WHAT’S THE DIFFERENCE BETWEEN ERP AND ACCOUNTING SOFTWARE?

Though the terms accounting software and ERP are often used interchangeably, understanding the differences between the two can help you better determine the best solution for your business.  The key differentiator between ERP and accounting software lies in their functionality, range, design, outputs, and size.  Put simply, accounting software can be a piece or subset of a comprehensive ERP solution.  Understanding this key distinction may influence your buying decisions and allow you to compare products within the same product category.

In the last few decades, we’ve seen a lot of changes to business management software solutions.  Emerging technologies like the Cloud and the adoption of the Software-as-a-Service model have made full-blown ERP affordable for small to mid-sized businesses.  While businesses of all sizes have long considered accounting software a necessity, that functionality is increasingly being fulfilled by more comprehensive ERP solutions.

Accounting software is able to track money flow by processing account receivables and payables while generating reports which display profit and loss to illustrate the financial status of the organization.  Enterprise Resource Planning (ERP) software can handle the full range of business functions with the ability to integrate multiple departmental functions, including accounting, into one seamless solution.

Think of an ERP solution as a collection of legos with pieces that can be fit together when needed or left out when unnecessary.  The accounting lego almost always comes with the starter pack.  It is a subset of any ERP bundle, but accounting is far from the extent of a modern ERP’s functionality.  In fact, other subsets of modern ERP bundles include order fulfillment, invoicing, inventory management, production management, job costing, reporting, eCommerce, Human Capital Management, Customer Relationship Management, and more!  ERP should be thought of as a system of record that can integrate with specialized third-party products, making the boundaries of modern ERP limitless.

Is It Time To Move From Accounting Software To ERP?

There’s no doubt that entry-level accounting software packages like Sage 50, Quickbooks and Freshbooks can benefit small businesses for a time.  These solutions offer basic financial management features, however, relying on basic accounting software will eventually stifle growth.  As your business grows you’ll either need greater functionality, the ability to process greater volumes of data and reports, more users or the ability to access the application from multiple locations, all of which can be achieved by upgrading to a comprehensive ERP solution.

Knowing when to make the jump to ERP is like knowing when you need glasses.  It’s not always abundantly clear that there’s a problem.  It’s a slow and subtle deterioration that likely goes unnoticed until that is, there’s a problem.  Suddenly you can’t read street signs when driving, or squint at the newspaper over coffee in the morning.  The right prescription glasses could easily correct your deteriorating sight, the same way that a “prescribed” ERP solution can empower decision makers and return business performance to its peak.

If you are unsure whether your business is ready to ERP, check out our blog post, “5 Signs your Business needs ERP Today!”