Choosing between ERP vs accounting software for your business is an important decision both logistically and financially. While some business owners are drawn to the flashy features offered by ERP systems, accounting software may be enough to handle the everyday operations of many small to medium businesses.
Once you’ve selected the right software for your business, you also need to know how to use it to the best of its capabilities. A trustworthy CPA can help you implement your software and take full advantage of its features to help your business thrive.
What Is ERP?
Enterprise resource planning (ERP) software helps businesses manage and automate processes across departments or units. The centralized and unified nature of an ERP system improves efficiency, streamlines business operations, and promotes collaboration across departments.
Kumar and Hillegersberg described ERP systems as “configurable information systems packages that link information and information-based processes within and across functional areas in an organization.”
It’s easy to understand therefore why many large businesses opt for ERP software; companies that require a high level of collaboration between departments will find the capabilities offered by ERPs useful for streamlining their operations.
ERP Software Features
An ERP system will typically include several standard features. Though different providers or versions could offer more or fewer features, you will often find:
- A centralized database: Important and relevant business data will be stored in a centralized database and used as a single source of information for the whole company.
- Integration tools: These tools help connect business processes across finance and accounting, supply chain management, inventory management, and HR, among others.
- Reporting and analytics: Decision-making and planning are made easier with reporting and analytics capabilities. These are used to create reports and analyze KPIs as a basis for making decisions about core business processes.
- Inventory management: This tool tracks inventory, aids in warehouse management, predicts spikes and lulls in demand, and automates the replenishment process.
- Supply chain management: SCM capabilities can streamline procurement, inventory, forecasting, and logistics.
- Financial management: Financial management capabilities include standard accounting features, budgeting, and financial reporting.
- HR: HR features streamline many HR processes including employee tracking, scheduling, and compliance.
- Customer relationship management (CRM): CRM helps employees manage relations with customers.
- Vendor relationship management (VRM): VRM helps employees manage relations with vendors.
Businesses with several locations across Florida or the U.S.A. can benefit from the increased efficiency an ERP system offers as it makes it easier to track and coordinate business processes across the board.
What Is Accounting Software?
Accounting software is focused on the financial side of a business. It typically handles the recording of financial transactions as well as common accounting and bookkeeping processes like payroll and tax calculations. Businesses can use accounting systems to record, analyze, and report financial information as well as keep transaction records well-organized for bookkeeping purposes.
While you can find accounting software included in other systems like ERPs, some vendors sell accounting software as a standalone product. You can find the following common features in many accounting software packages:
- General ledger: works as an archive to record debits, credits, and balances
- Accounts payable: tracks money owed to suppliers or vendors
- Accounts receivable: tracks money owed to the business
- Financial reporting: generates balance sheets and cash flow statements
- Expense tracking: simplifies expense categorization, expense tracking, reimbursement processes, and expense reporting
- Tax management: calculates taxes and generates tax-related reports
- Payroll: generates pay slips and facilitates electronic employee payments and tax withholding
Types of Accounting Software
There are three main types of accounting software. Each caters to different types of businesses with distinct needs:
- Desktop accounting software: This software can be a great choice for small businesses because the software is installed on just one computer or network. Generally, it will offer services like invoicing, bookkeeping, and reporting to keep your business organized and compliant.
- Cloud-based accounting software: Cloud-based solutions offer more flexibility and accessibility than desktop solutions. This is because they allow multiple users to access the system in real-time and from any location. Cloud-based software could therefore be appropriate for small, medium, and larger businesses.
- Enterprise resource planning (ERP) systems: As we have seen, ERP software provides a comprehensive solution more suitable for larger businesses.
With so many different systems to choose from, your business can benefit from expert help both in selecting the right system for your company and implementing it. Our accounting software implementation services include customization, training, data migration, Go-Live support, and the ongoing support you need to seamlessly integrate your new software with any other software you use.
What Is the Difference between ERP and Accounting Software?
The main difference between ERP and accounting software is that ERP allows you to integrate and manage all business operations from a central location whereas accounting software focuses exclusively on the financial aspects of your business. There are several considerations to take into account when deciding if accounting software is enough for your business or if you want to invest in an ERP system.
ERP and Accounting Software Pros and Cons at a Glance
Each ERP or accounting software solution will offer its own pros and cons. However, the following advantages and disadvantages are fairly typical of ERP and accounting software solutions in general.
| ERP | ACCOUNTING SOFTWARE | |
| FEATURES AND CAPABILITIES | + Customization capabilities mean businesses can tailor ERPs exactly to their business’s requirements
+ Suitable for rapidly changing or expanding businesses |
+ Provides standard accounting features that will meet many companies’ needs
– Lacks potential for customization |
| SETUP AND ONBOARDING | – Setting up an ERP system is more complex than setting up an accounting system.
– Requires customization, extensive staff training, and data migration across departments – May require extra hours of staff training at further expense |
+ Simple to implement and use
+ Only requires training within the accounting department |
| FLEXIBILITY AND SCALABILITY | + The best ERP systems are easy to scale as they’re designed for larger organizations.
– Some ERPs have clunky integrations that can be laborious to customize. |
+ Easy to use and will require little customization
– Processes aren’t typically very flexible or scalable if you expand your business (although you may be able to scale by upgrading your subscription) |
| COMPLIANCE AND CONTROLS | + ERPs may offer features that help ensure compliance in the case of an IRS audit.
+ Features in some ERP systems have controls preventing the alteration of entries after putting them in the system. This also helps with compliance. |
+ Many small business owners aren’t proficient in accounting. Being able to alter data after the fact is advantageous as mistakes may need to be rectified retrospectively.
– Most accounting software doesn’t offer advanced features to ensure compliance or enforce controls. |
Which Is Right for You?
There are some key differences to take into account when deciding if ERP or accounting software is right for your business. As well as the pros and cons discussed in the table, take the following points into account:
- Budget: An accounting system will be more economical as it only offers basic accounting functionality.
- Scope: ERP solutions cover several aspects of business whereas accounting solutions only cover the financial aspects of your business.
- Size of your business: ERP systems may be more suited to larger businesses that need to coordinate human resources management, inventory management, sales management, and project management over several departments and locations.
Streamline Your Operations With the Right Software
Financial software has become a pillar of modern business thanks to its ability to streamline and automate financial processes. Indeed, making your financial processes more efficient is essential for remaining competitive.
That said, selecting a software solution is only the first step. Be sure to get help from professionals to implement your financial software and then use it to the highest of its capabilities. This will help your business maximize its return on investment.
