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written by | August 8, 2022

What Makes ERP and Accounting Software Differ?

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Table of Content


Individuals engaged in the business sphere commonly use certain technical words. They frequently even fail to remember that not everyone can grasp that professional jargon. The same is true with ERP software; for specialists, they are indispensable tools, but for novices, the name may be confusing. 

So, if you're curious about the differences between ERP and accounting software, it's a good idea to seek more information on each subject. Although it has been found that many individuals use these phrases synonymously, ERP and accounting software are actually two distinct things. Their use cases and functionalities differ significantly. 

Did you know? The global ERP market is projected to reach around ₹9.34 lakh crores by 2030. 

What Is an Accounting Software? 

Accounting systems are essential for enabling and overseeing monetary operations, which are the backbone of any business. 

In normal accounting software, you'll discover elements like ledger accounts, journal entries, accounts receivable and payable, billing information, capital assets, etc. From there, you may produce simple financial reports like income statements, profit and loss statements, and so on. 

Also read: How to Use TallyERP.9 to Create Tax Classification

Accounting software provides customers with a glimpse of the company's financial performance at any moment by documenting and combining the financial components of an SME's activities. 

Effective accounting systems also ensure proper cost control in a business. Users may track financial transactions inside a single set of accounts due to the integration of financial and cost accounting into a centralised platform. It facilitates easy access to crucial data. 

In contrast, attempting to do so across several Excel spreadsheets increases the likelihood of false data entry and lower labour efficiency. A simple accounting software falls short since it can't quickly predict future events. This calls for a truly integrated system that enables smooth transactions and information sharing throughout the corporation. 

What Is ERP Software? 

Enterprise resource planning, or ERP, on the other hand, is a component that may be used to handle both a firm's tangible and intangible assets, encompassing inventory management, order fulfilment, production management, billing, analytics, and cost accounting. It also supports human resource and customer relationship management at the same time. Essentially, this application is intended to combine all aspects of the company into a single suite providing effective management choices. 

Accounting software is not intended to provide Manufacturing Administration, but ERP software is extremely capable of meeting these demands. Production Planning, a Bill of Materials, as well as many other features are part of this function. 

Due to continually increasing client demands, businesses often go through situations where it becomes challenging to control the supply of goods and production resources. It typically results in missing shipments, order modifications, and equipment breakdowns. Businesses require manufacturing management software to handle a range of issues with ease in such circumstances. The ERP can be a great solution when accounting software can't manage the complexity. 

In simple terms, the ERP solution aids companies in identifying further growth opportunities in the competitive industry while maintaining a satisfied client base. 

What Is ERP for Small Businesses? 

An ERP is a software suite that makes it possible to combine many functions or pieces of software into a unified platform for company needs. Your entire firm will function more smoothly using ERP software. ERP will centralise all of your business's key processes. Accounting, marketing, finance, supply chain, human resources, services, and manufacturing are only a few of the fundamental operations. 

ERP software will often operate in real-time. All of its operations use the same database. ERP is a form of management technology that, in plain English, integrates all of your company's main business processes in one location. 

Major Differences Between ERP and Accounting Software 

Today, you can organise your financial transactions and assure stress-free bookkeeping by using off-the-shelf or tailored accounting systems and ERP software. Instead of setting up your own servers and paying for a software licence, this may be quickly installed in the cloud and utilised on a subscription plan. 

But before you can choose which would better serve business needs, you must grasp the distinctions between accounting software and enterprise resource planning (ERP). 

ERP vs Accounting Software 

The primary difference between the two is that accounting software often aids in areas like bookkeeping, accounts payable, accounts receivable, financial analysis, and some basic sales tracking. Accounting software is created to manage specific company sectors. However, ERP software also offers certain extra capabilities to handle logistical needs, supply chain, warehousing, inventories, eCommerce, and contact management, in addition to the usual accounting capability. ERP is more accurately described as a seamless integration technology that offers firms an end-to-end solution. 

