft in early 1997, Open Financial Exchange supports a wide range of financial activities including consumer and small business banking, consumer and small business bill payment, bill presentment, and investments tracking, including stocks, bonds, mutual funds, and 401(k) account details. Since 2000, with the 2.0 specification, OFX has become XML 1.0 compliant and has added 1098, 1099 and W2 tax form download capabilities.
OFX (Open Financial Exchange)
A data format used by financial institutions to exchange financial information over the Internet.
On-time payment percentage
The percentage of the time that a customer pays its vendor's within the agreed 'payment terms.'
One Card
A single credit card used both for small amount purchases and for travel and entertainment expenses. Eliminates the need for multiple cards for different uses; the company or entity, rather than the individual user, is the liable party for charges to the card.
Costs associated with operation of a business, e.g., cost of goods sold (COGS), selling, general and administrative expense (SG&A).
Order to Cash (OTC or O2C)
The cycle or steps in a process that starts with credit extension and receipt of the sales order and ends when payment (cash) is received.
Originator
Any individual, corporation or financial institution that initiates an ACH transfer.
Other Receivables
Amounts usually owed by employees
Outbound Freight
Contracting to move an in-house work function to an external service provider that specializes in the function, e.g., freight bill auditing, processing and payment; objectives typically include cost reduction and access to required expertise.
Outsourcing
The process of hiring a third-party firm to handle internal company functions. Outsourcing often leads to cost-savings and better efficiency.
Overdraft
A debit or check written for an amount that exceeds the amount of funds available in the bank account. Financial institutions often will charge a fee for each overdraft made to the account.
A document that accompanies product shipped and lists quantity shipped versus amounts ordered; should be checked by Receiving to verify agreement with actual product received; used in a three-way match for payment approval with a Purchase Order and Invoice.
Paper Hanging
A form of check fraud involving intentionally writing checks on a closed account. The fraudster makes no physical changes to the checks, but the account information is no longer valid. Perpetrators only have access to a small number of remaining checks, meaning paperhanging is usually a short-term fraud, but often involves large-dollar purchases.
A form of check fraud involving intentionally writing checks on a closed account. The fraudster makes no physical changes to the checks, but the account information is no longer valid. Perpetrators only have access to a small number of remaining checks, meaning paperhanging is usually a short-term fraud, but often involves large-dollar purchases.
Par Value
Par value is the term used to represent how much of the contributed capital will be allocated to the Common Stock classification and how much will be allocated to the APIC classification in the equity section of the balance sheet. The company generally sets par value at the time of its incorporation when authorizing the number of shares available to issue. The par value does not necessarily (and usually does not) have any relationship to the value of the Common Stock.
Parcel
A single shippable item less than 75 pounds.
When a customer's parent company guarantees repayment of the customer's loan.
Payee
The individual or organization to whom a check is made payable. Also known as the receiver of payments.
A method to effect the transfer of value; the transfer of funds between bank depositories or to or from a debt instrument.
Payment Card Industry Data Security Standards (PCI DSS)
Standards developed by the Payment Card Industry Security Standards Council to assist organizations that process credit card payments with preventing fraud.
Payment terms
provisions, typically set by the vendor, regarding settlement of a transaction. May benegotiated between vendor and buyer as part of a contract. Example: payment terms 2/10 net 30, ( or 2 percent, 10 days, net 30 ) means if the customer pays the bill within 10 days of invoice date (some use receipt date), then the customer can deduct 2 percent of the value of the bill (usually excluding freight as part of the discount). Otherwise the customer has 30 days from invoice date or receipt date to pay the full value of the bill, after which interest charges may be applied. Actual assessment of penalty charges typically depends on the nature of the vendor/customer relationship.
Payor or Payer
The individual or organization that makes a payment.
Payment Card Industry Data Security Standard. Created in 2004 by major card brands Visa, MasterCard, American Express and Discover, the PCI DSS is a set of widely accepted standards for card transactions of all types.
Personal Guarantee
When a borrower or third party guarantees a loan with personal assets. The lender may take control of the guarantors' assets if the borrower defaults.
Personal Property Security Act (PPSA)
Canadian statutes that regulate the creation and registration of security interests.
Portfolio
A list of financial assets, investments and securities owned by an individual or an entity.
