Payments Terms Explained

An ABA routing number (also called an ABA transit number) is a nine-digit code used to identify banks in the U.S. It is mainly used for processing paper checks, wire transfers, and some electronic transactions.

The Accounts Payable Turnover Ratio measures how efficiently a company pays its suppliers over a given period. It tells businesses how many times they pay off their accounts payable balance within a year.

Accounts Payable (AP) refers to the outstanding payments a business owes to suppliers for goods or services received on credit. It is a key part of a company’s short-term liabilities and plays a vital role in managing cash flow and financial obligations.

The accounts receivable turnover ratio is a financial metric used to measure how efficiently a business collects payments from its customers.

Accounts receivable (AR) refers to the money owed to a business by its customers for goods or services that have been provided on credit.

Accrual basis accounting is a method that records income and expenses when they happen, not when money changes hands.

An accrued expense is a financial obligation a business has incurred but has yet to pay.

Accrued revenue is income a business has earned but hasn’t received payment for yet.

An ACH credit is a type of electronic payment made through the Automated Clearing House (ACH) network, which is used for transferring funds between bank accounts. It’s called a “credit” because it involves the sender pushing money into the recipient’s account.

An accounts receivable aging report is a financial tool used by businesses to track outstanding invoices and determine how long they’ve been unpaid.

ACH stands for Automatic Clearing House and is an electronic payment network used to transfer money between bank accounts in the U.S.

AVS is a security tool that checks whether the billing address you enter during a purchase matches the one your bank has on file.

Bad debt is money a business expected to receive but never does.

A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time. It shows what a business owns (assets), what it owes (liabilities), and the owner’s equity.

A bank reconciliation is the process of matching your business’s financial records with your bank statement to make sure everything lines up.

A bank statement is a document that summarizes all transactions in a bank account over a specific period, usually a month. It shows deposits, withdrawals, payments, fees, and interest earned, giving account holders a clear picture of their finances.

Batch processing in payment processing is when a business groups multiple credit card transactions together and submits them for settlement at the end of the day, rather than processing each payment individually in real-time.

Billable expense income is the money a business or freelancer collects from a client to reimburse costs that were incurred while providing a service.

The Card Security Code (CSC) is a short numeric code printed on your credit or debit card that adds an extra layer of fraud protection.

A Card-Not-Present (CNP) transaction occurs when a payment is made without the physical card being swiped, inserted, or tapped. Instead, the card details—such as the number, expiration date, and CVV—are entered manually, either online, over the phone, or through mail orders.

Cash basis accounting records revenue when money is received and expenses when money is paid. There’s no tracking of unpaid invoices or future bills—just money in and money out.

A cash disbursement is any payment a business makes using cash, a check, or an electronic transfer.

Cash flow refers to the movement of money in and out of a business over a specific period.

Cash on Delivery (COD) is a payment method where customers pay for goods at the time of delivery instead of in advance.

A chargeback is when a customer disputes a transaction with their bank or credit card company, causing the funds to be withdrawn from the merchant’s account.

A chart of accounts (COA) is a structured list of all the accounts used by a business to record financial transactions.

A credit card statement is a monthly report from your credit card issuer that details your account activity, including purchases, payments, fees, and interest charges.

A credit note is a way for businesses to correct an invoice without issuing a direct refund. Instead of sending money back, the business applies the credited amount toward a future purchase.

A CRM (Customer Relationship Management) system is a tool that helps businesses track interactions, manage customer data, and improve relationships with their clients.