The main differences between accounting software programs and ERP are as follows: 

  1. ERP is a business software that assists you in keeping track of your inventory management, physical and intangible capital, invoicing, order fulfilment, job costing, etc. The best online accounting software maintains the company's accounts or keeps track of how the money travels. 

The general ledger, accounts receivable and payable, salaries, costs, and other topics are dealt with in accounting. However, enterprise resource planning (ERP) aids in handling problems that accounting does not cover. In other words, ERP software's accounting features are a part of it. One may find a lot more than accounting software in the ERP.

  1. Regarding the cost of operation of software, ERP and Accounting software typically have significant differences. Even though accounting software is often inexpensive, a small firm may easily afford it. Yet even medium- to large-sized firms may find the expense of ERP deployment and maintenance prohibitive.

Also read: Banking Entry in Tally ERP 9 - Know Everything about Bank Entries in Tally ERP 9

  1. The number of people needed to manage the programme represents another significant variance. Small business owners may operate accounting software on their own. A team of experts would be needed to manage an ERP system in order to keep everything working. The learning curve for ERP software is often very high. 
  2. The accounting software includes limited or basic inventory monitoring alongside web-based add-ons. However, the ERP software is adaptable enough to remove individuals from the constraints of accounting software. It also helps you to improve your company's accuracy and client service. 

ERP assists you in lowering labour expenses, inventory write-offs, and carrying costs. Additionally, the inventory management element of the ERP assists you in making decisions more quickly and accurately, which is essential in today's intricate global inventory situations.

  1. Although accounting software lacks this sort of capability, ERP may assist in planning the resources needed for your organisation, such as the number of raw materials needed for the production chain and the management of a very complicated manufacturing line. 

While each is crucial to your company in its own particular manner, the ERP is more adaptable than accounting software. 

Everything depends on the requirements of your company and its size. A small firm can typically get by just fine with accounting software for a long time, but organisations that are rather large or that handle a lot of production and inventory will require ERP software to run their operations efficiently. 

Points of Difference 

ERP Software 

      Accounting Software

Functionality

ERP software is a software solution that helps in administration, CRM, acquisition, manufacturing, and production.

Accounting software is a separate software programme that focuses only on a company's accounting needs.

Pricing 

ERP software is more expensive than an accountancy software package since it is more comprehensive.

Accounting software is less expensive than an ERP solution and can handle all accounting activities. 

Business functions 

ERP software offers useful insights into a company's entire functioning rather than just one specific area.

Accounting software provides comprehensive data only on the company's financial situation.

Utilisation

ERP software is used by all employees to communicate information across domains. 

Collaboration between those in command of the business's finances and the shareholders is facilitated by accounting software.

How Does ERP Help Accounting Software for Small businesses?  

The size of a firm may or may not affect the need for an ERP. It enables you to see all of your business sectors more clearly. ERP enables your business to make an accurate choice faster without compromising the business. 

Also read: Journal Voucher in Tally - Examples, & How to Enter Journal Vouchers in Tally

Easy to Manage the Needs of Accounting 

Any corporation typically needs a strong accounting division. You can handle a lot more sectors with the help of an ERP system. Here are a few examples. 

  1. Your ability to predict capital requirements and financial management is improved by using an ERP system.  
  2. You can better organise your time and budget by using ERP. You may evaluate the financial sustainability of your small business with the aid of sound budget preparation. 
  3. In a firm, data management is crucial. Smarter data management can make a big difference. ERP software for small enterprises can centralise all of your data. 

Analytics/Reporting 

The data is only beneficial when your business can examine and understand it. If not, it serves no use. ERPs accomplish this! Most top businesses provide users with engaging reporting and the finest analytics solutions for tracking KPIs and displaying necessary information. 

Since an ERP is a comprehensive package, it helps every organisation understand how a tiny issue or adjustment in one area might impact the remaining company departments. 

