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 loosely without really understanding the difference between both. In reality, most are beginning to use the terms interchangeably. Knowing the difference will be able to help you compare accounting software and ERP program.

To start off, let’s explore the terminology of both in detail.

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.”

To fully illustrate the gap between accounting applications and ERP applications, let us look at the selection of functionality traditionally provided by each.

The Real Difference Between ERP and Accounting Software

Accounting applications, according to its title, 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 is 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 intangibles elements such as human labour hours, product lifecycle, performance components, and customer relationship management.

In other words, accounting or bookkeeping applications, because it is traditionally understood, is a subset of any ERP package.

Let us take the Microsoft Dynamics 365 modules for instance, where the functionalities are way beyond a simple accounting software. There are various other modules such as Field Service, Sales Management, Customer Relationship Management and more – which works seamlessly together.

Operational areas such as supply chain management, analysis and reporting, human resource management, project management as well as IT management are services which could be coordinated and handled under the Microsoft Dynamics 365 applications.

But, all this is semantics. Sure, accounting applications and ERP software might be two distinct things, but does this really matter in the modern environment?

Numerous ERP platforms such as Dynamics 365 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 is 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.

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.