Glossary
Finance glossary
Every term you run into between a receipt and a closed month, explained in plain words with a worked example. Look one up, or browse by topic.
/
Featured entryAccounts payable
Three-way match
Also called3-way matchtwo-way match
Checking a supplier invoice against the purchase order and the goods received note before paying it.
Topics
Browse by the part of the job you do
From the receipt at checkout to the ledger it ends up in, grouped the way finance work is usually split.
Receipts & capture
Expenses
Accounts payable
Accounts receivable
Accounting & close
Procurement
Tax & compliance
Payments & banking
A to Z
All terms
A
- Accountable planExpensesThe IRS rules an employer's reimbursements have to follow for mileage, per diem and other business expenses to stay tax-free for the employee.
- Accounts payable (AP)Accounts payableThe money a business owes its suppliers for goods and services it has received but not yet paid for.
- Accounts payable turnoverAccounts payableHow many times a year a business pays off its average accounts payable balance, a measure of how quickly it pays suppliers.
- Accounts receivable (AR)Accounts receivableThe money customers owe a business for goods or services it has already delivered and invoiced.
- Accrual accountingAccounting & closeRecording revenue when it is earned and expenses when they are incurred, whenever the cash actually moves.
- Accrued expenseAccounting & closeA cost the business has incurred in a period but not yet been invoiced for or paid, recorded as a liability at period end.
- ACH transferPayments & bankingAn electronic bank-to-bank payment through the US Automated Clearing House network, used for payroll, supplier payments and direct debits.
- Acknowledgement receiptReceipts & captureA signed document or message confirming that money, goods or documents were received, by whom and when.
- Adjusting entriesAccounting & closeJournal entries made at the end of a period so that revenue and expenses are recorded in the period they belong to.
- Aging reportAccounts receivableA report that lists what each customer owes, grouped by how long the invoices have been unpaid: current, 1 to 30 days late, 31 to 60, and so on.
- AmortizationAccounting & closeSpreading the cost of an intangible asset, such as software or a patent, over the years it provides value. The word also describes paying down a loan over time.
- AP automationAccounts payableSoftware that handles supplier invoices from arrival to payment with as little manual entry and chasing as possible.
- Approval workflowAccounts payableThe set of rules that decides who must approve a purchase, expense or invoice, in what order, before it can be paid.
- Audit trailReceipts & captureThe chronological record of who created, changed and approved a transaction, linked back to the document that proves it happened.
B
- Bad debtAccounts receivableAn amount a customer owes that the business no longer expects to collect, written off as an expense.
- Bank reconciliationAccounting & closeComparing the cash balance in the books with the bank statement, and explaining every difference between them.
- Billing cycleAccounts receivableThe regular period, such as monthly, at which a business invoices its customers for recurring or accumulated charges.
- Billing statementAccounts receivableA periodic summary sent to a customer showing charges, payments and the balance owed on an account.
- Bookkeeping vs accountingAccounting & closeBookkeeping records a business's transactions day to day; accounting uses those records to adjust, report, file taxes and advise.
- Business expensesExpensesThe costs a business incurs to operate and earn income, most of which can be deducted from income for tax.
C
- Capital expenditure (CapEx)ExpensesMoney spent on assets that will serve the business for more than a year, such as equipment, vehicles or buildings, recorded on the balance sheet rather than expensed at once.
- Card authorizationPayments & bankingThe card issuer's approval of a transaction at the moment of purchase, which places a hold on the funds before the final charge is settled.
- Cash advanceExpensesMoney given to an employee before a trip or purchase, to be accounted for later with receipts and any unspent amount returned.
- Cash applicationAccounts receivableMatching each customer payment received to the invoices it pays, so receivables show what is still owed.
- Cash basis accountingAccounting & closeRecording revenue when cash is received and expenses when cash is paid, regardless of when the work was done.
- Cash conversion cycleAccounting & closeThe number of days between paying suppliers for inventory and collecting cash from the customers who bought it.
- Cash receiptsAccounts receivableAll money a business takes in, by cash, cheque, card or transfer, and the records and journal used to track it.
- Category managementProcurementManaging purchases by grouping similar spend into categories, such as IT, logistics or facilities, each with its own sourcing strategy and owner.
