ERP Glossary: A Beginner’s Guide to Understanding ERP Terms

Unlocking the Language of Enterprise Resource Planning

ERP systems promise control, visibility, and scalability—but only if you understand what you’re getting into. For many first-time buyers, the terminology alone is intimidating. What’s an MRP? Why do people keep saying “go-live” like it’s a battlefield?

This confusion isn’t just annoying—it’s expensive. One of our clients once spent over $100,000 cleaning up data issues that stemmed from misunderstanding core ERP concepts during selection. You shouldn’t have to learn that the hard way.

This plain-language ERP glossary is designed to help you decode the most important terms, feel confident in ERP conversations, and ultimately make smarter decisions about your business systems.

What is ERP?

Enterprise Resource Planning (ERP)

A system that integrates and automates key business functions—such as finance, operations, inventory, and sales—into one centralized platform. The goal? Better data, better decisions, and better growth.

“ERP is like the nervous system of a business. When it works, everything flows. When it doesn’t, the whole body suffers.”— Stephanie Clark, Founder, Elliott Clark Consulting

Bonus Info: Get our eBook ERP Unlocked for first time ERP Buyers

Key ERP Terms for Beginners

Modules

Independent components of the ERP system, each serving a business function:

• Financial Management – General ledger, AP/AR, budgeting, and reporting

• Supply Chain Management (SCM) – Procurement, inventory, and logistics

• Human Resources (HR) – Payroll, timekeeping, employee data

• Customer Relationship Management (CRM) – Sales tracking, marketing, customer interactions

Pro Tip: Choose a system with the modules you need today—and the ability to add more as you grow.

Cloud ERP vs. On-Premise ERP

• Cloud ERP: Hosted offsite, accessible from anywhere, faster deployment

• On-Premise ERP: Installed locally, more control, but higher IT overhead

Customization vs Configuration

• Customization: Changing the code—flexible but risky

• Configuration: Changing settings—safe, supported, and faster

Integration

Connecting ERP with other systems like e-commerce, CRM, or legacy software to share data seamlessly.

Real-Time Data

Instant access to live business information across the system.

End-to-End Integration

Connecting every business function—from procurement to shipping—in a single, data-driven workflow.

ERP Vendor

The company that makes the ERP software (e.g., Microsoft, SAP, Oracle)

Value Added Reseller (VAR)

This is a company that sells ERP software (like Microsoft Dynamics 365 Business Central) and enhances it with additional services such as implementation, customization, training, and ongoing support. Unlike a basic software reseller, a VAR delivers more than just licenses—they add strategic value by tailoring the ERP solution to fit a client’s unique business processes and goals.

Third-Party Applications

Add-ons that extend ERP functionality, such as warehouse barcode scanning or payroll software.

ERP Tiers

• Tier 1: Global enterprises (e.g., SAP S/4HANA)

• Tier 2: Midsize companies (e.g., Dynamics 365 Business Central)

• Tier 3: Small businesses/startups (e.g., QuickBooks Advanced)

ERP Implementation Terminology

Go-Live

The moment your ERP system becomes operational. Think of it as ERP Launch Day.

From the field: A client once described go-live as “hitting the red button.” That’s why prep and testing are everything.

Data Migration

Moving historical data from old systems to the new ERP. It often includes “data scrubbing” to remove duplicates and errors.

Change Management

Helping employees adapt to new tools, processes, and workflows.

Read more about why change management is so critically important for digital transformation.

Business Process Reengineering (BPR)

Reevaluating and redesigning your workflows to fit ERP best practices instead of duplicating outdated habits.

Business Processes are the cornerstone of successful ERP processes.

Digital Transformation

In an ERP context, digital transformation means replacing spreadsheets and siloed software with a unified system that connects finance, operations, sales, and supply chain—so decisions are faster, smarter, and backed by real-time data.

Key Performance Indicators (KPIs)

Metrics that show how your ERP is performing and impacting your business.

Blueprinting

Documenting current processes and designing how they'll work in the ERP system.

Sandbox Environment

A safe space to test configurations and train users without affecting live data.

Workflows

Automated task sequences with built-in approvals, reducing manual steps and ensuring consistency.

Super Users

Internal champions with advanced training who support the broader team before and after go-live.

