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5 Main Differences Between ERP and Accounting Software

05 Nov, 2020 | Business Tips

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Accounting may not be your favourite aspect of your business, but it’s a necessary step for any enterprise. Keeping careful track of your numbers gives you more control over your business and allows you to grow to your full potential. Manual accounting or the use of traditional accounting software may work for small business owners at first, but the process can quickly become tedious and time-consuming.

You may have considered enterprise resource planning, or ERP, as an all-inclusive solution. Many people use the terms “accounting software” and “ERP” interchangeably, but they’re actually two different things that play vastly different roles in your company. There are a few important distinctions to make between ERP and accounting software before you decide which to invest in for your business.

 

  • ERP Solutions are More All-Inclusive

It’s important to fully define ERP before we can compare it to traditional accounting software, which is why we’ve chosen this as our first point. ERP, or enterprise resource planning, is essentially a database software package that encompasses all of your business’s operations and processes. This could include human resources, marketing, manufacturing, and, of course, accounting.

Basically, traditional accounting software handles only the accounting aspects of your business, while an ERP is a more all-encompassing option. Both options are likely to cover accounting elements like banking, accounts payable and receivable, financial reporting, and the like. But ERP will give you other modules for various other parts of your business. ERP software goes miles above and beyond what any accounting software could do for you.

 

  • Accounting Software Can’t Provide as Up-to-Date Information

Your standalone accounting software, more often than not, can’t communicate with your other software in real time. You’ll have to manually enter figures from your sales software, inventory management software, and other programs. While this might not sound like a huge problem, it can become incredibly time-consuming as your business grows, and it opens you up to a bigger chance of error. Not to mention that you won’t be able to pull your numbers on a moment’s notice.

ERP systems combine every aspect of your business and are able to handle all your various business processes. You’ll just need one program to handle it all, eliminating the need for tons of different software and hours to combine all the information. Plus, many ERP solutions offer cloud-based programming, meaning you can access your numbers anywhere you are, anytime you need them.

 

  • Some Versions of Either Aren’t GAAP Compliant

This next point is something to be aware of no matter which solution you choose. GAAP, or Generally Accepted Accounting Principles, is a combination of commonly accepted ways to record and report information along with authoritative standards that are set by policy boards. GAAP is used by the Financial Accounting Standards Board as the foundation for its set of accounting practices and methods. To ensure you’re on the up-and-up with your numbers, any software you use should be GAAP compliant.

Unfortunately, there is a lack of GAAP compliance with both standalone standard accounting software and ERP solutions. Even if the software does allow for GAAP compliance, it may be difficult to navigate and ensure that you’re using it correctly. Be sure to ask your vendor of choice whether their software can help you comply with local tax laws, financial regulations, and GAAP standards. 

 

  • Accounting Software Doesn’t Address Industry-Specific Needs

Accounting software is often designed to be one-size-fits-all. While that might make sense for the company designing the software, it doesn’t provide much value to the typical consumer. You want your accounting software to handle industry-specific needs, which many versions of standard accounting software simply aren’t equipped to do.

For instance, with your accounting software, you might have a limited ability to track your inventory. You may even have to install a third-party add-on that may or may not actually serve your needs. If you utilize an ERP that’s specific to your industry, however, you’re more likely to get the accounting features that actually matter to you and can benefit your business from day to day. 

 

  • Accounting Software Lacks Customer Service Management

As we’ve mentioned, standalone accounting software strictly handles, well, accounting. There’s no room for assistance with any other aspect of your business, including customer service management. This disconnect can make it difficult to keep all your numbers straight. Let’s say, for instance, you resolve a customer complaint by taking a 10% discount from their order. If you have to go to a whole new system to enter this change, you might forget and be left with mismatching figures at the end of the day.

On the other hand, an ERP solution can combine these elements with a seamless CRM module. You can see all of a customer’s previous interactions, update their information, and more. You’ll get far more capabilities than you’d receive with standalone accounting software and will have a more streamlined experience overall.

 

ERP vs. EPM

You might also be wondering how ERP stands apart from other programs you may use in your business. Many people wonder about the difference between ERP and EPM, or enterprise performance management. These software solutions are meant to complement your existing ERP and will typically be a replacement for spreadsheets. You can use EPM for budgeting, management reporting, financial consolidation, and more. 

EPM can usually be implemented more quickly than ERP since it’s not as all-encompassing. Using an enterprise performance management software in your business can dramatically assist your finance department and CFO in creating budgets and targets. 

 

ERP vs. SCM

Another big question in this space surrounds the difference between ERP, SCM and CRM. Let’s break down those last two terms separately to better understand what sets them apart from ERP. SCM, or supply chain management, is mostly external and deals with all of the connected manufacturers and individuals that make your business possible. 

ERP is more of an internal solution for businesses as opposed to the external reach of SCM. SCM programming is also more specialized and focused on one part of your business (the supply chain) as opposed to combining all aspects of your company. Finally, and perhaps most importantly, a supply chain management solution is more relationship-based involving the interactions with your suppliers, whereas an ERP is more task-based and centrally focused. 

 

ERP vs. CRM

Customer relationship management, or CRM, helps you to learn more about your consumers. These software solutions may allow you to create sales projections, store contact information, create personalized newsletters, identify new leads, and more. 

Like many of the other examples we’ve listed here, the main difference between CRM and ERP has to do with scale. While CRM software focuses solely on your customers, ERP focuses on multiple aspects of your business and allows you to control them all in one convenient place. 


Finding the Right ERP for Your Business

If you’ve decided that you want to invest in an ERP solution for your business, where should you begin? Start by evaluating where your company is right now. Look at your current processes and determine what’s working and what could be improved upon. Consider where you want your business to go, and think about what processes should look like to get you there. This will give you a starting point of the features to look for within your ERP software.

Budget is always going to be a consideration with any new software or equipment that you purchase for your business. When you’re setting your budget for purchasing ERP software, be sure to consider the “hidden costs.” You may encounter extra costs for hardware upgrades, software maintenance, implementation costs, and more. 

Research your potential software providers, not just the ERP solutions they’re offering. Without a solid company behind it, no ERP software will be valuable to you in the long term. Does your potential provider have a good reputation with its previous customers? Do they provide training for you and your employees to get familiar with the software? Is there a reliable support team available to help you troubleshoot if needed? See if your potential provider offers a free trial or demo of their ERP software.

 

Get an All-Encompassing ERP Solution with DEAR Systems

DEAR Systems recognizes how important a comprehensive ERP solution can be for your business. That’s why we’ve worked tirelessly to create the cloud ERP software of your dreams. Our software meets needs in all departments of your business, including inventory management, POS, sales, B2B portal, manufacturing, accounting, eCommerce, and more. One of the things we’re proudest of is how many industries have benefited from our ERP software. We have satisfied customers in retail, eCommerce, manufacturing, distribution, food manufacturing, and so many others. Our software easily integrates with many of the programs you’re already using, like QuickBooks Online, Shopify, Square, Amazon, PayPal, Etsy, HubSpot, and more. We offer monthly and annual pricing options to suit your needs, and you can begin your experience with a 14-day free trial. Contact us today to get started! 

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