Maintains Customer Relations 

ERP enables small firms to provide clients with their goods or services more quickly. While making a purchase from the vendor, the customer should be happy with their experience. While the customer is accepting the merchandise from you, the vendor must make them feel good about themselves. This will raise people's perceptions of your business. Through the use of ERP software, you may achieve this client satisfaction. 

Data Quality and Financial Management 

The finance department can simply access the data with the use of an ERP system. A company that has well-organized processes and resources will be able to maintain sound financial practices. 

Some businesses employ different systems for their accounting and sales operations. These firms have to update their data manually. However, an accounting ERP system includes an automated data transmission. In this situation, managing the data doesn't require any human resources. The data management is also precise, reliable, and quick. 

Risk Management 

An ERP is not only simple to use but by understanding your failure risks, you can also lower them. With the use of an ERP system, businesses can foresee all of the occurrences as well as all of the potential liabilities. 

Also read: Accounting Vouchers in Tally - Here's An Overview on Accounting Vouchers in Tally ERP 9

Conclusion 

Accounting software and ERP systems have significant differences. Accounting software is often solely used by the accounting and finance departments, while all organisational divisions have access to ERP systems. The most significant distinction between the two systems is that ERP includes several linked modules to support effective corporate performance, particularly in accounting. While accounting software often has a limited set of accounting features and is challenging to interface with other corporate systems. 

Let's say you only automate a portion of the tasks in your company. In that situation, this may result in fresh issues that would make the business less effective. This sub-optimal automation merely results in losses and wastes time and resources. That's why choosing software that effectively and efficiently manages all business activities in your organisation is important. 
With  Biz Analyst, you can manage your business efficiently. The app syncs with Tally data, making it easy to access, even when you're offline. Managing your accounts, creating ledger entries, and accessing business reports are all possible with this software.

FAQs

Q: What is the ERP life cycle?

Ans:

The ERP installation life cycle refers to implementing it to automate business activities. From the very beginning, it encompasses several phases and steps, including project implementation planning, assessment, designing, deployment, transition, and operations.

Q: What are the advantages and disadvantages of an ERP system?

Ans:

Advantages: Improved managerial efficiency. Improved information availability and accuracy. better coordination 

Disadvantages: licencing and development expenses are high. High implementation and maintenance costs.

Q: How many types of ERP are there?

Ans:

There are three basic categories of ERP systems, each with a selection of implementation models. The three most popular forms of ERP systems are hybrid, on-premise, and cloud-based.

Q: Why are ERP systems so important for accountants?

Ans:

Thanks to ERP technology, your accounting staff can easily access the database anytime. Companies that employ separate systems for marketing and accounting must manually handle the data. But with an inclusive ERP software, data is sent quickly and automatically, guaranteeing that your data is reliable and consistent.

Q: What is finance and accounting in ERP?

Ans:

The accounting and finance component in ERP has several unique capabilities to simplify all your business finance operations to match the needs of the firms. They include gathering and maintaining financial data, managing assets and currency, and even producing reports and assisting with financial data analysis. 

Q: How is ERP used in accounting?

Ans:

Data entry is simplified, and the company's accounting is automated thanks to the workflow and other time-saving technologies already included in an ERP for accounting administration. It eliminates problems with cash flow and enhances cash management while streamlining procedures linked to accounts payable and receivable accounts.

Q: What does ERP stand for in accounting software?

Ans:

A form of software known as Enterprise Resource Planning (ERP) is used by businesses to manage routine commercial operations, including accounting, purchasing, project management, risk management and internal control, and supply chain management.

Q: Is an ERP an accounting system?

Ans:

There is a widespread misunderstanding regarding accounting software and the ERP system. In contrast to popular belief, an ERP system is actually a completely separate type of software. Most people mistakenly believe that an ERP is simply another title for accounting software.

Q: What is the difference between ERP software and accounting software?

Ans:

The real-time monitoring and mobility capabilities of accounting software are constrained. ERP unifies all accounting transactions in a solitary database. ERP systems minimise the need for several tools to address the needs of various departments by offering an integrated approach for a variety of business activities.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.