What is the difference between ERP & Accounting Software?

What is the difference between ERP & Accounting Software?

In the business community, ERP and Accounting Software are erroneously considered to be the same and thought they come with the same functionality. The scope of an ERP is much greater than accounting software and they should not be confused as one.

An accounting software as the name suggests is used to manage the accounts of the business, it keeps track of all the financial activities of the business on the other hand an ERP is a business management software that comes with integrated modules and applications that let the business collect, store, manage and interpret data from different business activities which results in smooth functioning of the business and driving growth.

Let’s have a look at exactly what Accounting Software is and how is it different from ERP Software, the scope of both from the business perspective, and how beneficial they are to the organization.

What is an Accounting Software?

Accounting software manages the financial and cost accounting activities of the business and generally includes functions that empower the finance department of the organization.

It keeps track of financial transactions such as:

  • Journal entries
  • Cashflows
  • Accounts receivables (AR)
  • Accounts payable (AP)
  • Balance sheets, etc.

Accounting software facilitates the finance team to speed up the collection and storage of key financial reports that can easily be streamlined.

The main benefit of Accounting Software is that it improves financial health and visibility, speeds up decision making, and reduces the cost of administrative labor.

In nutshell, it gives a macro view of all the financial operations of a business. It has high utility in day-to-day accounting operations, which helps in recording sales, monitoring revenue, and tracking invoices, apart from allowing the generation of key financial reports.

What is an Enterprise Resource Planning (ERP) Software?

An Enterprise Resource Planning (ERP) Software is a business management solution backed with integrated applications and modules that helps in managing the different business functions. ERP combines financial management, supply chain, CRM, etc., which helps businesses gain complete visibility and control over the organization’s processes.

An ERP provides a single source of truth which provides data analysis capabilities for better controlling and forecasting across data-wide functions. It streamlines and integrates various business processes that boost productivity.

Why ERP is better than Accounting Software?

  •  ERP software has more functionalities than accounting software and it goes far beyond what accounting software can offer. An ERP has accounting and financial management capabilities along with other modules coverage like sales, purchasing, inventory, warehouse, CRM, and HR.
  • Stand-alone accounting software is not meant for industry-specific needs. Tracking the inventory accounting software requires third-party add-ons while ERP is backed with rich functionalities that could manage almost all the business activities.
  • Accounting Software does not include sales or customer relationship management functionalities while an ERP software comes with a seamless CRM module that allows businesses to have updated contact information and access the history of previous communications.
  • ERP Software provides the accessibility of Real-time data in a single database which provides an integrated solution for a wide range of business processes. ERP systems connect every part of the business which facilitates intelligence decision-making.
  • ERP Software helps businesses with planning and forecasting the changing market trends, while accounting software lacks this capability.
  • Accounting software cannot help businesses comply and adhere to government regulations, while ERP software helps the business in meeting industry, governmental and financial regulatory requirements.

Closing Statement

If you are using Accounting Software, once your business grows, at some point the small business accounting software would become incapable to manage the growing needs of your business. An ERP would not only streamline and integrate your business functions but would also provide a single source of truth to manage all the business functions through a single platform, which will help your business manage the functions better and drive growth.

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