Positive Pay
A best-practice deterrent to check fraud, positive pay involves daily reconciliation of a company's issued checks to checks presented for payment to the company's bank. The company sends a daily data file of issued checks to the bank. The information in the data file includes check number, amount and date, bank and account information. It may also include payee information, as payee positive pay is becoming more common (ensuring that the correct payee is on the presented check). Checks presented for payment are compared to the checks-issued file; those that fail to match are rejected and a list of the exceptions is sent to the company, which makes the decision whether to pay or not.
Practical Highway Miles
The number of actual miles a truck or semi-trailer must travel between origin and destination. Carriers may charge based on practical miles or shortest miles, which is the shortest possible route between the origin and destination, regardless of what route the driver traveled.
Pre-Arranged Payment and Deposit
A type of ACH transaction (ACH Standard Entry Class code PPD) that a transfer of funds by way of direct access to a consumer's checking or savings account, e.g., direct payroll deposit (credit), or consumer bill payment (debit).
Predictive Dialer
A new, high-speed telephone system that automatically dials batches of telephone numbers simultaneously until one number is answered and also monitors the length of each call to determine an average call length.
Preference Payment
A payment made during the preference period
A class of contributed capital in the equity section of the balance sheet that represents the residual ownership interest in a company by a person or organization but it has a priority over Common Stock in the payment of dividends and usually the distribution of assets.
Prepaid
Freight and charges are the responsibility of the shipper and are paid prior to receipt of the bill of lading.
Prepaid Expense
An asset that has a future value and it is expensed as the asset's value is used over the time you expect to receive the benefit. An example is the payment of an insurance premium which covers a 12 month calendar period. The company has an initial asset of the value of the prepaid premium which is then expensed at a rate of 1/12th per month during the policy period the company benefits from having the insurance.
Prepaid Liability
A liability incurred when a payment is received prior to a company providing the full benefit of the product or service to be rendered. An example is a deposit payment from a customer who will receive a product or service at a later date sometimes referred to as a customer deposit liability account.
A method of determining the value of a company to investors; it is arrived at by the formula: (market value per share / earnings per share).
PRO Number
A carrier number used to identify freight for billing, tracing, etc.
Procurement
Generally, procurement is the act of purchasing items for your organization. Many companies also refer to their purchasing departments as the procurement department. Procurement performs activities associated with documenting and placing orders with supplier of goods or services. They also develop purchasing policies and negotiate supplier contracts.
Profit
A company generates a profit when its revenues and gains are greater than its expenses and losses. Profits increase a company's retained earnings and generally an owner's equity value.
Proforma Invoice
An invoice typically sent prior to shipment and represents an estimate. It is not the actual bill. Companies do not pay from these invoices. A commercial invoice should follow with the final price.
Proft and Loss Statement
Often called simply "P&L." A financial statement reporting activity for a certain specified period: quarter or year, for example. Also called "income statement" or "statement of earnings."
Promissory Note
A legal document between a lender and a borrower where the borrower promises to repay the loan by a given date. The promissory note also contains information about the terms and conditions of the loan.
Prox
Short for proximo , from the Latin "proximo mense," which means the next month. Proximo terms are terms that specify payment in the month following the shipment, invoice or receipt. The number identifies the day of the following month on which the payment is due. For example, "Net 10th Prox." means payment is due on the 10th of the month following the month the invoice is dated or goods received. "Net 15th Prox." means payment is due on the 15th of the next month following the month of the invoice date.
Purchase Card (P-Card)
Multi-purpose bank card aimed at streamlining the traditional purchase order and payment processes for lower-dollar transactions, typically not exceeding $5,000, but often much smaller.
Purchase Order (PO)
Information sent to a vendor to request product or service; typically includes item, quantity, price, discounts, vendor information, and ship-to information.
Purchasing
Activities associated with documenting and placing an order with a supplier of goods or services; buying/obtaining goods and services; also the department responsible for those activities.
Purchasing Card (P-Card)
Multi-purpose bank card aimed at streamlining the traditional purchase order and payment processes for lower-dollar transactions, typically not exceeding $5,000, but often much smaller.
A measurement of a business's liquidity. It compares the company's cash and cash equivalents, such as marketable securities and accounts receivables with current liabilities. Also called an acid test.
Quote
Real Property
Real estate and buildings. Real property is also called immovable property.
Receipt
A written or electronic record of a transaction verifying payment.
Location where a company receives shipments from suppliers; also the set of activities surrounding acknowledging the receipt of goods and transfer of ownership.