Technical ERP Concepts You Should Know

API (Application Programming Interface)

Allows other tools to connect to your ERP

RBAC (Role-Based Access Control)

Users only see data relevant to their job

DBMS (Database Management System)

 Manages your data (e.g., SQL Server)

Multitenancy

A cloud feature where multiple customers share infrastructure securely

Data Lakes vs Data Warehouses

• Data Lake: Unstructured, raw data for flexible analysis

• Data Warehouse: Clean, organized data for reporting

IoT (Internet of Things) in ERP

Smart sensors and devices that feed data into the ERP system (e.g., machine performance on the shop floor)

Financial ERP Terms Explained

General Ledger (GL)

The master accounting record

AP/AR

Accounts Payable (bills to pay), Accounts Receivable (customer invoices)

Inventory Costing Methods

FIFO, LIFO, Average Cost—determine how inventory is valued

Learn more about Inventory Costing in Business Central

Budgeting & Forecasting

Tools to plan future revenue, expenses, cash flow

Cost Allocation

Spreading costs across departments or projects

Financial Consolidation

Combining financials across business units

Fixed Assets Management

Tracks equipment, vehicles, and depreciation

ERP Terms for Manufacturing and Supply Chain

BOM (Bill of Materials)

Recipe of parts to make a product

MRP (Material Requirements Planning)

Ensures you have the right materials at the right time

WMS (Warehouse Management System)

Controls inventory, bin locations, shipping

Shop Floor Control

Monitors real-time production activity

Capacity Planning

Balances labor, machine time, and inventory

JIT Inventory (Just-in-Time)

Minimizes inventory holding costs

Lot Tracking

Tracks inventory by batch or serial number

Kanban

Visual scheduling for lean manufacturing

AI in ERP

Artificial Intelligence (AI) 

AI refers to the ability of computers and software systems to perform tasks that normally require human intelligence. In an ERP context, AI helps systems recognize patterns, make decisions, learn from data, and automate complex processes.

Machine Learning (ML)

A branch of AI that allows ERP to "learn" from patterns and improve over time (e.g., refining demand forecasts based on trends)

Large Language Model (LLM)

A type of AI trained on vast amounts of text, allowing ERP systems to understand and generate human-like language (e.g., Microsoft Copilot in Business Central)

AI Agent

An autonomous tool within the ERP that performs tasks on your behalf, such as scheduling, sending alerts, or updating records

"AI agents will become the primary way we interact with computers in the future. They will be able to understand our needs and preferences, and proactively help us with tasks and decision making."— Satya Nadella, CEO of Microsoft

Natural Language Processing (NLP)

The ability of AI to interpret human language—so users can interact with ERP through chatbots or voice queries

Microsoft Copilot

Embedded AI assistant in Dynamics 365 Business Central that helps with tasks like writing emails, summarizing reports, or generating forecasts

“LLMs and AI agents are making ERP more accessible than ever. You don’t have to be a power user to get power-user results.”— Stephanie Clark, Elliott Clark Consulting

Read about Real life uses of Copilot in Business Central

Customer and Reporting Terminology

Self-Service Portals

Give customers or vendors real-time access to orders and payments

Quote-to-Cash (Q2C)

The entire sales process, from quote to payment

Business Intelligence (BI)

Dashboards, KPIs, and visuals for smarter decisions

Dashboards

Real-time displays of performance metrics

Reports

Periodic summaries (e.g., sales by region)

Drill-Down

Click into reports to see detailed data

Predictive Analytics

Uses history to forecast future trends

Why Understanding ERP Terminology Matters

ERP is more than a software tool. It’s a catalyst for transformation. When you understand the language, you can:

• Ask better questions

• Avoid costly mistakes

• Make informed decisions

• Lead your team with confidence

Whether you’re implementing your first ERP or optimizing your current system, understanding these terms gives you an edge—and keeps you in control.

Next Steps

Not sure if ERP is for you? Check out our ERP ROI Calculator

Struggling with Profit Leaks? Get our CEO Playbook and find them.

Just need to figure it out? Book a strategy call with our Founder and ERP Expert, Stephanie Clark

Coming soon: Business Central Glossary Video Walkthroughs on YouTube.

About Elliott Clark Consulting

With over 500 ERP projects under our belt and decades of experience, we don’t just implement ERP systems—we turn them into growth engines. At Elliott Clark Consulting, we specialize in guiding small and midsize manufacturers and distributors through successful ERP journeys with Microsoft Dynamics 365 Business Central. We focus on outcomes that help make you more profitable.

Ready to take control of your operations? Let’s talk.

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