What’s the Difference between ERP and Accounting Software?

When it comes to business software, there are two main types: ERP and accounting software. While they both have their purposes, knowing which one is right for your business can be confusing. In this post, we'll break down the differences between ERP and accounting software, so you can make an informed decision about which type of software is best for you.

If you're in the market for business software, you may be wondering what the difference is between ERP and accounting software. Both types of software have a lot of features in common, but there are some key differences that you should know about before making a decision. In this post, we'll look at the most important distinctions between ERP and accounting software. We'll also discuss which type of software is right for your business.

In short, ERP software is broader in scope than accounting software. It can help you manage all aspects of your business, not just your finances. This makes it a better fit for businesses growing or having complex needs. If you're looking for software to help you manage your finances specifically, accounting software is probably the better choice. But if you want a more comprehensive solution, ERP is the way to go.

If you run a business, you know that accurate and up-to-date accounting information is essential for making informed decisions. You may also be wondering about the difference between ERP software and accounting software. In this blog post, we'll explore the key features of each type of software and discuss which one is best for your business.

Let's get started!

What Is An Accounting Software? 

A primary function of accounting system software is, as one might expect given its name, the administration of an organization's financial records and transactions. In addition to the specifics regarding balance sheets, income, and profit-and-loss statements, audit files of taxes, and other related matters, it maintains a record of all of the business's financial transactions, such as cash flow, journal entries, accounts receivable/accounts payable (AR/AP), and so on.

This kind of software is developed with the express purpose of serving the requirements of a company's accounting and financial departments. In addition to enabling the production of essential financial reports, it is also helpful in the day-to-day operations of accounting since it helps monitor revenue, record sales, and track invoices. It also makes it possible to generate critical financial reports.

In addition to giving a number of benefits, such as correct decision making, a reduction in labour cost, the avoidance of miscalculations, automated transactions, and so on, accounting software also offers a broad overview of the financial health of an organisation. One well-known piece of accounting software is known as QuickBooks.

What Is An ERP Software?

Historically, enterprise resource planning (ERP) systems were implemented as monolithic suites that carried out their functions independently and did not communicate with any other systems. In addition, each system required expensive, complex, and customised programming in order to meet the one-of-a-kind business needs. This slowed down or even blocked the adoption of new technology or the optimisation of existing processes.

The fact that all of these distinct operations can be managed within a single fluid system is what differentiates the ERP software used today from previous generations. It provides data connectivity not only within your ERP system but also within your productivity tools, e-commerce platforms, and even customer interaction solutions, allowing you to integrate all of your data for improved insights that enable you to optimise your business's processes across the board.

In addition, a contemporary ERP solution provides deployability choices that are flexible, enhanced security and privacy, increased sustainability, and low-code customization. But most significantly, it will create continuity and durability into your organisation and processes by providing insights that assist you in innovating at a rapid rate while simultaneously preparing your firm for what's next.

An enterprise resource planning (ERP) system is a type of business management software that is loaded with a set of integrated applications and modules. These applications and modules enable a company to collect, store, manage, and interpret data from their various business activities, which in turn enables the company to operate in an efficient manner as a whole. In addition to this, it is employed for the planning and management of the company's resources.

It encompasses all aspects of a company's operations, including purchasing, sales, accounting, inventory management, production, supply chain management, quality assurance, regulatory compliance, customer relationship management, and even management of human resources. ERP software, or enterprise resource planning software, is used to manage the majority of the company's operational tasks, including accounting.

All of the aforementioned elements of an ERP system are linked to one another and collaborate closely. For example, an increase in the number of items in the warehouse or inventory division is reflected on an invoice that was created by the accounting division for goods purchases. This takes place in real-time. The benefits that it provides to the company include things like streamlined procedures, increased production and efficiency, expanded visibility, decreased expenses and risks, and many more.

More than just the General Ledger

Before the advent of cloud-based software and IaaS (Infrastructure as a Service), accounting software was primarily concerned with General Ledger tasks, including debits, credits, and financial statements for companies of all sizes. They were cast in a very particular part, and they played it quite well.

Products such as MYOB and Quickbooks, as well as newer companies such as Xero, are commonplace among small businesses operating in this sector. These services provide accurate and vital accounting software geared towards Small businesses and lower end SMBs. They are meant to make it easier to track and administer General Ledger at a price that is reasonable for smaller businesses.

However, as competition in the market has increased and the requirements of businesses have progressed, the distinction between the requirements of a small to medium-sized business (SMB) and those of an enterprise-level organisation has become less clear. As a direct consequence of this, firms in the accounting Software industry widened the scope of their products in an effort to incorporate a greater number of functions. These days, it is not at all unusual for accounting software platforms to provide the following features:

• Payroll
• Quote generation
• Invoicing and Payments
• Purchase Order generation and reconciliation
• Inventory integration
• …and more.

