Business Management Software has undergone a lot of changes and upgrades. Every big organization is looking for Enterprise Resource Planning software. Since long, all have been using accounting software, and it’s essential to know what are the differences between ERP and accounting software. A lot of people think that Accounting Software and ERP are interchangeable. However, if you’re in discussion with an expert, you will realise both can be very different.
It’s essential to understand the difference between ERP and basic Accounting Software to know which one will suit your organization better. Let’s find out what are these differences.
Accounting software basically provides all functionality for accounting. This can include areas such as Accounts Receivable, Accounts Payable, Financial Reporting and Sales Recording. In the case of small businesses, accounting software is often the first software system to be implemented. However, its functionality is narrow and manages only one specific area of a business.
On the other hand, ERP software includes the same functionality as accounting software, plus some advanced tools. ERP also covers functional areas like Inventory Tracking, Customer Relationship Management,
Human Resources, Payroll, Barcode Scanning, etc.
Many businesses start with basic accounting functionality by using Accounting Software. However, when your business grows, you need to switch to an ERP solution to fulfil your need for additional functionality. A fully-integrated and comprehensive ERP software includes industry-specific functionality that is more wide and advanced.
Differences Between ERP and Accounting Software
1. ERP has All-in-One Features
The ERP system is utilized to enhance the production, sales, schedule production, use full capacity, and reduce inventory. However, the functionality of ERP software is to manage intangible assets, human resources, financial resources, and materials. It covers a range of functionality which is not in accounting software. It also involves intangibles like customer relations, human work hours, product lifecycles, and performance units. The differences between the ERP system and accounting software lies in this factor.
2. Accounting Software is a Subset of ERP System
Accounting is like a subset of an ERP system. Software for accounts deals with accounting transactions like accounts receivable, accounts payable, balances, and payroll. The modules often used in the software are General Ledger, Expenses, Sales Order, Purchase Order, Billing, and Timesheet. ERP software goes far beyond what accounting software can offer.
3. ERP Handles the Entire functions of an organization
The fundamental and primary difference between ERP and accounting software is that the accounting software handles individual business accounts. In contrast, Enterprise Resource Planning or ERP software handles the entire business accounts and functions of an organization. ERP caters to all the possible functions of the business and helps to provide a platform to integrate the business functions. It allows for a seamless flow of information between these functions. On the other hand, the accounting software doesn’t provide for this kind of functionality. It focuses more on the statistics and numbers of resources, budgets, departments, and reports.
4. Requirements of the Client & Organization
ERP systems can analyze the trends, improvise on the turnover times and recognize the shortcomings. All these things aid in optimizing resources such as materials, manpower, machinery, etc. This feature speeds up the client’s business process as it complies with the best standards used in the relevant industry. The need to switch to the ERP system or continue with the traditional accounting system depends on the business. If the client is expecting growth, the client should opt for an enterprise resource planning system instead of a conventional accounting system. This will ensure that the growing business adapts well and makes optimum use of the resources.
Bottom Line – The Future of ERP System
Slowly, the ERP software may take over the accounting software entirely in the future. The industry is moving ahead with times. The accounting software usage is fading away as more and more people are using ERP software. The business all over the world is feeling the need to stop with the traditional accounting system and adopt the advanced ERP packages available in the market.