ACCOUNTING SOFTWARE VS. ERP. WHAT’S THE DIFFERENCE?

There are many key differences between an Enterprise Resource Planning (ERP) software and a standalone accounting software. Despite these differences, there remains a false impression that leaves many people using the names interchangeably. Understanding the key differences between the two categories of software is the first step to determining the right solution for your business processes.

While there is some crossover over in software capabilities, they key difference lies in the number of capabilities each solution has to offer. Accounting software offers financial management through accounts payables, accounts receivables, general ledger accounts with reporting, and payroll. ERP software provides multiple modules, including the same accounting features as a standalone accounting software, as well as applications for supply chain management, inventory management, human resources, and eCommerce.

What is Accounting Software?

Accounting software is used to track financial transactions and record profit / loss margins to improve overall finances and cash flow. Core functionalities include general ledger (GL), accounts payable (AP), accounts receivable (AR), bank management, and financial reporting. Common additional functionalities include payroll services, billing, project management, and inventory management data.

Accounting systems are designed to manage only one specific area of a business. Many first-time, and small business owners will solely implement accounting software, while other operational tasks such as inventory management and customer service requests are tracked manually.

Additionally, accounting software is primarily used by finance and accounting departments as part of their daily operations. Accounting modules such as fixed asset management and billing/invoicing provide a streamlined data collection of key financial information and create key financial reports such as profit and loss statements, balance sheets, and income statements.

What is ERP Software?

Enterprise resource planning (ERP) software includes the same functionalities as accounting software, plus other key tools for managing daily business processes. An ERP is defined as the integrated management of main business processes, often in real time and mediated by software and technology.

This fully integrated solution usually includes inventory management, supply chain management, customer relationship management, and warehouse management. These additional capabilities integrated with financials will provide:

• Sales management – quotes, sales order processing, invoicing, returns and credits, and sales forecasting.
• Customer relationship management – lead tracking and work order management.
• Procurement management – automated purchase orders and requisitions.
• Production control – material resource planning and bills of materials.
• Operations management – workflow-based alerts.
• Improved inventory control – warehousing stock transfers and improved picking/packing.

Which is Right for your Business?

If your business prefers keeping track financials separate from other areas of your business or has unique financial needs that can only be handled in a dedicated accounting system, then a stand-alone option will be for you.

However, businesses are finding traditional accounting software is becoming less and less common as businesses turn to fully integrated management solutions to meet their needs. Because ERP software includes all the necessary accounting features PLUS other key tools for managing daily business processes, it wouldn’t make sense to implement both systems. Instead, once your business has outgrown manual processes and requires additional features for daily business processes, we suggest implementing an ERP software.

Your Next Steps

If you think your business is ready to implement an ERP solution, contact the ACC Team! We’re here to walk you through every step of the way (and beyond!).