Difference Between ERP and Accounting Software

Difference Between ERP and Accounting Software

What is the real difference between ERP and accounting software? Most people use these terms interchangeably without understanding the difference between both. Understanding the difference between Enterprise Resource Planning (ERP) and accounting software is important because they serve distinct but interconnected functions within an organization’s management and financial systems.

To start off, let’s explore both terminologies.

What is Accounting Software?

According to Wikipedia, accounting software’s definition is “Accounting software describes a type of application software that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, journal, general ledger, payroll, and trial balance. It functions as an accounting information system.”

What is Enterprise Resource Planning (ERP)?

While ERP is defined as “Enterprise resource planning (ERP) is the integrated management of main business processes, often in real-time and mediated by software and technology. ERP is usually referred to as a category of business management software — typically a suite of integrated applications—that an organization can use to collect, store, manage and interpret data from these many business activities.”

The Real Difference Between ERP and Accounting Software

Accounting applications deals with accounting arrangements like payroll, accounts receivable, accounts receivable, and trial accounts. Even though there’s a crossover with ERP performance, both are somewhat different.

ERP applications are a resource management system, monitoring tangible and intangible resources, materials, human resources, and operations. ERP applications cover a selection of performance not generally provided by bookkeeping applications, which includes intangible elements such as human labor hours, product lifecycle, performance components, and customer relationship management.

In other words, accounting or bookkeeping application is a subset of an ERP package.

Numerous ERP platforms are offering exactly the exact same bookkeeping operation but with scalable expansion possible. The reason why that accounting software and ERP applications have come to mean the identical thing in the current market is the accounting applications as we traditionally know are fading away. As the business moves away from the term accounting software, it is likely that ERP software will completely replace the latter and will be the only term used by most moving forth.

The difference – Why it is important

Scope and Functionality

ERP software typically encompasses a broader range of functions beyond accounting, such as supply chain management, human resources, customer relationship management, manufacturing, and more. Accounting software, on the other hand, focuses primarily on financial management functions, such as bookkeeping, accounts payable and receivable, general ledger, and financial reporting. Understanding this helps organisations to select the right software that fits their specific needs and requirements.

Integration and Data Management

ERP systems are designed to integrate various departments and functions within an organisation, enabling seamless data flow and information sharing across different areas of the business. Accounting software, on the other hand, may not have the same level of integration capabilities. This is crucial when it comes to managing data and ensuring consistency and accuracy in financial reporting.

Scalability and Growth

ERP systems are typically designed to support the needs of large and complex organisations with multiple locations, business units, and diverse operations. Accounting software, may be suitable for small to mid-sized organisations with simpler financial management requirements. An ERP system may be better suited if your organisation is planning for future expansion or changes in their business operations

Business Processes and Efficiency

ERP systems often include features for streamlining and automating business processes, such as procurement, inventory management, and production planning. Accounting software, while focused on financial functions, may not have the same level of process automation capabilities.

Decision Making and Reporting

ERP systems provide robust reporting and analytics capabilities, enabling organisations to generate insights and make informed decisions across various functions and departments. Accounting software may not have the same level of comprehensive reporting and analytics features. A basic accounting software may not be able to provide you with detailed insights from your financial data.

Understanding the difference between ERP and accounting software is crucial for organisations to choose the right software that aligns with their business needs, supports their operations, and enables effective financial management and decision-making. It helps ensure that the software selected meets the organization’s requirements for functionality, integration, scalability, efficiency, and reporting, leading to improved overall performance and success.

If you are ready to explore ERP solutions and replace your accounting software, contact us and we’ll be happy to share more with you.