Reconsignment
A change made to a bill of lading in regards to the name of the consignee or the location of delivery of a shipment that is still in transit.
Record Retention Schedule
Also "record retention period." The prescribed length of time to keep certain historical business records, often specified by type; the reason for keeping it; and its final disposition, whether to archive or dispose of it.
Recourse Factoring
A factoring agreement where the factor has the right to reclaim their advance to the client if the customer does not pay the debt.
Remittance Information
The information needed by the biller to accurately post customer bill payments.
Remotely Created Check (RCC)
A check drawn on a bank account that is created by a person other than the account holder and does not bear the physical signature of the person on whose account the check is drawn. An RCC may contain a statement of customer authorization, the account holder's printed or typed name on the check, or the statement "No signature required" or "Signature on file." Also called a "telecheck", "demand draft", or "preauthorized draft."
Replevin
The method used to deliver remittance information.
Requisition
A request for service or product initiated by the user or consumer.
The sum of the company's income from inception, less dividends declared. Retained earnings are one part of the owners' Equity section of a Balance Sheet, the other is Contributed Capital.
Retained Earnings Statement
Explains the change of retained earnings over a period of time. Increases or decreases in Retained Earnings is generally the result of a Loss, Gain, or Profit generated from a company's financial transactions.
Return on Investment (ROI)
A financial ratio used to value or ascertain a company's return or gain on an investment.
Revenue
Gross income from business operations from which no costs have been subtracted. Also called the "top line."
Increases in economic resources or assets; monetary amounts received for goods or services provided in normal operations for a given period, typically in the form of cash or accounts receivable. Revenues increase equity.
RosettaNet
A non-profit organization (www.rosettanet.org) that seeks to develop and implement standard electronic commercial interfaces for supply-chain (manager-supplier) transactions on the Internet. Created in 1998, the self-funded group includes companies like American Express, Microsoft, Netscape, and IBM. It is working to standardize labels for elements like product descriptions, part numbers, pricing data, and inventory status. The group hopes to implement many of its goals through XML, a mark-up language that lets programmers classify information with tags.
Route
The means and the path by which a shipment of goods moves.
Routing Transit Number (RTN)
A nine-digit number that designates a specific financial institution used to process transactions. The number appears on the bottom of financial instruments, like checks, and indicates the bank on which the check is drawn.
Software-as-a-Service or “software on demand.” Software that users subscribe to and access via the internet whenever they need it opposed to software that must be installed, updated and maintained on a company’s internal computers.
Sales Tax
A tax on gross receipts from retail sales of products and services and is calculated as a percentage of the sales prices.
Sarbanes-Oxley Act of 2002
A United States law passed in response to a series of corporate scandals including Enron, WorldCom, and Tyco International. Provisions require the CEO and CFO of all publicly traded companies attest that they have strict internal controls within the company's policies and procedures. SOX is intended to deter and punish accounting fraud and corruption
SDN
The Specially Designated Nationals and Blocked Persons list prepared by the Treasury Department’s Office of Foreign Assets Control. U.S. businesses are prohibited from doing business with the individuals, organizations, and countries on the SDN. The list includes terrorists, drug and weapon dealers and other prohibited individuals and organizations. Click here for OFA’s SDN List
The section of the bill of lading where the shipper assigns to the carrier the collection of freight charges from the consignee, without recourse to the shipper. When Section 7 is signed, the carrier is at risk for collection of freight payment.
Secured Transactions (lien)(SLAs)
A security interest granted over an item of property, such as a home, business, or equipment to secure the payment of a debt.
Securities and Exchange Commission (SEC)
An agency of the U.S. federal government created to prevent fraud in securities transactions and mutual fund trading.
Segment
A grouping of information within an EDI transaction set (e.g., name and address).
Segment Identifier
The code that introduces a new segment in an EDI transaction set.
SEPA
Single Euro Payment Area. An initiative to streamline electronic and international payments in Europe. Electronic payments within or between the 31 member states are accepted in euros, with each country adopting similar business, legal and technical requirements. SEPA will govern all European payments by 2011.
Service Level Agreements (SLAs)
A contract that defines levels of service in measurable terms.
Set Up
The complete assembly of an item.
Shared Services
The standardization, re-engineering, and consolidation of a non-core function within a company. It generally involves the centralization of administrative functions.
Shares is a term referred to the units of ownership interest provided to the stockholder or owner of a company. The term is often used in connection with the number of units issued to an owner of Common Stock or Preferred Stock.
