IM Exam 3 Definitions

Lockbox Method of collecting payments

Lockbox payments are a way for companies to streamline the way they accept money from customers and get access to the cash. When a company uses a lockbox service, they typically set up a special P.O. box for their customers to send payments to; then the bank collects those payments, deposits the cash, and updates the company on their transactions.

Materials Requirement Planning (MRP)

Material requirements planning (MRP) is a computer-based inventory management system designed to improve productivity for businesses. Companies use material requirements-planning systems to estimate quantities of raw materials and schedule their deliveries

Point of Sale (POS)

Point of sale (POS), a critical piece of a point of purchase, refers to the place where a customer executes the payment for goods or services and where sales taxes may become payable. It can be in a physical store, where POS terminals and systems are used to process card payments or a virtual sales point such as a computer or mobile electronic device.

Procure to Pay Process

Procure-to-pay is the process of integrating purchasing and accounts payable systems to create greater efficiencies. It exists within the larger procurement management process and involves four key stages: selecting goods and services; enforcing compliance and order; receiving and reconciliation; invoicing and payment.

Cash receipts transaction file

Simply put, a cash receipt is recognized when an entity receives cash from any external source, such as a customer, an investor, or a bank. Typically, this cash is recognized when money is received from a customer to offset the accounts receivable balance generated when the sale transaction occurred.

three way match

The "three-way" part of the three-way match refers to the three documents that will be compared: The vendor's invoice that was received and will become part of an organization's accounts payable when it is approved. The purchase order that was prepared by the organization. The receiving report that was prepared by the organization The "match" part of the three-way match refers to comparing the quantities, price per unit, terms, and other information appearing on the three documents. In other words, does the vendor's invoice detail agree with the organization's purchase order, and to the goods actually received as shown on the organization's receiving report? Only if the details on the three documents are in agreement will the vendor's invoice be entered as an account payable. The three-way match is an important step in safeguarding an organization's assets.

general authorization

you can make the decision without approval

Available to purchase (ATP)

you have it in stock and it has no already been claimed or held for another customer/order

Customer Order

· customer order is a formal order from the customer which provides details of the amount and due date for a customer's requirement of products. It is a written document specifying the orders made by the customer. It states the amount of money to be paid, the due date on which the money can be expected, and also the quantity of the product being delivered.

Request for Quotation (RFQ) 2

2 A request for quote (RFQ), also known as an invitation for bid (IFB), is a process in which a company solicits select suppliers and contractors to submit price quotes and bids for the chance to fulfill certain tasks or projects. The RFQ process is especially important to businesses that need a consistent supply of a specific number of standard products. Companies may send RFQs alone or before a request for proposal (RFP).

disbursement voucher

A Disbursement Voucher is a form used to have a check made to pay an individual or an organization for merchandise sold or services rendered

Check Register

A check register, also called a cash disbursements journal, is the journal used to record all of the checks, cash payments, and outlays of cash during an accounting period. A check register usually has columns to include the dates, check number, payee, account names used, and the credit and debits associated with the transaction

Credit Memo

A credit memo, also called a memorandum, is a document issued by a seller that reduces the amount owed by a client from a previous invoice. This means that whatever the client owes to the seller will decrease after this memo is issued

Debit memo

A debit memorandum, or "debit memo," is a document that records and notifies a customer of debit adjustments made to their individual bank account. The adjustments made to the account reduce the funds in the account but are made for specific purposes and used only for adjustments outside of any normal debits. The reasons a debit memorandum would be issued relate to bank fees, undercharged invoices, or rectifying accidental positive balances in an account. The opposite of a debit memorandum is a credit memorandum

vendor's invoice

A document listing the amounts owed to a supplier by the recipient is known as a vendor invoice. A supplier prepares and issues an invoice when a customer orders goods and services on credit. Vendor invoices include the amounts owed, sales taxes, freight and delivery charges, the date by which the payment should be made, and where to send the payment

General ledger system

A general ledger, also known as a nominal ledger, is a bookkeeping ledger that serves as a central repository for accounting data transferred from all subledgers like accounts payable, accounts receivable, cash management, fixed assets, purchasing and projects. Each account maintained by an organization is known as a ledger account, and the collection of all these accounts is known as the general ledger.

Purchase Order (PO)

A purchase order (PO) is a commercial document and first official offer issued by a buyer to a seller indicating types, quantities, and agreed prices for products or services. It is used to control the purchasing of products and services from external suppliers.[1] Purchase orders can be an essential part of enterprise resource planning system orders. Indent is a purchase order often placed through an agent (indent agent) under specified conditions of sale.

receiving report

A receiving report is an internal document used to record what materials and inventory were received by the company. The receiving report is sent to other departments to notify them what items have been received and are ready for use.