In the past, much more sophisticated capabilities were typically associated with ERP software.

Why is Accounting Software going into the Enterprise Resource Planning (ERP) space, and would it be sufficient for SMB or Enterprise level organisations to continue using Accounting Software rather than transitioning to a full ERP?

Database Integrity

The debate over whether to use enterprise resource planning software or accounting software has a lot of pros and cons, but the integrity of the data is probably the most critical consideration for any company moving into the connected future.

Accounting software is not inherently less accurate than enterprise resource planning software. On the other hand, quality accounting software should prioritise accuracy above all else. Accounting software is at a particular disadvantage in terms of maintaining the integrity of its data due to the fact that accounting platforms itself need to exchange data with third-party software in order to realise the full potential of the benefits they offer to an organisation.

ERPs offer more precise data load management capabilities than accounting software does. The enterprise resource planning system (ERP) manages a single database that multiple features, such as customer relationship management (CRM) and inventory management, as well as financial, human resources, and commision management, access, update, and validate. This eliminates the need for separate applications to share, sync, and draw information from their own individual databases.

Big Data at the corporate level will require high fidelity if it is going to be of any use to the organisation now that the Internet of Things is rapidly becoming a reality.

Even while this may be primarily the responsibility of CTOs and CIOs, all of the executives in the C-Suite should think about how the data gathering and validation they are doing now contributes to their big data analysis. These factors may encourage large businesses as well as small and medium-sized businesses to make the transition from accounting software to full-service ERP.

The Benefits of ERP for Your Business

ERP technology is better at bringing processes together, despite the fact that there is no software that provides a comprehensive solution for every company operation. You won't have the intelligence, acceleration, and adaptability you require to begin optimising your operations unless all of your processes, systems, and data are connected to one another.

Here are three ways enterprise resource planning (ERP) can help your company:

• Motivate people to perform at their best. You'll have access to insights that increase the quality of your decision-making and uncover new ways to boost the performance of your operations when you use solutions that integrate artificial intelligence (AI).

• Accelerate operational impact. By linking different processes and data, you will be able to bring more visibility and flexibility to employees, which will allow them to take action more rapidly and deliver more value to the company as a whole.

• Ensure the flexibility of the business. The majority of enterprise resource planning (ERP) systems are designed to be flexible and develop with their users' businesses. This gives businesses the ability to better anticipate and adapt to any operational disruptions or shifts in the market.

What Exactly Differentiates Accounting Software From Enterprise Resource Planning (ERP) Software?

You may have realised by now that the enterprise resource planning (ERP) software and accounting software are very different from one another despite sharing some functions in common. Nevertheless, despite the distinctions between the two, a large number of people use the terms interchangeably, which is not the appropriate thing to do.

It is imperative that you are familiar with these distinctions in order to choose between the two options that are most suited for your company. Let's get into the nitty-gritty of how enterprise resource planning software differs from accounting software:

• Scope of use: This is the most important distinction that can be made between the two. Accounting software is only concerned with the financial aspects of a company, but enterprise resource planning (ERP) systems not only contain but also expand beyond these considerations.

Accounting software is solely useful to individuals working in the finance or accounts department, whereas enterprise resource planning (ERP) software can be utilised by workers in any department within an organisation.

• View of the business: The nature of the insights that are provided by each option is still another important aspect that sets the two options apart from one another.

Accounting software can shed light on how well a company is doing financially.  Still, it does not provide cross-departmental insights by itself until it is integrated with an ERP. On the other hand, an ERP delivers an encompassing perspective of the business by combining all of the business data and giving the organisation a single, centralised source of information.

• Ability to meet business needs: Only the requirements of a particular industry can be satisfied by accounting software. For example, it is unable to track inventories for enterprises involved in production or distribution.

On the other hand, an ERP programme may handle inventories, production planning, supply chain, production resources, customer data, shipping, and other aspects of a business. ERP software can even be modified to match the most specialised requirements of an individual company. Within the food production industry, a bakery and a seafood factory can each use a distinct enterprise resource planning system, for instance.

• Planning & forecasting: An additional significant distinction between accounting software and ERP is that the former cannot assist with planning, budgeting, or forecasting, but the latter may assist with the planning of resources required, such as raw materials for the production process, the interpretation of market trends and forecasting using analytics, the recognition of inadequacies, the improvising of business workflows, and even the management of very complicated manufacturing operations at the shop floor.