Shipper
The person whose commodities are being moved by a carrier on contractual terms.
When a customer pays less than the total amount due on an invoice; the deduction is usually taken for a real or perceived error, such as damaged goods.
Single Euro Payment Area (SEPA)
A geographical area where electronic payments within or between 32 European member states are accepted in euros; each member country adopts similar business, legal and technical requirements.
Six Sigma
A method or set of techniques, Six Sigma has also become a movement focused on business process improvement. It is a quality measurement and improvement program originally developed by Motorola that focuses on the control of a process to the point of ± six sigma (standard deviations) from a centerline, or put another way, 3.4 defects per million items. A Six Sigma systematic quality program provides businesses with the tools to improve the capability of their business processes. It includes identifying factors critical to quality as determined by the customer, reducing process variation and improving capabilities, increasing stability and designing systems to support the six sigma goal.
Skimming
1) Stealing money from cash receipts for personal use and not reporting them in a deposit. 2) Stealing the information from payment cards and using it for fraudulent purchases.
The process of finding the whereabouts of persons, often hard-to-locate debtors, known as skips.""
SME
Subject matter expert.
Sole Proprietorship
A business that is owned and operated by one individual. The sole owner assumes all financial and legal liability for the business.
Sourcing
The process of identifying, negotiating, and creating supply agreements with vendors of goods and services.
Spend Analysis
A critical part of spend management, it's an in-depth analysis of an organization's expenditures data; includes what you spend, with whom you spend it, and how you spend.
A payment that is applied to the wrong account. Also refers to a payment that is divided or split" among several invoices."
Spot Rate Quotation
A carrier price offer to a shipper applicable to a single, specific shipment; a negotiated one-off price.
Standard Carrier Alpha (SCAC)
An industry-wide code issued by the National Motor Freight Traffic Association (NMFTA) to identify all carrier companies.
Statement
A written record of an account; also a summary of outstanding (unpaid) invoices. Unlike an invoice or bill, a statement is not generally used as a formal request for payment but rather as a reminder of amounts owed by a customer.
A periodic report that states all transactions on a single account. A statement can also be an itemized list of charges showing due dates and amounts owed.
Stem Time
The amount of time required for a truck or semi-trailer to travel between origin and destination.
Stock
Another term used to describe the ownership interest in a company. Often used interchangeably with contributed capital, common stock and preferred stock.
Stock Certificate
A document providing evidence of a person or organizations' ownership interest in a company. A stock certificate is issued to a an owner of Common Stock or Preferred Stock.
Stock Keeping Unit (SKU)
The unit of measurement used to record products on a stock record and manage inventory.
Generally, a stock option is a contractual right granted by a company to the named holder of the option the right to purchase the company's stock at a fixed price stated on the stock option within a specified period of time. If the stock option is not exercised within the specified period of time, then the contractual right lapses.
Stockholder
Refers to the owner of a company who has contributed cash or some other form of consideration in exchange for an ownership interest.
Another term used interchangeably with Equity. It is the section of the balance sheet that provides information about the amount of contributed capital and amount of earnings retained in the company. This section is generally the sum of: Common Stock + APIC + Retained Earnings.
The pickups or deliveries between the initial pickup and the last delivery.
Straight Through Processing
A method of electronic payment processing where funds are transferred and settled without the need for manually re-keying the data.
A cooperative agreement among U.S. states intended to simplify and standardize sales tax collection and administration between states. A main goal is to promote parity between brick-and-mortar merchants and remote / internet sellers from a sales tax standpoint.
Strike Price
Another term used for describing the fixed price documented in a stock option. See Exercise Price.
Subordination
Successful Effort Accounting
Used in extraction industries, e.g. oil & gas or mining, this accounting method carries forward only successful exploration and evaluation costs--costs are only capitalized if they can be associated directly with future production; costs of unsuccessful efforts are written off as expense at the time they are incurred.
Supply and Demand
A model in economics that states that when the supply of a commodity is high but the demand low, the price drops; when supply is low but demand is high, the price rises. Over time in a competitive market, a price equilibrium will be reached; for example, if prices become too high, demand will drop, which will force prices down.
An agency of the Department of Transportation that was created to take over the ICC's duties after the latter's termination in 1995.
SWIFT
The Society for Worldwide Interbank Financial Telecommunication is a private consortium of member banks that maintains a worldwide network for exchange financial information; SWIFT is a messaging system transferring information about money transactions, not the actual money.
