Are you looking for a suitable solution to automate asset-related processes within your company? Then, you should pay attention to ERP systems and accounting software first. Indeed, such solutions have become indispensable attributes of the digital infrastructures of companies that operate large volumes of business and customer data. Many companies use them together, while some settle on only one option. Which of them should you choose, or is it better to use both at once? Below, we will help you figure it out.
What Is the Difference Between ERP and Accounting Software?
So, what is an ERP system in accounting? In a nutshell, it is software that helps businesses automate and manage core business processes to achieve optimal performance. Typically, these business processes include finance and accounting, supply chain, human resources, purchasing, distribution, inventory management, and more. Also, ERP systems are characterized by a single centralized database, which represents a single source of truth for all departments that interact with it.
As for accounting software, its main and only task is to automate the processes of the accounting department, in particular, all those associated with monitoring the company’s expenses and income. In practice, such software solutions include incoming payment history, recurring expenses (including those related to debts and loans), analytics, invoice creation, and inventory control).
The key difference between these two types of software is their purpose: while accounting software is focused on optimizing and centralizing tasks related to managing and monitoring a company's financial flows, ERP systems connect the financial component with the processes in which it participates. Thus, the second type of software allows companies to make more informed decisions about managing their budget.
Benefits of Using ERP Software
Now, let's look at the main advantages of ERP software.
Reduced IT costs
ERP systems usually cover many more processes than accounting systems, which means that only one team will need to support them (and update them if we are talking about a custom product). This is much more convenient than using several autonomous solutions that need to be integrated with each other and updated individually.
Real-time information and faster reactions
ERP systems allow company employees to make changes or update data in real time. Thus, each department that has access to such a system (unlike accounting systems, which are available to accounting departments only) will be able to use up-to-date data without the need to synchronize it.
ERP systems provide more productive interaction between company departments, reducing the need to coordinate these processes outside the digital plane. This is more convenient and prevents missing important information.
Greater productivity and efficiency
ERP software, in many cases, provides end-to-end automation of processes related to the financial component of the company – this includes inventory management, planning work processes, payroll calculation, and much more, which ultimately determines the level of business profitability.
Better customer service
Another particular use case for ERP systems is tracking orders and deliveries. This directly affects the quality of customer service without requiring the use of any additional software solutions. Thus, by getting much more than ERP accounting features only, companies can lay a solid foundation for cultivating loyalty among their customers.
Benefits of Using Accounting Software
Let's try to contrast the advantages of accounting systems with the above-mentioned advantages of ERP systems.
Accounting products are usually affordable for small businesses (many are completely free). At the same time, the implementation of even a ready-made, full-fledged accounting ERP system can reach thousands of dollars, not to mention custom development.
ERP systems often have redundant functionality that is not needed by the vast majority of small and medium-sized businesses. Thus, they have to overpay for something that may never be needed at all. As for accounting software, it has limited functionality that the vast majority of accountants use, so the cost of implementing such products will most likely pay off in full from the very beginning.
Experienced accountants from one company to another deal with similar accounting solutions, which means they are unlikely to require lengthy onboarding to fully master the functionality of a new product. At the same time, ERP accounting software can be difficult to master. Moreover, specialists working in the SMB sector may never have any experience interacting with such software products.
Accounting software usually seamlessly integrates with other components of the company’s IT infrastructure, which simplifies their customization to the workflows occurring within it. At the same time, the more complex the software, the more difficult its integration, and this thesis rightly applies to full-scale ERP systems.
Accounting software has a low entry threshold, as it often involves only entering data to calculate specific indicators. Thus, changing from one product to another does not cause any downtime since specialists from the accounting department can easily apply their existing skills to the new solution as well.
Why ERP Is the Right Choice for Growth
Of course, both types of software, ERP system and enterprise accounting system, have significant advantages that make them a good choice for a specific company. At the same time, if your company is committed to constant growth and development, the accounting system may not be enough. In particular, some of its capabilities may be limited and, thus, force you to purchase additional third-party applications to automate related processes. In turn, choosing an ERP system will ensure synchronous growth of your IT infrastructure with your business needs, and you will receive a comprehensive solution for optimizing all tasks related to your company’s assets.
At the same time, it is important to understand that using basic ERP systems like Excel ERP may be a good solution only at the beginning of your business evolution. Over time, the functionality of such products will limit your automation capabilities and create new obstacles to achieving optimal efficiency. Conversely, regularly purchasing licenses for customized ERPs may result in you being forced to overpay for excess functionality, while many processes specific to your company will still be missing out on being automatized to one degree or another.
That's why when you reach a certain stage of your business growth, you will most likely have to think about custom development. In this case, you will certainly have to invest in a large project initially, but over time, this investment will pay off in full.
As you can see, in comparison with accounting systems, ERP systems are more fully functional solutions that can meet the needs of businesses of any size. It probably doesn't make sense to use them in a small business, especially when it comes to custom products.
However, when your business begins to scale rapidly, you will definitely need to think about switching from an accounting system to an ERP one. If you understand that it is the best choice for you but are disappointed in the capabilities of ready-made, out-of-the-box solutions, you can always choose us for custom development.
We will carefully analyze the existing business processes in your company and also take into account your long-term goals to create a product that will grow with you. You can also verify our expertise by considering one of our latest cases dedicated to the creation of a custom ERP software for oil and gas industry. And, of course, you can contact us at any time convenient for you to discuss the details of your project and calculate its budget.