Request for Proposal (RFP)

A request for proposal (RFP) is a business document that announces and provides details about a project, as well as solicits bids from contractors who will help complete the project. Most organizations prefer using RFPs, and, in many cases, governments only use requests for proposal. A request for proposal for a specific program may require the company to review the bids to examine their feasibility, the health of the bidding company, and the bidder's ability to do what is proposed.

Request for Quotation (RFQ)

A request for quote (RFQ), also known as an invitation for bid (IFB), is a process in which a company solicits select suppliers and contractors to submit price quotes and bids for the chance to fulfill certain tasks or projects. The RFQ process is especially important to businesses that need a consistent supply of a specific number of standard products. Companies may send RFQs alone or before a request for proposal (RFP).

Open Purchase Requisition

A request in the requisition transaction file until it is denied or becomes a valid purchase order, at which point it becomes 'closed'.

reverse auction

A reverse auction is a type of auction in which sellers bid for the prices at which they are willing to sell their goods and services. In a regular auction, a seller puts up an item and buyers place bids until the close of the auction, at which time the item goes to the highest bidder. In a reverse auction, the buyer puts up a request for a required good or service. Sellers then place bids for the amount they are willing to be paid for the good or service, and at the end of the auction the seller with the lowest amount wins.

Check Voucher (aka voucher check)

A voucher check is a combination of a check and a voucher, also known as a "remittance advice", which includes pertinent information about the parties to the transaction and thus creates an auditable paper trail about that check's payment

disbursement voucher payable

A voucher is often a prenumbered form used in the accounts payable department to standardize and enhance a company's internal control over payments to its vendors and service providers. The unpaid vouchers provide the detail for the total amount reported as vouchers payable or accounts payable.

voucher system

A voucher system procedures design to only allow approved cash disbursements and new obligations. In other words, a voucher system is a set of internal controls that helps management stop fraudulent withdrawals from the company by employees and others outside the organization

encumbrance

An encumbrance is a claim against a property by a party that is not the owner. An encumbrance can impact the transferability of the property and restrict its free use until the encumbrance is lifted. The most common types of encumbrance apply to real estate; these include mortgages, easements, and property tax liens. Not all forms of encumbrance are financial, easements being an example of non-financial encumbrances. An encumbrance can also apply to personal - as opposed to real - property.

sales invoice

An invoice used as a source document for recording a sale on account A sales invoice is a business document that's prepared whenever you need to request payment from a customer for goods or services that you've supplied. The invoice contains important details like the product, quantity, price and terms of payment, such as the company's bank details. As far as documents go, it's one of the easiest to create, and it's also one of the most important. An invoice establishes the customer's obligation to pay. By issuing an invoice, you're verifying the contract that exists between you and the customer and that you've completed your side of the bargain. Once the customer agrees to the invoice, it becomes a legal debt the customer has to pay

Evaluated Receipt Settlement (ERS)

An invoiceless approach to accounts payable that replaces the three-way matching process (supplier invoice, receiving report, and purchase order) with a two-way match of the purchase order and receiving report.

Backorder

An item not currently in stock but to be sold or delivered when it becomes available

Sales History File

Area where some organizations move closed sales orders in order for future reference.

Balance Forward Approach

BALANCE FORWARD ACCOUNTING is where you maintain a list of charges and payments for each account. To find out the balance at any point in time, you add the charges, add the payments, and then subtract total payments from total charges. A billing statement is sent out every month with any balance carried forward from the previous statement (making payments to the entire balance)

voucher package

Combination of a purchase order, receiving report, and supplier invoice that all relate to the same transaction. Voucher information may be assembled into a packet, where the basic voucher document is attached to the supplier invoice, evidence of receipt, and purchase order. This packet is useful for keeping related documents in one place, and makes it easier to both justify and audit payables transactions.

Monthly Customer Statements

Customer statements allow you to remind your customers about outstanding invoices, or send details of their account activity for their records. Send a statement to your customers if they have more than one invoice outstanding, or if your customer wants to see all invoices and payments. (they show activity and outstanding invoices)

Shipping Notice

Document that informs the billing department that the customer's order has been filled and shipped. a formal notification that goods ordered are in route to their destination

Supplier (Vendor) Reference File

Files such as current vendor catalogs. Used by company to quickly look at vendor catalogs or prices. could contain a category number for the vendor to reference what industries they supply (like electronics or raw materials), maybe it contains a listing of the goods they can provide and quotes

ISO standards related to procurement

ISO 14000 ISO 9000

ISO 14000

ISO 14000 is a set of rules and standards created to help companies reduce industrial waste and environmental damage. It's a framework for better environmental impact management, but it's not required. Companies can get ISO 14000 certified, but it's an optional certification. The ISO 14000 series of standards was introduced in 1996 by the International Organization for Standardization (ISO) and most recently revised in 2015 (ISO is not an acronym; it derives from the ancient Greek word ísos, meaning equal or equivalent.)