Money and assets that physically exist. To be considered tangible, a piece of property must be movable. Real Estate, which is immovable, is not considered tangible personal property.
The landmark case in which the U.S. Supreme Court's rulings established escheatment priority rules that determine which state is entitled to abandoned property in the event of disputes. First priority is given to the state of the last known address of the owner - i.e. the customer to whom the credit belongs; if the customer's address is unknown, the state of incorporation of the holder of the credit takes precedence.
Three-way match
Validation of an invoice by matching it to a purchase order and a receiving document. If all three match or agree, the invoice is approved for payment.
Time Value of Money
The principle that money received in the present is worth more than money invested in the future.
Taxpayer Identification Number. A nine digit number assigned by the IRS to individuals (SSN), employers (EIN) and nonresident aliens (ITIN).
TIN Matching Program
An IRS online database and batch process program where payers can search payee name and TIN combinations. The system informs the payer if the name and the TIN are a valid match or not.
Transaction
Activity between two parties. A transaction can be financial or commercial.
Transaction Set
In ANSI X12, the electronic equivalent of a paper form (e.g., invoice, purchase order).
Transportation policy
The shipper's policy guidelines, including routing instructions, pertaining to the transport of their goods.
Travel and Entertainment (T&E) Expenses
Expenses employees incur for business travel and entertainment that may be tax deductible.
Expenses employees incur for business travel and entertainment that may be tax deductible.
Trial Balance
An accounting worksheet in which all general ledger transactions are listed in debit and credit columns for a certain period, and verified to see that they match.
Truckload
The quantity of freight that fills a trailer, usually over 10,000 pounds, and to which truckload rates apply.
Truncation
The process of removing a paper check from its processing flow.
TWIST
TWIST is a not-for-profit international industry group focusing on end-to-end connectivity of financial processes, seeking development and adoption of standards for straight-through processing (STP) of wholesale trade transactions, working capital management and corporate payments. TWIST emphasises market collaboration and has taken a proactive role in developing standards in conjunction with other standards such as ISO / SWIFT, IFX, FpML, RosettaNet, MDDL market data standards and CRG-Edifact.
In the case of accounts payable, income to an nonresident alien for services performed in the United States; U.S Source income must be reported to the IRS on IRS Form 1042S.
UB-92
The standard billing format for submitting hospital claims, developed by the AHA's National Uniform Billing Committee.
UCC
Uniform Commercial Code -The laws that govern commercial transactions in the United States.
UN Joint European and North American Working Party (UN-JEDI)
The international EDI standards developed by the UN-JEDI (defined below) committee; EDIFACT stands for Electronic Data Interchange For Administration, Commerce and Transport.
UN/EDIFACT Standards
The international EDI standards developed by the UN-JEDI (defined below) committee; EDIFACT stands for Electronic Data Interchange For Administration, Commerce and Transport.
Receivables for which services or products have been delivered and revenue recognized but no invoice has been issued; unbilled receivables are a metric to watch, since timely billing is critical to cash flow.
Unclaimed Property
Tangible or intangible property that is considered lost or abandoned by the rightful owner after that owner cannot be located for a specific period of time. Intangible unclaimed property typically includes money, checks, drafts, deposits, interest, dividends and income, credit balances, customer overpayment, gift certificates, security deposits, refunds, credit memos, unpaid wages, unused airline tickets, and unidentified remittances. Such property must be reported and escheated (remitted) to the states after a dormancy period and a due diligence effort to locate the owner. See Escheatment.
Unclaimed Property Professionals Organization (UPPO)
An organization created to ease the burden of reporting unclaimed property and simplifying compliance issues. It works closely with the National Association of Unclaimed Property Administrators.
Uncollected Funds
Checks that have been deposited into an account but have not yet been paid by the bank(s) on which the checks were drawn.
A set of statutes and laws adopted by most states to govern commercial transactions uniformly. Click on The Uniform Commercial Code for more information.
Uniform Customs and Practice for Documentary Credits (UCP)
A set of rules regarding the issuance and use of letters of credit developed, maintained and published by the International Chamber of Commerce. The most recent version, UPC 600, took effect on July 1, 2007.
Uniform Law Commission
The Uniform Law Commission is also known as the National Conference of Commissioners on Uniform State Laws. The commission was established in 1892 and provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.
Unmatched Payments
Payments made that differ from the amounts that are due.