• Compliance: One further significant distinction between the two is whether or not one complies with business, government, and financial regulations. An accounting software cannot help a company comply with standards and regulations like GAAP standards, tax laws, and financial regulations; however, an enterprise resource planning (ERP) system can by virtue of its dedicated regulatory compliance module reduce the likelihood of errors and recalls and assist a company in doing so.

• Cost of ownership: When it comes to the total cost of ownership, the two software packages are extremely different from one another. Even for smaller companies, the accounting software is quite cost-efficient and can be purchased for a reasonable price.

On the other side, the costs associated with adopting and maintaining an ERP are significantly higher in comparison. On the other hand, the introduction of ERPs that run in the cloud and on the web has made their acquisition more inexpensive.

• Personnel required for managing: Although owners of small businesses are fully capable of managing accounting software on their own, maintaining an ERP system requires significant effort. Manufacturing companies of a medium and large scale necessitate the services of an IT support staff to keep their operations up and running.

• It would be unjust, to tell the truth, to convert this into a debate about accounting software against ERP because both ERP and accounting software are significant pieces of software in their own right. The requirements of the company, regardless of how large it is, as well as its financial plan, are of the utmost importance.

In the event that a company needs a fundamental system that assists with financial reporting and automates accounting, purchasing an accounting solution could be a wise investment. On the other hand, enterprise resource planning (ERP) is the answer if the requirement is to manage all parts of the business, including accounting.

These days, thanks to the development of Cloud ERP, even small and medium-sized businesses are able to take advantage of the benefits of ERP software, such as improved and standardised processes as well as compliance with regulatory requirements, amongst other benefits, without having to worry too much about their budgets.

A Cloud ERP system is more cost-effective than a traditional on-premise ERP solution, making it easier for small and medium-sized businesses (SMEs) to include it in their spending plans.

Benefits And Drawbacks Of Changing To ERP

The difficulties that can arise for a small or medium business that is thinking about switching from basic accounting software to an enterprise resource planning system are similar to the larger problems that many SMBs encounter when they make the transition to enterprise scale. This transition involves a leap in scale that fundamentally alters the workflow of the business, as well as an increase in personnel, complexity, revenue, and risk. A successful installation of ERP is one step towards a successful transition from SMB to enterprise, but executives need to take into consideration the following while formulating their business plan.

There Are Three Signs That Indicate You Need an ERP

If you're having trouble with your legacy system and reading this, you presumably already know that implementation is in your future; nonetheless, the following symptoms indicate that you need new ERP beginning right now:

• The fundamentals are preventing you from making progress: It's possible that you've been getting by just fine with the fundamentals, but if your existing software is restricting your potential to grow on a worldwide scale and enter new markets, it could be time to consider upgrading to a more advanced ERP system.

• You have to deal with different kinds of systems: You have multiple different systems, and you've seen that they don't function together very well as technology advances. For instance, you might find that the new accounting software you purchased isn't compatible with the older HR system you're using, and you might be sick of squandering time and resources attempting to piece together a solution.

• You are unable to satisfy the expectations of your consumers. If both your employees and your customers are mobile, but your system is unable to accommodate them, it is time to make an investment in a system that can accommodate everyone.

If you believe that you cannot afford to invest in meeting the expectations of your customers and you are not willing to provide your workers with the tools they need to succeed, then you will, plain and easy, lose those customers to a firm that is in direct competition with you.

TIP: If you or your staff is asking for a new system and there is opposition to an ERP change, one of the ways to battle this is to schedule a demo so that everyone can see what options are available. This will allow everyone to get a better idea of what is currently available. Additionally, when everyone has a sense that they were included in the decision-making process, the implementation of the plan will be much simpler.

Which Aspects of the Business Stand to Gain from ERP?

ERP is capable of covering many essential tasks across your organisation, helping to break down boundaries between the front office and back office in the process and enabling the capacity to adapt your system to new business goals. The following are some of the most important functions of a business:

1. Commerce

An enterprise resource planning (ERP) system has the potential to provide a comprehensive, omnichannel solution for today's retailers, one that brings together the in-store, digital, and back-office experiences. As a consequence of this, customers will have a more individualised and hassle-free shopping experience as a result of AI recommendations, and retailers will be able to improve the productivity of their employees, assist in the reduction of fraud, and develop their businesses.

2. Finance

A modern ERP system will assist you in boosting your profitability while simultaneously driving compliance. It provides dashboards and AI-driven insights that provide you a snapshot of your money, allowing you to tap into real-time information whenever and wherever you want to. It should also help you reduce manually inputting information by automating everyday operations and provide tracking capabilities that assist with your company's regulatory compliance. Both of these features should help you reduce the amount of time your company spends on compliance issues.

