4 Key Differences Between Accounting Software and ERP

Do you want to simplify your company's financial processes? or are you confused by the distinctions between accounting software and ERP? With so many alternatives available, we understand that it may be challenging to determine the best option for your needs.  

However, having a clear understanding of the distinctions between ERP and accounting software can greatly assist you in making an informed decision that aligns within your budgetary constraints. In this blog, we will discuss the key differences between accounting software and ERP. 

What is Accounting Software? 

Accounting software is a specialized system designed to manage financial transactions, track expenses and revenue, generate financial statements and simplify basic accounting tasks such as accounts payable, receivable and bookkeeping activities. This software is frequently used by small to medium sized organizations and focuses solely on financial management. 

What is the definition of an ERP system? 

In a Harvard Business Review article, the renowned thought leader and author Thomas Davenport describes enterprise resource planning system (ERP) is a comprehensive software solution that houses all corporate information including the customer, marketing, sales, production and financial aspect of the business. It means this system is a centralized database that simplifies the flow of information throughout the business. 

Accounting Software vs. Erp  

Here’s a table comparing the key differences between accounting software and ERP software: 

1. Scope and Flexibility

Accounting software provides standard functionalities that cater to general accounting requirements. Although it increases the efficiency of certain financial tasks, the scope of this software is much more specific and may lack some customization in its feature.  

On the other hand, ERP systems offer greater scope and customization options, allowing businesses to tailor the software to their specific workflows and unique business processes. This type of system will support the growth and changing needs of your businesses more effectively.

2.  Complexity and Implementation

Implementing an ERP system involves a more complex and time-consuming process since it affects people and business processes across entire organization.  

In addition, ERP systems require thorough planning, customization, data migration and training to ensure the successful of its implementation. Some ERP vendors frequently provide free basic training to customers, but you may need to pay for additional training hours or seminars during or after the implementation. 

To avoid and prevent blowing the budget your company must anticipate and consider these expenses to allocate the right budget to it.  

3. Cost Considerations

The cost of implementing an ERP system is typically higher than accounting software due to its broader functionalities and customization options. ERP systems involve upfront costs for licensing, implementation, customization and training.  

Accounting software, being more focused on financial management, generally offers more affordable pricing options, making it a cost-effective choice for small to medium-sized businesses. 

Read: 4 Tips to Choosing the Right ERP for Your Business  

4. Data Visibility and Reporting

ERP systems provide a holistic view of the entire organization consolidating data from various departments. This enables executives to access real-time information and generate comprehensive reports, offering better insights for strategic decision-making.  

In a study, organizations that implemented an ERP system experienced an average improvement of 50% in their financial reporting accuracy, which was especially needed in closing the book. 

Accounting software, although essential for financial reporting, may lack the broader organizational perspective that ERP system can deliver. 

Read Next: Understanding the Basics of Data Analytics and its Application 

Is ERP Software the Best for Finance and Accounting Industry? 

While ERP systems offer accounting functionality, they may not always be the best choice for every organization's accounting needs. Small businesses with straightforward financial requirements often find accounting software more than enough. However, as companies grow and add complexity to their operations, integrating accounting functions into an ERP system might be advantageous.  

THE BOTTOM LINE 

Companies that want to make educated judgments regarding their financial management requirements must be aware of the key distinctions between accounting software vs. ERP systems. Your firm's size, complexity and specific needs will determine whether to use integrated ERP software or specialized accounting software. 

It's important to keep in mind that selecting the appropriate software is crucial for enabling strategic decision-making, guaranteeing compliance and preserving accurate financial records. You can make a decision that is in line with your long-term objectives by analyzing your company's demands and carefully weighing your options. 

Get Reliable Support 

In need of a partner who can simplify your processes and choose the right system? With over 10 years of experience, D&V Philippines offers a competitive suite of outsourced finance and accounting services. We have been a reliable and trustworthy expert ever since. Let us handle your financial needs and provide you with reliable services. Schedule a free consultation with us today! 

You can also get a copy of our whitepaper, Finding the Right Talents: D&V Philippines Solutions for Modern Accounting Firms, to learn how we invest in our talents’ professional growth and development so they can meet your standards and expectations.