ERP and Accounting Software Differences

ERP and Accounting Software Differences

If you have a business of nearly any size, you’re using some sort of accounting software to run it. Most small businesses start out on QuickBooks or similar, which does a great job with basic accounting requirements.

But what happens when you outgrow your accounting software? Or, what if you’re starting a business whose operations and finance structure will be complex right away? You might need to consider something more robust. As you begin your search, you might come across the term, “Enterprise Resource Planning” or “ERP”. These software solutions offer accounting plus other business functionality and are often the logical next step for emerging companies or those with more complex requirements. Before you make your short list, read this post to understand some key differences. 

Difference #1: Functionality

Accounting software generally provides accounting functionality only, like accounts payable and receivable, financial reporting, bank management, and some ability to record and track revenue or sales. 

While an ERP system has all the core accounting features, it also has functionality for nearly every other aspect of the business, including manufacturing/supply chain management, inventory and warehouse management, eCommerce, and more. 

Difference #2: Coverage

Accounting software is designed to manage accounting only, but this makes sense, as all businesses need accounting—arguably before anything else. Other functions can, for the most part, be handled manually or with spreadsheets (for a time, at least). 

ERP software is considered an end-to-end business management solution. It is designed to not only manage other areas, like manufacturing or warehouse/inventory management, but more sophisticated, industry specific functionality, depending on the industry.

Difference #3: Integration

Accounting software generally stands alone. It does not (or cannot) integrate with other systems. Although it’s not likely you have other systems if you’re using a basic accounting package, if you do use something else, it’s doubtful that the two can talk to one another. 

An ERP system, on the other hand, is fully integrated; all its “moving parts” talk to one another. The advantage is that data can flow between areas and into and out of the accounting component without requiring double entry. 

Difference #4: The Intangibles

ERP systems were designed to manage intangible assets as well as tangible ones. An ERP solution can help you manage human resources, customer relations, product lifecycles, and more. 

Difference #5: Accounting vs True Business Management

What it all boils down to is this: accounting software simply manages accounts, while ERP software helps you manage the entire business. With that, an ERP system can help you understand how the business is performing. With visibility across your entire organization, combined with artificial intelligence and analytics features now available in most ERP systems, you can dig down into the data to analyze trends and other performance indicators to find ways to improve and optimize.

Choose The Right Solution For Your Business—For Now And The Future

In short, accounting software can be considered a subset of ERP. So, what does your business need? There is no right or wrong answer; it depends on your business processes and the volume of business you do—but it also depends on where you’re going. ERP systems were made for companies that want to grow, so it’s important to carefully consider your future needs as well as those you currently have. Think about your strategic and financial goals as well as what the software should help you accomplish.

If you’re ready to move off your accounting software and into an ERP solution, contact the ERP experts at ArcherPoint.

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