3. Human resources

The most up-to-date systems provide methods for managing firm data and streamlining staff administration chores such as payroll, hiring, and other responsibilities. You will be in a better position to help retain employees, acquire new employees, and empower existing employees, all while analysing employee performance and recognising potential HR issues before they arise.

4. Manufacturing

This function enhances company communication, automates day-to-day activities through the use of robotic process automation, and provides manufacturers with the capacity to fulfil consumer requests and manage resources by accessing data in real time. The management of projects and costs, in addition to production planning, can all be optimised with the help of this solution.

5. Supply chain

Imagine if your organisation is still manually inputting information and attempting to locate stock in the warehouse. In that situation, automating these operations with ERP can help you save both time and money in a straightforward manner. You can get a better hold on your inventory management with the help of modern technologies that provide you with dashboards, business intelligence, and even technology based on the Internet of Things (IoT).

Why Is ERP Software Necessary for the Manufacturing Sector?

In conclusion, an accounting solution software can only manage the things that concern the financial and accounting parts of the company, and it can only do it in isolation.

It is unable to assist with buy and sales, planning and scheduling, customer relationship management, quality control, supply chain management, compliance with regulatory standards, warehousing and traceability demands, as well as research and development and formulation requirements (in case of process manufacturing businesses).

ERP software, which meets the requirements of virtually every type of company, is essential to the manufacturing sector for this very reason. It connects one department to another, such as accounting, and automates every operational action, which provides a much larger integration of corporate processes into a single system. Additionally, it allows for far greater automation of every operational activity.

Therefore, if you own a process manufacturing company and have been looking for a tool that will help streamline your entire organisation by covering every department, including accounting, your search can now be considered complete. Please don't hesitate to get in touch with us so that we can have a no-obligation conversation about the ways in which ERP is distinct from accounting software and the ways in which our ERP solutions may assist your company on a holistic level.

Accounting For Change

Earlier, we touched on the inclination for accounting software platforms to incorporate new capabilities that take the platform outside of the constraints of General Ledger. These new functions can be thought of as "add-ons."

Accounting software is expanding into areas of the business that are not typically connected with accounting, and now that we have explored the capabilities of ERP, it is a little bit clearer why this expansion is occuring. Let's look into this further:

• No platform wants to be redundant – Accounting software might, in many respects, be seen as a victim of its own success. SMBs can more easily develop into enterprise-level organisations with the assistance of MYOB, Xero, and their peers. When they reach the enterprise level, they now look to ERP to manage the activity of their businesses across the network.

In spite of the fact that this does not immediately render accounting software obsolete, it does make the software answerable to an umbrella platform that has the potential to eliminate the need for accounting software by deploying its own accounting module.

• Platforms need to keep growing – The business world needs to evolve, and the underlying software platforms must catch up. A company that isn't expanding its offerings is taking unnecessary risks. The platforms that provide accounting software are increasingly coming under pressure to innovate in order to attract new consumers.

• API invasion – While application programming interfaces (APIs) are essential to the interfacing of many platforms across the cloud, they also have the effect of obscuring the boundaries between individual pieces of software. Data is the power behind software, and platforms that fail to innovate risk seeing APIs become obsolete in their operations.

Why Some Companies Are Unwilling To Adopt ERP Implementation

In spite of all the available alternatives, there are still businesses who are hesitant to deploy ERP. There are likely many other explanations for this, yet every problem with fear has a solution.

1. FEAR: How can I be sure I'm picking the best ERP programme for my company?

It is not necessary to locate the ideal piece of software in order to solve all of your problems. Instead, ERP should be able to take the most beneficial aspects of the business procedures that you are already utilising and bring them together under the umbrella of a single system, all the while enabling all members of your organisation to view the same information. Once again, this is where the technology partner that you choose to work with is vital.

2. FEAR: We are unable to fund a significant ERP upgrade.

There is no need that an implementation proposition for a solution must be all or nothing. Depending on the requirements of your company, you may want to acquire individual modules of a software solution. Your staff will have an easier time transitioning into the ERP implementation phase as a result of this, and it will avoid you from having to make an investment in a significant software makeover before you know whether or not the capabilities you are adding will be profitable.

3. FEAR: We are really apprehensive about dismantling the processes that are already in place.

As was previously mentioned, the ERP system that you select needs to be compatible with the tools that are already being utilised by your company and ought to incorporate functionalities that are able to facilitate its continued expansion. For instance, if the software you have largely handles the financial, supply chain, and manufacturing portions of your company, you may want to search for a solution that brings in a strong business intelligence component. This can help you make better decisions about how to run your company.