- Charge cardExpensesA payment card whose full balance must be paid at the end of each statement period, with no option to carry a balance and pay interest.
- ChargebackPayments & bankingA reversal of a card payment initiated by the cardholder's bank after the cardholder disputes the charge.
- Chart of accounts (COA)Accounting & closeThe complete list of accounts a business uses to record its transactions, organized into assets, liabilities, equity, revenue and expenses.
- Contract lifecycle management (CLM)ProcurementManaging contracts from request and drafting through negotiation, signature, performance and renewal or termination.
- Corporate cardExpensesA payment card issued to employees for business spending, billed to the company rather than paid by the employee.
- Cost centreAccounting & closeA department or unit whose costs are tracked separately. A business can see where money is spent and who is responsible for it.
- Credit card statementPayments & bankingThe monthly summary a card issuer sends showing every charge, payment, fee and the balance due for one billing cycle.
- Credit limitAccounts receivableThe maximum balance a business allows a customer to owe on credit at any one time.
- Credit noteAccounts receivableA document a seller issues to reduce or cancel an amount it has invoiced, for example after a return, a price error or a discount.
- Credit vs debitPayments & bankingWith a debit card you spend your own money from a bank account; with a credit card you borrow from the issuer and repay later. In bookkeeping, debits and credits are the two sides of every entry.
D
- Days payable outstanding (DPO)Accounts payableThe average number of days a business takes to pay its suppliers after receiving their invoices.
- Days sales outstanding (DSO)Accounts receivableThe average number of days it takes a business to collect payment after making a sale on credit.
- Debit noteAccounts payableA document a buyer sends a supplier to reduce what it owes, for example after returning goods or being overcharged.
- DepreciationAccounting & closeSpreading the cost of a physical asset, such as equipment or a vehicle, over the years it is expected to be used.
- Digital loyalty cardReceipts & captureA loyalty card kept on a phone or an account instead of on paper, such as a wallet pass, a phone-number lookup at checkout or a linked payment card.
- Digital receiptReceipts & captureA receipt issued electronically, by email, in an app or pushed from the point of sale, instead of printed on paper.
- Direct debitPayments & bankingA payment the recipient pulls from the payer's bank account, on a schedule or on demand, under an authorization the payer signed in advance.
- DunningAccounts receivableThe process of reminding customers, in escalating steps, to pay invoices that are due or overdue.
- Duplicate expenseExpensesThe same cost claimed or paid more than once, whether by mistake or on purpose.
E
- E-invoicingReceipts & captureExchanging invoices as structured data between the seller's and buyer's systems, rather than as PDFs or paper.
- Early payment discountAccounts payableA price reduction a supplier offers if an invoice is paid before its due date, such as 2% off if paid within 10 days.
- Entertainment expenseExpensesSpending on meals, events or hospitality for clients, prospects or staff, which tax rules often restrict more tightly than other business costs.
- ExpenditureAccounting & closeMoney spent or committed to acquire goods, services or assets. An expenditure becomes an expense when its cost is used up.
- Expense categoryExpensesThe label that says what an expense was for, such as travel, meals or software, and which ledger account it posts to.
- Expense controlExpensesThe policies, approvals and checks that keep business spending within budget and within the rules, before and after the money goes out.
- Expense fraudExpensesEmployees claiming money they are not entitled to through their expense reports, by inventing, inflating, repeating or disguising expenses.
- Expense managementExpensesThe process, and the software, for capturing, approving, reimbursing and recording what employees spend on the business.
- Expense policyExpensesThe written rules that say what employees can spend company money on, how much, and what proof they must provide.
- Expense reportExpensesA list of business expenses an employee submits for approval and reimbursement, with a receipt for each item.
F
- FAVR (fixed and variable rate) allowanceExpensesAn IRS-approved way to pay employees for driving their own car: a fixed payment for ownership costs plus a per-mile payment for running costs, both based on local prices.
- Fiscal receiptReceipts & captureA receipt produced by a point-of-sale system that is registered with, or reports to, the tax authority. Each sale can be verified.
G
- GAAPAccounting & closeThe standards and rules that set how financial statements must be prepared in a given jurisdiction. They can be compared and trusted.
- GDPRTax & complianceThe European Union's data protection law, which governs how organizations collect, use and protect personal data about people in the EU.