ISO 9000

ISO 9000 is a set of international standards, established by the International Organization for Standardization, as the basis for quality management systems and quality assurance

two way match

In 2-way matching, the purchase order and invoice information are verified to match within your tolerances as shown: The quantity billed must be less than or equal to the quantity ordered. The invoice price must be less than or equal to the purchase order price

Service Level Agreement (SLA)

In broad terms, an SLA will typically include a statement of objectives, a list of the services to be covered by the agreement and will also define the responsibilities of the service provider and customer under the SLA (a contract)

Lapping

Lapping occurs when an employee alters accounts receivable records in order to hide the theft of cash. This is done by diverting a payment from one customer, and then hiding the theft by diverting cash from another customer to offset the receivable from the first customer. This type of fraud can be conducted in perpetuity, since newer payments are continually being used to pay for older debts, so that no receivable involved in the fraud ever appears to be that old. Lapping is most easily engaged in when just one employee is involved in all cash handling and recordation tasks. This situation most commonly arises in a smaller business, where a bookkeeper may be responsible for all accounting tasks.

Inventory master file

The Inventory Master file contains a record for each inventory item in each inventory or warehouse location. Each Inventory Master record stores the current quantities and costs for the item in the specified inventory location, as well as other information about the item that is specific to the warehouse location. A Catalog record must exist for an item before it can be created in the Inventory Master file. Each Inventory record in the system is uniquely identified by the combination of the Location and the Item Number field. A single inventory item may exist in one or more inventory locations. An item must be set up in at least one inventory location before it can be purchased or sold. Each Inventory Master record contains some information that is normalized or synchronized based on the information in the Catalog record for the item (the item description, type, status, product line, etc.) and some information that is maintained independently in each inventory location (the on hand quantity, reserved quantities, allocated quantity, and on order quantity for the item). The Inventory Master file is used to generate the Inventory Valuation report and it is where the accounting cost for the item is maintained.

Customer master file

The customer master file is used to maintain information in the accounting database that is unique to each customer. Examples of the information contained within the file are as follows: Customer name, Customer identification number, Customer address, Contact name and phone number, Sales representative name, Customer tax identification number, Customer credit limit, Customer credit score, Customer payment terms, Customer ship-via settings, Past due notification flag, Monthly statement flag, Taxable flag, Tax exempt ID number

Just in Time Inventory

The just-in-time (JIT) inventory system is a management strategy that aligns raw-material orders from suppliers directly with production schedules. Companies employ this inventory strategy to increase efficiency and decrease waste by receiving goods only as they need them for the production process, which reduces inventory costs. This method requires producers to forecast demand accurately

Order to Cash Process

The order to cash process embraces all the steps and processes that are set into motion when a client places an order, covering everything that your employees will do up to and including the receipt of payment. O2C processes include order taking, reconciliation of order and inventory, assembling the goods and verifying that this has been done correctly, dispatch and delivery of goods, invoicing, payment and finally, reporting. The order to cash process thus consists of two distinct subsets of processes: the order management process and the bill-to-cash process.

Cross sell

To cross-sell is to sell related or complementary products to an existing customer.

Cash Disbursement Transaction File

a file that contains records of all the various disbursements that have taken place and used to update the cash master file

Purchase Order Transaction File

a file that gets updated when a purchase order is made. A purchase order in this file would be closed when you receive the goods (I think)

Open Voucher / Vouchers Payable

Used in place of Accounts Payable and Invoices Payable in organizations that use voucher systems. A voucher is an internal document describing and authorizing the payment of a liability to a supplier. It is most commonly used in a manual payment system, where it is part of the system of controls. A voucher typically contains the following information: The identification number of the supplier. The amount to be paid. The date on which payment should be made. The accounts to be charged to record the liability. Any applicable early payment discount terms. An approval signature or stamp

Open Purchase Order

When someone in your company needs to purchase products or services from a vendor, he could call the vendor and order them over the phone, but then there wouldn't be a written record of the order. If he instead opens a purchase order (PO), which is a request to purchase goods or services from a vendor, it gives you a written record of placing the order. It's up to you to decide whether only one person will be authorized to open POs or many are authorized, and the approval process needed to issue a PO.

