In the ever-evolving world of procurement and spend management, understanding the terminology is key to staying ahead of the curve. Whether you’re navigating new processes or optimizing existing ones, this guide is designed to help you grasp the essential concepts in procurement, supplier management, and accounts payable automation.Learn how these terms apply to procurement operations, especially when using a powerful platform like Vroozi SpendTech®.
Accounts Payable (AP) & Invoicing Terms
- Accounts Payable (AP): Money a company owes to suppliers or creditors for goods or services that have been received but not paid for. It also refers to the department that processes invoices.
- AP Approver: Reviews invoices submitted for approval to either approve or reject them.
- Permissions:
- Code AP Docs: If coding permission is assigned to AP approvers, they can modify or enter invoice accounting information.
- Edit invoices upon approval: Editing permission allows AP approvers to modify invoice details after submission.
- Permissions:
- AP Processor: Manages and submits invoices for approval or coding, tracks invoices, handles exceptions, and posts AP documents (invoices/memos).
- Invoice Categorization:
- All: Invoices created by all users.
- Overdue: Payment past due.
- Exception: Undergoing AP exception handling.
- Draft: AP processing has begun.
- Parked: Held by a user for further processing.
- Pending: Awaiting approval.
- Approved: Approved for payment.
- Rejected: Rejected during approval, sent back to the AP processor for reconciliation.
- Coding: Submitted for coding.
- Posted: AP processing complete; sent to an external service to facilitate payment.
- Partially Paid: Invoice with an outstanding payment.
- Paid: Fully paid invoice.
- Invoice Categorization:
- AP Manager: Has access to all invoices and AP documents in the system and can perform tasks assigned to other AP roles, such as approving or posting invoices.
- AP Invoice Automation: Technology that uses digital tools and automation to streamline invoice processing and increase visibility.
- Invoice Automation: The technology used to automate handling, validating, approving, and paying invoices.
- Invoice Processing:
- 2-Way Match: Matching the purchase order (PO) and invoice to ensure they align (e.g., PO quantity and unit price match the invoice).
- 3-Way Match: Matching the PO, invoice, and goods receipt to ensure all documents align, including receipt of goods.
- Credit Memo: A statement of credit issued by the supplier, typically due to a return or billing adjustment.
- Debit Memo: A statement of credit initiated by the buyer, usually for a returned item or other adjustments.
Reporting & Data Visualization Terms
- Ad Hoc Reporting: Allows users to independently create and build reports based on specific business needs. This includes creating individual reports or dashboards for personal or organizational use.
- Dashboard: Various “Looks” created by Admins or shared by other users, often represented as visualizations.
- Looks: Isolated data visualizations created through selected fields, tables, and visual elements.
- Starter: A standard Look that can be customized and added to a dashboard.
- Field Picker: A tool that lets users map fields from unique data and select dimensions to build a report or Look.
- Dimension: A group or bucket of data points (e.g., categories).
- Measure: Data points that provide information about a dimension.
- Pivot: A function that turns dimensions into columns in the Look for better visualization.
Supplier & Catalog Management Terms
- Catalog Management: The process of managing and approving goods and services through supplier catalogs, which are then published in a centralized marketplace.
- Supplier Onboarding: Setting up supplier data, catalogs, and document exchange to ensure smooth transactions with the company.
- Supplier Portal: A digital platform enabling suppliers to manage their catalogs, submit invoices, and collaborate on orders.
- Supplier Relationship Management (SRM): The ongoing process of assessing and working with suppliers to determine how they contribute to mutual success, strategizing for better performance.
- Punch-Out Catalogs: External supplier-managed eCommerce sites that users access through the company’s procurement system to browse and select items. Items added to a cart are transferred to the company’s purchasing system for processing.
- Level 2 Punch-Out Catalogs: More advanced punch-out catalogs, where users can search directly for specific stores, aisles, or SKUs.
Procurement Processes Terms
- Procurement: The process of acquiring goods and services to support a business’s daily operations, including activities such as sourcing, negotiation, and purchasing.
- Procure to Pay (P2P): An integrated process that connects purchasing activities to accounts payable for maximum efficiency, also known as the Req-to-Invoice process.
- Purchase Order (PO): A legal document issued by the buyer to confirm their intent to purchase goods or services from a supplier.
- Purchase Requisition: An internal request submitted within a company to initiate the purchase of goods or services.
- Source-to-Pay (S2P): A broader business process that encompasses everything from sourcing and procurement to paying for goods and services, with a focus on strategic sourcing activities.
- Goods Receipt: A document or process that confirms receipt of goods or services from a supplier. It is essential in three-way matching for verifying that items ordered are correctly delivered.
Spend Management & Analytics Terms
- Spend Analysis: The process of analyzing procurement spending data to identify opportunities for cost savings, improve performance, and optimize procurement strategies.
- Spend Management: Managing procurement spending and supplier relationships to maximize the value of every dollar spent, using detailed data analytics.
- Spend Under Management (SUM): The percentage of a company’s total spending that is managed through the formal procurement function.
- Spend Visibility: The ability to see and analyze where and how money is spent on goods and services with suppliers, providing insights for better financial management.
Risk & Compliance Management Terms
- Compliance Management: Ensuring that all purchasing activities adhere to established rules, procedures, and policies to mitigate risks and ensure compliance.
- Supplier Risk Management: The process of identifying, evaluating, and controlling risks that can arise from working with third-party suppliers.
- Procurement Fraud: The illegal manipulation of procurement processes for financial gain, such as through bribery, false invoicing, or manipulating bids.
Technology & Automation Terms
- Dynamic Discounting: An early payment program offering discounts based on the number of days until payment is due (the earlier the payment, the higher the discount).
- Electronic Data Interchange (EDI): The standardized electronic exchange of business documents between buyer and supplier, allowing for secure and automated data processing.
- Enterprise Resource Planning (ERP): Software that assists in managing overall business operations, including procurement, HR, finance, and supply chain management.
- Optical Character Recognition (OCR): Technology that converts scanned documents into editable and searchable data, helping to automate document processing, particularly invoices.
- Invoice Automation: Technology used to automate the validation, coding, and payment of invoices. This includes applying technologies like OCR and three-way matching to ensure accuracy and efficiency.
Miscellaneous Concepts
- Power Shopper: A user role that converts shopping lists into purchase requests, manages cart approvals, and finalizes purchasing decisions in the company’s procurement system.
- Re-Invoicing: Occurs when a supplier re-bills for items during a return or replacement process. It must be enabled for the organization and is not reflected in Vroozi.
- Request for Proposal (RFP): A document posted publicly by an organization to solicit bids from contractors or vendors for a specific project.
- Request for Quotation (RFQ): A document sent to suppliers to request price quotations for specific goods or services.
- Reverse Auction: A procurement method in which suppliers submit bids to compete for a buyer’s contract, often driving prices lower through competition.
Conclusion
This detailed glossary provides a comprehensive look at the essential terms and concepts used in procurement, accounts payable, and supplier management. By understanding and utilizing these terms, you can improve your procurement processes, streamline operations, and maximize cost savings. Ready to take the next step? Request a demo of Vroozi SpendTech® today and see how these processes can work for your business.