Unprocessed Non-PO Invoice
Unverified List
A list published by the Department of Commerce’s Bureau of Industry and Security. It contains the names of foreign individuals whose participation in transactions may have failed to follow U.S. export control regulations. The Bureau has not been able to conduct pre-license checks or post-shipment verifications of the transactions. Click here for the Unverified List
Use Tax
A tax on the use or consumption of a taxable product or service and was devised to capture revenue that slips through the cracks of the sales tax law. (See Sales and Use Tax Concepts)
VAT is a consumption tax levied on goods and services at each step of the production/distribution cycle. An indirect tax, VAT is paid by manufacturers, distributors and retailers when they receive goods in their inventories. Businesses are able to recover VAT payments through tax deductions, with the cost of the tax ultimately paid by the end-consumer. More than 100 countries worldwide have VAT systems in place, including Canada, New Zealand, Japan, Australia and the European Union. VAT rates can vary from 3.6 percent to 25 percent of a good's total value.
Value-Added Network (VAN)
A large communication network that facilitates EDI between companies.
Value added tax. VAT is a consumption tax levied on goods and services at each step of the production/distribution cycle. An indirect tax, VAT is paid by manufacturers, distributors andretailers when they receive goods in their inventories. Businesses are able to recover VAT payments through tax deductions, with the cost of the tax ultimately paid by the end-consumer. More than 100 countries worldwide have VAT systems in place, including Canada, New Zealand, Japan, Australia and the European Union. VAT rates can vary from 3.6 percent to 25 percent of a good’s total value.
Vendor Master File
A central, comprehensive data base file generally maintained by the Accounts Payable Department that contains information about vendors used to facilitate financial transactions between companies. The information includes payment terms, address, names, credit limit, and payment or purchase transaction history.
Vendor-bridging
When a company has been cut off from one supplier and turns to a new vendor to purchase products and/or services.
VNX
Value not to exceed.
Voucher
A document that can serve as an authorization for payment and/or entry to the accounts payable system of a vendor invoice; usually indicates how the invoiced amount should be charged in the companies general ledger.
In essence, a waybill is a bill of lading for air shipments; has much of the same information, but is not a document of title.
Weight Break
The weight where less-than-truckload rate equals truckload rate at the minimum weight.
Weight Group
Refers to weight limits used to determine the mode of carrier for the shipment.
Wholesale Lockbox
A third party collection service that collects business-to-business payments from a lockbox dedicated to receiving payments from these businesses. This is typically a high-dollar, low volume payment lockbox.
Wire Transfer
Method of payment in the form of an electronic transfer of funds (EFT) between the payer (the company) and recipient (the vendor). A wire transfer costs approximately $10 -$30 per transaction. A Wire transfer is faster than ACH but more expensive.
A method of payment in the form of an electronic transfer of funds (EFT) between the payer (the company) and recipient (the vendor). A wire transfer costs approximately $10 - $30 per transaction. A Wire transfer is faster than ACH but more expensive.
WNX
Weight not to exceed.
Work Flow
Refers to the technology which uses electronic systems to manage and monitor business processes, allowing the flow of work between individuals to be defined and tracked; moving information in document form according to defined processes; tracking the process of creating, reviewing and distributing documents for action.
Workflow
In a payables or source-to-pay context, refers to the technology which uses electronic systems to manage and monitor business processes, allowing the flow of work between individuals to be defined and tracked; moving information in document form according to defined processes; tracking the process of creating, reviewing and distributing documents for action.
Working Capital
The available short-term liquidity (excluding loans like line of credit) a business has for day-to-day operations; calculated by subtracting current liabilities from current assets.
World Wide Web Consortium (W3C)
The body responsible for managing Internet standards development.
XBRL (eXtensible Business Reporting Language) is a royalty-free, open specification for software that uses XML data tags to describe financial information for public and private companies and other organizations.
A family of statistical models used to calculate the probability a company will file for bankruptcy. The original Z-Score model only sampled publically-traded manufacturing companies. Z' (Z Prime) included manufacturing and privately-held organizations. Z?'s (Z Double Prime) samples were compiled from manufacturing and non-manufacturing firms, such as retailers and wholesalers, and companies located outside the U.S.
Zombie Debt
Bad debt that is so old the borrower may have forgotten he or she owed it. It may have been given up on by the company to which it was owed. Zombie debt can haunt a debtor if a debt collector buys the debt for a low price from the company in attempt to recover the owed funds.
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