Key Differences Between ERP and Accounting Software

If you are a business owner (small, medium or large), you would be familiar with terms such as ERP and accounting. You may also have used one or both in your business. Yes, you may have caught yourself interchanging both terms during office conversations!

If you’ve been using ERP and accounting interchangeably, you haven’t committed any crimes – not yet. However, it is important to know the key differences between ERP and accounting software, especially when you’d need to pay for either of them. This knowledge ensures that you understand your business’s exact needs for either software. Paying for an accounting system when you need an ERP system can have awful consequences, and vice versa.

What Do You Do with Accounting Software?

Accounting software is any digital solution that helps you manage your business’s banking and financial transactions. The following is a quick list of the operations you’ll most likely complete with an accounting software:

• Accounts receivable
• Accounts payables
• Bookkeeping
• Periodic financial reporting
• Mileage tracking (for more advanced accounting software like QuickBooks, Xero and Oracle).
• Bank reconciliation
• Payroll processing

Accounting software is basically the first software you’ll invest in as a small business owner. Therefore, it is important to ensure you get your figures right from the very start of your business. The items on the list above are about all the features an accounting software offers your business. However, as your business expands, you’ll need a business solution that can scale seamlessly with your business. In essence, you’ll need to integrate your accounting software with other business software or opt for data migration services to do more.

What Is ERP Software?

On the other hand, an ERP system is an all-encompassing system that handles more than the finances of a business. An ERP software covers and integrates different functions that have to do with other aspects such as logistics, customer relationships and employee/staff management. These functions include:

• Customer relationship management
• Human resource management
• Inventory Management
• Supply Chain Management
• Financial Management
• Business intelligence

Differences Between ERP and Accounting Software

1. ERP Software is Usually Inclusive

Most accounting software only run what appears to be a generic aspect of business finances. Therefore, it may not be able to meet the industry-specific needs of businesses. On the other hand, an ERP system is usually inclusive as it covers other functions that may be unique to some businesses.

2. ERP Software is Priced Higher

Since an ERP software includes the functions of a host of other business solutions, such as inventory management, customer relationship management and financial management, it is usually costlier than standalone accounting software.

3. Ideal for Medium to Large Businesses

Suppose you’re a small (or startup) business owner, and your business needs can be efficiently met using manual operations. In that case, it may not be cost-effective to opt for an ERP system. However, it is worth considering one when your business begins to scale.

4. ERP is not Accounting-Centric

Most ERP solutions that include a financial management option often provide surficial financial management operations. However, even when advanced operations are included, they are usually not as detailed and thorough as is obtainable with software dedicated solely to accounting. As a result, many entities using the ERPS also use or integrate a specialized accounting software adding to the cost overheads in licensing. 

Nonetheless, you can make significant upgrades to your accounting system to relatively match the provisions of ERP software, at least, when you choose the right accounting software provider. Many businesses don’t require comprehensive ERP software and need to manage their revenue functions like invoicing, billing, cash and expenses, financial reporting and basic inventory. But, many businesses are oversold ERP products and spend hours in IT and administrative costs, learning to use the product, adapting business processes to the new ERP and incurring expenses on maintenance. Switching over to a simpler yet robust accounting software could save on overheads, reduce the learning curve and increase productivity. 

Data Migrations with SaaS Direct

Migrating accounting data requires an understanding of the chart of accounts, the key finance data and must ensure data integrity, security and accuracy. SaaS Direct specializes in accounting data conversions and data migrations with capabilities to convert 40+ software. With over 1500+ accounting data conversions delivered and over 25 years of cumulative ERP and accounting data migration experience, SaaS Direct helps businesses improve productivity and increase financial transparency. Talk to us regarding your data conversion needs for a session of expert advice.