ERPNext basics
What is ERPNext? A small-business introduction
ERPNext is open-source business software that keeps accounts, sales, purchasing, stock and projects in one system. Each task creates a record that links to the one before it, so a quotation can become an order, a delivery, an invoice and a payment without retyping. It is released under the GNU General Public Licence, so the software has no licence fee. Hosting, setup and support still cost money.
What ERPNext is
ERPNext is business management software. The official documentation describes it as the "central nervous system" of a business, bringing inventory, finance, projects and customer records into one place. ERP stands for enterprise resource planning. In plain terms, it means one system for the records most small businesses keep in separate spreadsheets and apps.
Source: ERPNext documentation: introduction.
The areas the documentation names include accounting, invoices and payments, inventory, assets, projects, customer and supplier records, quotations and prices, budgets, payroll and maintenance. ERPNext runs on the Frappe Framework, which provides the database layer, user login and the programming interface underneath. Frappe Technologies owns the ERPNext and Frappe trademarks.
Source: Frappe: licence and trademark.
ERPNext is open source. The source code is public on GitHub under the GNU General Public Licence version 3. That gives you the right to use and change the software. It does not include hosting, setup, training or support.
Source: ERPNext on GitHub.
Everything is a record that links to another
The easiest way to understand ERPNext is to follow one sale. The documentation describes the standard order-to-cash flow as Quotation, Sales Order, Delivery Note, Sales Invoice and Payment Entry. Each step is a separate record. Each one is created from the one before, so the customer, items and prices carry forward.
Source: ERPNext documentation: Sales Order.
| Record | What it holds | What it is for |
|---|---|---|
| Quotation | Items, prices, taxes and validity offered to a customer. | The offer. |
| Sales Order | The customer’s confirmed request, quantities and delivery dates. | Tells the team what to prepare and bill. |
| Delivery Note | The items sent from a warehouse. | Updates stock. It is optional, so a sales invoice can be made straight from an order. |
| Sales Invoice | The amount the customer owes. | Posts the receivable, income and tax to the accounts when submitted. |
| Payment Entry | Money received, linked to the invoice. | Reduces what the customer still owes. |
Source: ERPNext documentation: Delivery Note.
Source: ERPNext documentation: Sales Invoice.
Source: ERPNext documentation: Payment Entry.
You can also start without a quotation, or skip the delivery note for a service. Our beginner tutorial walks through this chain with a fictional company.
Set up the shared lists first
Records are only useful if the details behind them are clean. ERPNext keeps those details in master records. The documentation suggests setting up the company, chart of accounts, taxes, warehouses, items, customers and suppliers before you enter transactions, then running a full sales, purchase, stock and accounting cycle before go-live.
Source: ERPNext documentation: setting up.
- Customer. One record for each independently billed party. Contacts and addresses are stored as linked records, not typed into the name.
- Item. A product or service you buy or sell, with its unit, price and tax treatment.
- Company and accounts. The company sets the country, currency and fiscal year. The chart of accounts decides where each transaction is posted.
Source: ERPNext documentation: Customer.
People, permissions and reports
Not everyone should see or change everything. The setup guide includes a step to create users, assign roles and set user permissions. Customer pages note that creating records needs the right permissions.
Reports read from submitted records, so you see the same numbers the accounts use. Two reports matter early:
- Accounts Receivable shows which customer invoices are still unpaid and which are overdue.
- General Ledger lists every debit and credit created by submitted transactions and links each row to its source record.
Source: ERPNext documentation: Accounts Receivable.
Source: ERPNext documentation: General Ledger.
A transaction only appears in the ledger once it is submitted. Draft records do not post to the accounts.
What is UAE-specific
The core ERPNext documentation covers general business flows. UAE and Saudi VAT settings sit on a separate documentation page, so keep them apart in your mind.
- Enter the Tax Registration Number (TRN) in the Tax ID field of the company, each customer and each supplier.
- ERPNext provides default tax templates for 5% VAT, zero-rated and exempt supplies, and for excise at 50% and 100%. You can create your own.
- That page does not describe UAE e-invoicing exchange.
Source: ERPNext documentation: UAE and KSA VAT setup.
UAE e-invoicing means sending structured invoices through an accredited service provider, which a business appoints separately. See what an ASP is and the UAE e-invoicing guide. ERPNext holds your records. It is not an accredited provider.
What ERPNext does not do for you
Free software is not a finished business system. Before you decide, plan for the work around it:
- Setup. Someone must configure the company, taxes, items, price lists and users, and import your data.
- Hosting and backups. The software has to run somewhere, and someone has to keep it updated and backed up.
- Training. Your team needs to learn the records and the order in which to create them.
- Support. Questions and fixes still need a person.
We explain the cost side in is ERPNext free?. If you are comparing a provider, the free e-invoicing article shows the same distinction between free software and the total cost.
This article explains the documented workflow. For a hands-on test, use a separate demo company and confirm the navigation and connected records against the ERPNext version you plan to run.
Prepared by the StarterKit team. Regulatory statements link to UAE government sources. Examples and suggested work plans are labelled separately; they do not determine your business’s legal or tax position. Check the linked decisions for the full conditions and later changes.