Shipping Transaction File

Where data of the shipment is recorded. (items shipped, the carrier, the location shipped from, the customer being shipped too, the goods being shipped, the total cost of the shipment - i think..)

purchase order transaction file (quizlet def)

Where newly confirmed valid purchase orders are kept. (quizlet def)

Receiving Report Transaction File

Where receiving reports are recorded. a file that gets updated with receiving reports (counting goods when they arrive from vendors/shippers). They are itemized by the receiving report and update the master inventory file

Sales Order Transaction File

Where sales order data is recorded.

Unapplied Cash

a cash payment that was received but has not yet been posted to a particular customer's receivable balance

Bar Coded Products

a code consisting of a group of printed and variously patterned bars and spaces and sometimes numerals that is designed to be scanned and read into computer memory and that contains information (such as identification) about the object it labels

remittance list

a document listing names and amounts of all customer payments received in the mail

Shipper/Carrier Reference File

a file that contains data about the various shippers used by the company. (shipping rates, shows who we like using, history)

Supplier (Vendor) Master File

a file that contains data about the various vendors used by the company and their performance would contain the name, address, contact info, vendor ID, maybe a contact at the vendor, and maybe a name of an employee who works with the vendor, of all the various vendors you have

voucher register

a journal used to record vouchers The voucher register is a journal that records all vouchers once they are approved. Sometimes the voucher register is called the book of original entry because all the vouchers are entered into the voucher register before they are entered into any other part of the accounting system.

turnaround document

a record of company data sent to an external party and then returned by the external party for subsequent input to the system (output then data added and becomes an input)

Purchase Requisition (PR)

a request made by a department in a company to the purchasing department

Open Sales Invoice

a sales invoice that has not been paid yet by the customer

Open Sales Order

a sales order that has not yet been shipped (shipping closes an order and triggers an open invoice)

Stockout

a situation where a customer demand for an inventory item goes unfulfilled because the requested item is unavailable at the needed time and place

drones

an aircraft that does not have a pilot but is controlled by someone on the ground. Can be used to do inventory counts

vendor-managed inventory (VMI)

an approach for improving supply chain efficiency in which the manufacturer is responsible for maintaining the retailer's inventory levels in each of its stores

Electronic Lockbox method of collecting payments

eLockbox service is a virtual holding terminal for your business to business payments. Essentially, it's a trusted third party payment system where all transacting can be done from behind your computer screen. After integration with your chosen technology, you can then offer multiple accounts receivable options to your vendors/client base including ACH, eCheck and credit card. Moving forward on a monthly basis, you can even set them up with scheduled payments or manually charge the same method of payment from the previous month. As a payor, you can remit payment from any business that has integrated with a SaaS digital payment solution. This means no manual processing - completely eliminating paper check.

sales invoice transaction file

file that keeps sales invoice records (amount shipped, amount invoiced, etc. and whether or not the customer has paid it)

Kickbacks

gifts given by suppliers to purchasing agents for the purpose of influencing their choice of suppliers. Payment made to someone to facilitate a transaction.

Specific Invoice Method

involves matching payments to specific sales invoices

"Blind Copy" of Purchase Order

is a blank copy of the purchase order. It is used so that receiving personal in the warehouse count the items that are received and is used as a way to reconcile any differences from the receiving report (the filled out blind purchase order) and the purchase order

ACH (Automated Clearing House)

is a computer-based electronic network for processing transactions, usually domestic low value payments, between participating financial institutions. It may support both credit transfers and direct debits. The ACH system is designed to process batches of payments containing numerous transactions and charges fees low enough to encourage its use for low value payments

Remittance advice

is a document that describes payments that are being made, especially the part of the invoice that the customer sends back with payment. (pair up an invoice to a payment)

Packing Slip

is a document that includes the complete list of items included in a package. Packing slips include SKU numbers, weights, dimensions, and the number of units that are used by shipping departments to determine what inventory needs to be sent out to accurately complete an order. Finally, the buyer or receiver of the order will check the received items against the packing slip to ensure all the ordered items arrived.

Bill of Lading

is a legal document issued by a carrier to a shipper that details the type, quantity and destination of the goods being carried. A bill of lading also serves as a shipment receipt when the carrier delivers the goods at a predetermined destination. This document must accompany the shipped products, no matter the form of transportation, and must be signed by an authorized representative from the carrier, shipper and receiver. Also, the bill of lading is a legally binding document that provides the carrier and shipper with all of the necessary details to accurately process a shipment. It has three main functions. First, it is a document of title to the goods described in the bill of lading. Secondly, it is a receipt for the shipped products. Finally, the bill of lading represents the agreed terms and conditions for the transportation of the goods.