- General ledger (GL)Accounting & closeThe master record of every financial transaction a business has posted, organized by account.
- Goods received note (GRN)Accounts payableA record, made when a delivery arrives, of what was actually received against a purchase order.
- Gross profitAccounting & closeRevenue minus the cost of goods sold: what a business earns from its sales before overhead, interest and taxes.
- Gross receiptsTax & complianceThe total amount a business or organization takes in from all sources during a period, before any costs or expenses are subtracted.
- Gross revenueAccounting & closeTotal income from sales before returns, discounts and allowances are subtracted, and before any costs.
- GST / HSTTax & complianceCanada's federal Goods and Services Tax (GST) and the Harmonized Sales Tax (HST), which combines GST with a provincial portion in participating provinces.
- GST/HST RegistryTax & complianceThe CRA's free online tool for confirming that a supplier's GST/HST account number is valid and was registered on the date of a transaction.
I
- Incidental expenses (incidentals)ExpensesSmall costs of business travel, such as tips to porters and hotel staff. On a hotel bill, incidentals are the extra charges added to the room.
- Income statement (profit and loss statement)Accounting & closeA report of what a business earned and spent over a period, from revenue at the top to net income at the bottom.
- IncurredAccounting & closeAn expense is incurred when the business becomes responsible for paying it, which can be before or after the money is paid.
- Input tax creditTax & complianceThe credit a registered business claims for the GST/HST it paid on business purchases, deducted from the tax it owes on its sales.
- Institution numberPayments & bankingThe three-digit code that identifies a Canadian bank, credit union or other financial institution in the payment system.
- Interchange feePayments & bankingThe fee a merchant's bank pays the cardholder's bank on each card transaction, the largest part of what merchants pay to accept cards.
- Intercompany transactionAccounting & closeA transaction between two companies in the same group, such as a sale, a loan or a shared cost, which must be eliminated when the group reports as one.
- InvoiceReceipts & captureA document a seller sends to a buyer listing what was supplied, what it costs, the tax charged and when payment is due.
- Invoice exceptionAccounts payableA supplier invoice that fails a check, such as a price or quantity mismatch, and is held until someone resolves it.
- Invoice factoringAccounts receivableSelling unpaid customer invoices to a finance company for immediate cash, less a fee.
- Invoice processingAccounts payableThe steps a business takes to receive, check, approve, record and pay a supplier invoice.
- ISO 27001Tax & complianceThe international standard for information security management systems, used to certify that an organization manages security risks in a structured, audited way.
- Itemized receiptReceipts & captureA receipt that lists every item bought, with its price and the tax charged, rather than only a total.
J
L
- LiabilitiesAccounting & closeWhat a business owes to others, such as supplier bills, loans, wages and taxes, recorded on the balance sheet.
- Line-item extractionReceipts & captureReading each line of a receipt or invoice into structured data: description, quantity, unit price, amount and tax.
- LockboxAccounts receivableA bank service that receives customer cheque payments at a dedicated address, deposits them and sends the business the payment details.
- Loyalty programReceipts & captureA way for a business to reward repeat customers, usually with points, stamps or perks earned on purchases and traded for discounts or free items.
M
- Making Tax DigitalTax & complianceThe UK government's program requiring businesses to keep tax records digitally and file returns through compatible software.
- MaterialityAccounting & closeThe threshold above which an error or omission would change the decisions of someone relying on the financial statements.
- Maverick spendProcurementPurchases made outside the company's agreed buying process, contracts or preferred suppliers.
- Merchant category code (MCC)Payments & bankingA four-digit code that card networks assign to a merchant to classify the type of business it does, such as 5812 for restaurants.
- Mileage reimbursementExpensesPaying employees a per-kilometre rate for business trips made in their own vehicle.
- Month-end closeAccounting & closeThe set of tasks an accounting team completes after each month ends to make the books complete, accurate and ready for reporting.
O
- Open bankingPayments & bankingA framework that lets customers securely share their bank data with, or start payments from, authorized third-party apps without handing over their passwords.
- Operating expense (OpEx)ExpensesThe day-to-day costs of running a business, such as rent, salaries, software and utilities, expensed in the period they occur.
- Optical character recognition (OCR)Receipts & captureSoftware that turns an image of text, such as a photo of a receipt, into characters a computer can search and process.
