4 Major Differences between an Accounting and ERP software

Are accounting and ERP software the same? This is a very common question asked by stakeholders in small to large organizations. While there are a few overlapping features, there is a considerable difference between an ERP and finance software

In this article, we will explore some of the major differences between these two types of software. But before we begin, let’s take a look at the relationship between accounting and ERP. Accounting may not be the most likable area of a business, but it is one of the most critical components of a business. Having a clear understanding of your firm’s financial health gives you clarity regarding your investments, spending, and earnings, enabling you to scale effectively. 

With the arrival of technology, manual accounting practices are gradually vanishing. We are seeing more and more small businesses use accounting software to streamline their accounting processes. In fact, a Statista report says that around 64.4% of small businesses use accounting software to organize and simplify their accounting [1]. 

While there are plenty of financial accounting tools available, a lot of companies opt for an all-inclusive ERP solution. However, a lot of people use the terms “ERP” and “accounting software” interchangeably. In reality, they are two completely different things and have different roles in a business. 

Before you make a decision about investing in an ERP or finance software, you should understand the difference between the two. Let’s take a look at them.

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Difference between ERP and accounting software

1. ERP tools are inclusive

Before we begin, it is essential to understand what an ERP system is and what it does. So, the main question here is what is ERP? Enterprise resource planning or ERP is primarily an all-inclusive software that comes with a bunch of tools for different business operations and processes. These include marketing, manufacturing, accounting, human resources, and customer relationship management. 

On the other hand, a typical financial accounting software only addresses the accounting parts of your business. An ERP is also capable of handling various aspects of accounting including accounts receivable and payable, financial reporting, and banking. Having said that, it also offers different modules that are designed to handle processes in different parts of a business. An ERP software has a lot more to offer than an accounting software, and this has to be one of the major differences between an ERP and an accounting software. 

2. Accounting tools do not offer real-time information

Daily life of business people at the office

On many occasions, your standalone accounting software may not be able to exchange information with your other software solutions. Information and data between different software systems are only possible when all the tools have excellent integration options. 

When your accounting software is not integrated with your CRM or other tools including human resource management (HRM), customer relationship management (CRM), and more, you are required to update information manually. Although this may not come across as a major issue, this becomes a tedious activity when your business expands. Besides, manual data entry also increases the chances of making errors. 

Hence, users do not have the luxury to pull out real-time information if different software systems are not synchronized. This is a key difference between an ERP and accounting software. 

ERP systems blend different parts of your business and cater to different areas of a business. The advantage of using an ERP is that you will be able to perform different tasks related to different departments from a single platform. 

3. Accounting software does not address niche industry requirements

Typically, accounting software vendors stick to a one-size-fits-all approach. While this approach may work fine for the firm that develops the tool, it does not provide significant value to a typical end-user. In an ideal scenario, you would want your accounting software to handle niche industry requirements. However, most of the standard accounting tools lack features that are specific to your industry. This is another difference between an ERP and accounting software. 

For example, an accounting software might not have the right features to track your inventory. You would require to install third-party software to fulfill your requirements. It would be a wise decision to opt for an ERP system that can handle the niche requirements of your industry that also come with accounting features that are beneficial to your firm. 

4. ERP software come with customer service management

Customer service icon

There is no doubt that standalone accounting software does a good job while handling accounting. However, it has very few features that can help other aspects of your business including customer relationship management. This bridge between different applications could make it significantly difficult to ensure your numbers are accurate. 

An ERP system combines different elements of your business and provides an end-to-end CRM solution. Here, you can easily access customer information, and past interactions, and update the status of your customer relationships effortlessly. In short, you have access to far more features in ERP software in comparison to a standalone accounting system. 

Choosing the best ERP software for your business

If you have made up your mind about investing in an ERP system for your business, it is time to take the next step. You can begin by assessing the areas within your company that can be improved. Get clarity about where you see your business in the next few years and if you are on the right track. This will give you a better understanding of the features you are looking for.

The next phase would be to finalize a budget and find an ERP tool that fits your budget. While defining the budget, ensure you take into account the “hidden fees” and costs. Besides, you may have to shell out some extra cash for software maintenance, implementation, and hardware upgrades. 

If you are wondering which are the best ERP software solutions around, you can go through the ERP tools on our website. Compare the features, and pricing plans, and select the tool that is suitable for your business. 

SEE ALSO: 7 Accounting Software Trends to Watch Out in 2022

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Karandeep V

Karandeep V

Karandeep was born in Pune, Maharashtra, an upcoming metropolitan city in the Western region of India. While most members of his family are engineers, he had different ideas. He was more inclined toward exploring the non-technical aspects of a business, which is why he studied Bachelors of Business Administration at Symbiosis International University, Pune.  Having said that, his love for new and upcoming technologies remained intact, which is why he has written extensively about technology throughout his career. After a brief stint with a gaming company at the beginning of his career, he discovered that his love for writing was not temporary.  Being a tech geek, he always liked installing and playing around with new applications on his mobile devices and the home desktop. He was fascinated by how technology can simplify even the most mundane and complex tasks with just a few commands. He keeps a close eye on how businesses use different tools to streamline their operations to boost productivity and efficiency. At ToolsMetric, he writes product reviews that cover the main features and specifications of different enterprise applications. The sheer amount of innovation and hard work that goes into building these tech solutions is one of the reasons why Karandeep loves reviewing these tools. Besides product reviews, he also writes interesting news articles and blogs that track the latest developments in the tech industry.  When he is not writing, you can find him rooted to his seat playing video games, watching movies, or supporting his favorite football team. Since his childhood, he has always loved to travel and explore new places. Traveling is a major part of his life due to a myriad of reasons such as experiencing new cultures, food, and traditions. His other hobbies include playing football, cooking, and running.  You can find him on LinkedIn here.

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