GDPR (General Data Protection Regulation)

is a legal framework that sets guidelines for the collection and processing of personal information from individuals who live in the European Union (EU). Since the Regulation applies regardless of where websites are based, it must be heeded by all sites that attract European visitors, even if they don't specifically market goods or services to EU residents.

Advance Shipping Notice (ASN)

is a notification of pending deliveries, similar to a packing list. It is usually sent in an electronic format and is a common EDI document

EMV (smart card) technology

is a payment method based upon a technical standard for smart payment cards and for payment terminals and automated teller machines which can accept them. EMV originally stood for "Europay, Mastercard, and Visa", the three companies which created the standard

blanket purchase order

is a purchase order which a customer places with its supplier to allow multiple delivery dates over a period of time, often negotiated to take advantage of predetermined pricing. It is normally used when there is a recurring need for expendable goods. Blanket orders are often used when a customer buys large quantities and has obtained special discounts. Based on the blanket order, sales orders ('blanket releases' or 'release orders') and invoice items can be created as needed until the contract is fulfilled, the end of the order period is reached or a pre-determined maximum order value is reached

Corporate debit cards (aka procurement cards)

is a type of company charge card used for smaller purchases to achieve greater cost efficiency, control and convenience. Procurement cards are also known as purchasing cards, P-Cards or PCards

PCI DSS (Payment Card Industry Data Security Standard)

is a widely accepted set of policies and procedures intended to optimize the security of credit, debit and cash card transactions and protect cardholders against misuse of their personal information. The PCI DSS was created jointly in 2004 by four major credit-card companies: Visa, MasterCard, Discover and American Express.

Return Material Authorization (RMA)

is an e-commerce term that describes an arrangement in which the supplier of a good or product agrees to have a customer or client ship that item back to them in exchange for a refund or credit. This sort of agreement, which is also called a return merchandise authorization or returned goods authorization, allows for a higher degree of guaranteed quality.

Personally Identifiable Information (PII)

is information that, when used alone or with other relevant data, can identify an individual. PII may contain direct identifiers (e.g., passport information) that can identify a person uniquely, or quasi-identifiers (e.g., race) that can be combined with other quasi-identifiers (e.g., date of birth) to successfully recognize an individual.

Electronic Data Interchange (EDI)

is the concept of businesses electronically communicating information that was traditionally communicated on paper, such as purchase orders and invoices. Technical standards for EDI exist to facilitate parties transacting such instruments without having to make special arrangements. It involves the electronic transfer of information in a standardized, machine-readable format

Electronic Funds Transfer (EFT)

is the electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of bank staff

Economic Order Quantity (EOQ)

is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has been refined over time.1 The formula assumes that demand, ordering, and holding costs all remain constant

Cycle Billing

is the practice of invoicing different customers based on a schedule rather than billing all accounts at once on a single date. Statements are prepared and sent out at varying intervals, spreading out the company's workload and making it easier for it to keep track of who has been billed

order acknowledgement

means a written or electronic notice delivered by DSM PTG to SHC in accordance with this Agreement to the effect that DSM PTG has received and accepted a Purchase Order

specific authorization

need approval before making authorization

RFID (radio frequency identification)

radio frequency identification, denoting technologies that use radio waves to identify people or objects carrying encoded microchips.

tickler file

system to remind of action to be taken on a certain date a file consisting of memoranda, notices, electronic signals, or the like that serves to remind the user of matters that must be attended to.

Financial Electronic Data Interchange (FEDI)

the combination of EFT and EDI that enables both remittance data and funds transfer instructions to be included in one electronic package financial EDI is the electronic transfer of payments, payment-related information, or other financial documents in a standardized, machine-readable format.

Sales Order

the document created during sales order entry listing the item numbers, quantities, prices, and terms of the sale

Closed transactions (closed orders, closed invoices, etc.)

the order or the invoice has been fulfilled. An order is closed once it has been shipped and invoiced. An invoice is closed once the customer pays off the balance.

Picking Slip/Ticket

the picking slip (or pick list) is an internal document sent to the operations team, or whoever's responsible for assembling the order. Like the packing slip, the picking slip will include an itemized list of products ordered, including quantity. The picking slip will also list the warehouse location and SKU number. The picking slip helps your operations team and order management system and team stay organized and streamlined as they fulfill orders. It also creates another paper trail against which you can compare numbers for inaccuracies, which can help to reduce shrinkage

upsell

to convince an existing customer to buy additional, related goods or at a higher cost.

Open Vendor's Invoice (Open Payable) Transaction File

updates the master Payables file to show the current amount of open invoices.