- Out-of-pocket expenseExpensesA business cost an employee pays with their own money and then claims back from the company.
P
- Payment gatewayPayments & bankingThe service that securely captures card or payment details at checkout and sends them to be authorized, connecting a merchant's website or terminal to the payment networks.
- Payment runAccounts payableA scheduled batch in which a business pays a group of approved supplier invoices at once.
- Payment termsAccounts payableThe conditions a supplier sets for paying an invoice: when it is due, any discount for paying early and any charge for paying late.
- PCI DSSTax & complianceThe security standard that every organization storing, processing or transmitting payment card data must follow.
- Per diemExpensesA fixed daily amount paid to cover meals and incidental costs while travelling for work, instead of reimbursing each receipt.
- Place of supplyTax & complianceThe rules that decide where a sale is considered to take place for sales tax purposes, and therefore which tax and rate apply.
- Policy violationExpensesAn expense or purchase that breaks a rule in the company's spending policy, such as exceeding a limit or missing a receipt.
- Prepaid expenseAccounting & closeA cost paid in advance for goods or services the business will use in future periods, held as an asset until it is used up.
- Pro forma invoiceReceipts & captureA preliminary invoice sent before goods ship or work starts, showing what the final bill will be. It is not a demand for payment.
- Procure-to-pay (P2P)ProcurementThe full process from identifying a need to buy something, through ordering and receiving it, to paying the supplier's invoice.
- ProcurementProcurementEverything a business does to acquire the goods and services it needs: choosing suppliers, negotiating terms, ordering and managing the relationship.
- Proof of purchaseReceipts & captureAny document that shows a purchase took place: what was bought, from whom, when and for how much.
- Purchase order (PO)Accounts payableA document a buyer sends a supplier to order specific goods or services at an agreed price, before they are delivered or invoiced.
- Purchase order vs invoiceAccounts payableA purchase order is the buyer's request to buy, sent before delivery. An invoice is the seller's request for payment, sent after.
- Purchase requisitionProcurementAn internal request from an employee to buy something, sent for approval before a purchase order is placed.
- Purchasing card (P-card)ExpensesA company card for buying goods and services directly from suppliers, used in place of purchase orders for small, routine purchases.
Q
R
- RebillingAccounts receivableCharging a client for costs a business paid on its behalf, such as travel, materials or third-party fees, often with a markup.
- Receipt captureReceipts & captureGetting receipts into a finance system, by photo, email, inbox sync or a direct feed from the point of sale. They can be coded and matched.
- Receipt matchingReceipts & capturePairing each receipt with the card or bank transaction it belongs to. Every charge has its evidence and every receipt has its payment.
- Record retentionReceipts & captureThe rules for how long a business must keep its financial records, and in what form, before it can destroy them.
- Reimbursable expenseExpensesA cost someone paid that another party has agreed to pay back, such as an employee's business purchase or a cost billed on to a client.
- ReimbursementExpensesRepaying an employee for business costs they paid personally, once the expense is supported and approved.
- Remittance adviceAccounts receivableA note from a customer telling the seller which invoices a payment covers, and explaining any difference.
- Request for proposal (RFP)ProcurementA formal document inviting suppliers to propose how they would meet a business need, used when the solution and price both need to be compared.
- Request for quotation (RFQ)ProcurementA request asking suppliers to quote a price for clearly specified goods or services, so offers can be compared on cost.
- RetainageAccounts payableA portion of each payment, often 10%, that a customer holds back until a contract is complete, common in construction.
- Revenue recognitionAccounting & closeThe rules that decide when a business records revenue, based on when it delivers what it promised to the customer.
- Reverse chargeTax & complianceA VAT mechanism where the buyer, instead of the seller, accounts for the tax on a purchase.
S
- Sales taxTax & complianceA tax charged at the point of sale to the final customer, most familiar as the state and local sales taxes in the United States and the provincial sales taxes in some Canadian provinces.
- Segregation of dutiesAccounting & closeSplitting key steps of a financial process between different people. No one person can both make and hide an error or a fraud.
- Self-billingReceipts & captureAn arrangement where the customer, not the supplier, prepares the invoice for a supply and sends a copy to the supplier.
