ERP or Accounting Software? Which is Superior?

PostedOn: 2017-04-17 15:12:51

Businesses often confuse enterprise resource planning (ERP) with accounting software. While these two applications have functions that overlap, they serve very different purposes. Here are the benefits of each program, so you can decide which one is best for you.

What is Accounting Software?

Accounting software helps a business handle their financial processes. These programs handle wide-ranging ledger and payroll functions and carry out accounting operations. Accounting software falls into two main categories: single-entry systems and double-entry systems. Single-entry applications automate basic financial tasks, such as record keeping and check writing; double-entry applications manage more advanced functions like inventory and invoicing.

Unlike ERP, accounting software only processes financial data. Users will need to analyze financials such as cash flow and fixed assets manually. This is often labor-intensive because an important person needs to make sense of all the data.

Think of accounting software as "entry level." It lacks the functionality to make predictions about a company's financial position and doesn't automate advanced tasks like ERP does.

What is ERP?

ERP, on the other hand, provides users with a comprehensive overview of their financials. These applications execute accounting operations record keeping, check writing, fixed assets, inventory, invoicing, etc. but also forecast future financial growth, making it a powerful piece of software for businesses of every size.

Another benefit of ERP is that it gathers data from multiple databases and displays it in one single location. Users can then access this information and collaborate on projects. Cloud-based ERP provides users with even more benefits. These programs save data in the cloud, so businesses can view information anywhere in the world.

When businesses integrate ERP with their customer relationship management (CRM) system, they can predict customer trends and patterns. This helps them move customers through the sales cycle and fine tune their marketing efforts. ERP collects data sets from various sources to provide users with business intelligence about sales and operations. Custom reports let them assess, and then act upon, important business information.  

More businesses are using ERP than ever before. Eighty-one percent of organizations have already implemented this software or are in the process of doing so, according to Panorama Consulting Solutions.

Which is Superior?

ERP offers all the features of accounting software but comes with other functions, too, making it a better fit for most brands. It provides users with an abundance of data that lets them make quick decisions which influence the business development and simplify supply chain management.  

ERP also helps businesses improve their operational efficiency at every stage of the supply chain. Companies can track product development, handle complicated financials and enhance delivery processes. In fact, mid-sized companies who use modern ERP systems can increase on-time deliveries by 24 percent. Users are able to customize ERP software to suit their business requirements, too. 

Still, accounting software could prove useful for many companies. Only 40 percent of small business owners feel they are knowledgeable about accounting and finance, according to one study. Accounting software supports companies that want to record and track financial data in one place.

While accounting software is useful as a basic source of financial information, ERP offers much more scope. ERP provides users with a holistic overview of their finances, helping them manage cash flow, pay staff on time and predict future events. It better suits companies that crave more control over their accounts.