- Service level agreement (SLA)ProcurementThe part of a service contract that sets measurable performance standards, such as uptime or response times, and what happens if they are missed.
- SettlementPayments & bankingThe step in which funds from card or other payments actually move to the merchant's bank account, usually a day or two after the sale and net of fees.
- SG&A (selling, general and administrative expenses)Accounting & closeThe operating costs of selling a product and running the company that are not part of making the product or delivering the service.
- Short pay (deduction)Accounts receivableWhen a customer pays less than the invoice amount and keeps the difference, for a reason it may or may not explain.
- SOC 2Tax & complianceAn independent audit report on how a service provider protects customer data, based on criteria set by the American Institute of CPAs (AICPA).
- Source documentReceipts & captureThe original record that proves a transaction happened, such as a receipt, invoice, contract or bank statement.
- SOX complianceTax & complianceMeeting the requirements of the US Sarbanes-Oxley Act, which makes public companies' executives responsible for accurate financial reporting and effective internal controls.
- Spend analysisProcurementCollecting, cleaning and classifying all of a company's spending data to see what it buys, from whom and at what price.
- Spend managementExpensesControlling all of a company's outgoing money, from employee expenses and cards to supplier bills and subscriptions, in one process.
- Spend under managementExpensesThe share of a company's total spending that goes through its agreed processes, contracts and suppliers.
- Statement descriptorPayments & bankingThe merchant name and details that appear next to a charge on the cardholder's bank or card statement.
- Subscription managementPayments & bankingTracking and controlling a company's recurring subscriptions, especially software. It knows what it pays for, who uses it and when each renews.
- SubstantiationReceipts & captureProving that an expense was real and for business: the amount, date, place and business purpose, backed by a receipt.
- Supplier onboardingProcurementCollecting and verifying a new supplier's information, such as legal name, tax numbers, banking details and compliance documents, before it can be paid.
- Supplier risk managementProcurementIdentifying, assessing and reducing the risks that come from depending on outside suppliers, from financial failure to security breaches.
- Supplier statement reconciliationAccounts payableComparing a supplier's statement of account with your own payables records, and explaining every difference.
- Supply chain financeAccounts payableA financing arrangement in which a bank pays a buyer's suppliers early, at a small discount, while the buyer pays the bank on the original due date.
T
- Tax deduction (tax write-off)Tax & complianceAn amount subtracted from income before tax is calculated, which lowers the income the tax applies to. In everyday speech it is often called a tax write-off.
- Telecom expense management (TEM)Accounts payableThe work, and the software, for tracking, checking and allocating what a business pays for mobile, phone, internet and data services.
- Thermal paperReceipts & captureHeat-sensitive paper used for most store receipts. The print can fade within months, especially with heat, light or friction.
- Three-way matchAccounts payableChecking a supplier invoice against the purchase order and the goods received note before paying it.
- TokenizationPayments & bankingReplacing a card number with a unique substitute value, a token, that can be stored and used for payments without exposing the real number.
- Total cost of ownership (TCO)ProcurementThe full cost of buying and using something over its whole life, including purchase, running, maintenance and disposal, not just the price.
- Transit numberPayments & bankingThe five-digit number that identifies the branch of a Canadian bank or credit union where an account is held.
- Travel allowanceExpensesA set amount an employer pays toward an employee's work travel costs, instead of reimbursing each expense against receipts.
- Travel and entertainment (T&E)ExpensesThe category covering business travel, meals and client hospitality, usually one of the largest pieces of employee spending.
- Trial balanceAccounting & closeA list of every account in the general ledger with its closing balance, used to check that total debits equal total credits.
U
V
- Value added tax (VAT)Tax & complianceA consumption tax charged at each stage of the supply chain, where registered businesses reclaim the tax they paid on their inputs.
- Vendor managementProcurementOverseeing a company's suppliers after they are chosen: tracking performance, managing contracts and costs, and keeping relationships productive.
- Vendor master fileAccounts payableThe central record of every supplier a business pays: legal name, address, tax numbers, payment terms and bank details.
- Virtual cardExpensesA card number issued digitally, often for a single supplier, purchase or subscription, with its own limit and expiry.
W
Get started
Spend less time on the paperwork behind these words.
Smartbills collects receipts at the point of sale and from your inbox, codes them and sends them to your accounting software with the evidence attached.