5 Main Differences between ERP and Accounting Module
Accounting software is primarily used for finance and accounts- related business operations. It provides data security, and integrity and helps business to handle their finances automatically in a better way. However, ERP software is a consolidated business solution that contains a lot of modules including the Accounting Module. The main difference between ERP and accounting software is in their scope and functionality. Accounting software facilitates the management and automation of a company’s financial activities, managing accounts, enabling small enterprises to switch from their early manual processes and spreadsheets to contemporary accounting systems. ERP software provides accounting capability along with numerous more capabilities like POS solution, sales management, inventory control, Human Resource management, and many more.
Accounting Module vs ERP Solution
ERP entered the realm of corporate technology in 1990 when Gartner initially recognised it as a separate category of software. Numerous global corporations have been utilising Enterprise Resource Planning (ERP) systems for several decades, resulting in their significant achievements and success. The Accounting module facilitates the automation of company’s financial activities. It enables small enterprises to transcend their initial reliance on manual processes. ERP software provides accounting capability along with numerous other capabilities.
Initially, the primary consideration of many businesses may revolve around accounting software, as their primary challenge during rapid growth is in maintaining organisation: monitoring sales, collecting payments, managing supplier payments, and calculating profitability. While, accounting software can assist with these tasks, it is important to note that it cannot independently monitor suppliers, facilitate the management of an expanding workforce, or offer insights into warehouse expenses and operations.
Five Main Differences between ERP and Accounting Module
When evaluating an accounting module against ERP solution, there are five major factors that a business should take into account. These factors albelow:
1. An ERP system is like a collection of Legos
An ERP solution can be likened to a set of Legos, where each component acts as a single module and can be combined to create a larger structure. It depends on the business type and size, which modules they want to integrate with the ERP system. ERP provides a more extensive range of functionalities compared to accounting software. An ERP system provides comprehensive accounts and finance management functionalities that offer a holistic perspective of the entire organisation .
2. Independent Accounting software lacks customisation for specific sector requirements
Stand-alone accounting software for manufacturing and distribution enterprises has a restricted ability to monitor inventories and sometimes relies on cumbersome third-party add-ons. An ERP solution provides manufacturers and distributors with effective and comprehensive inventory management solutions. By utilising manufacturing ERP, you may effectively oversee inventory to minimise expenses associated with carrying stock, enhance the speed and accuracy of decision-making, and save labour costs. Moreover, ERP solutions efficiently oversee the entire shop floor execution system without any interruptions. An Enterprise Resource Planning (ERP) solution provides the capability to effectively oversee and control Bill of Materials (BOMs). Furthermore, it play important role in production planning, supply chain management, production resources, supply shipments, and several other functions. Accounting software lacks production management features.
3. Accounting software and ERP solutions may not necessarily adhere to Generally Accepted Accounting Principles (GAAP)
Several independent accounting and ERP solutions, including some well-known ones, do not adhere to GAAP standards or present challenges in meeting GAAP requirements. This software fault poses a financial burden for many small and medium-sized organisations that are experiencing growth. It is imperative to inquire with the vendor about how their software can facilitate adherence to GAAP standards, tax rules, and financial regulations.
4. Accounting Software does not encompass sales or customer relationship management
An ERP solution offers comprehensive functionality for managing sales, purchase and processing orders. ERP solutions typically include a CRM module that allows users to access up-to-date contact information and view the history of past contacts. In contrast, stand-alone accounting software lacks these characteristics.
5. Accounting software has limitations when it comes to providing up-to-date information and the ability to access it from different locations
ERP consolidates all financial data into a unified database. ERP systems streamline corporate processes by offering a comprehensive solution. It caters to several departments, hence eliminating the need for separate tools. In addition, the cloud provides integrated data of a company that can be accessed from anywhere via a mobile device or any desktop PC. Modern ERP systems integrate all aspects of a company’s operations, ensuring that up-to-date information informs all decisions. Managers find ERP solutions very easy and convenient to run business operations.
Future of stand-alone Accounting Module?
Recently, the market for accounting software packages has experienced a series of setbacks. The ICA’s IT Faculty surveyed accounting practices and criticised leading accounting software companies, Sage and Iris. According to the faculty’s findings, 24% of accountants encountered a decrease in both time and fees as a result of an accounting software malfunction. With the increasing demand for improved integration of business operations, ERP is rapidly dominating the market for accounting software, especially among expanding enterprises. As organisations expand beyond the capabilities of QuickBooks, they want ERP and accounting software that provides accounting features as well as operational features to efficiently handle various business activities. Investing in an accounting module integrated with an ERP system is a highly advantageous decision for your firm at this time.
The Advantages of ERP for Business Expansion
At first, companies often rely on ad hoc methods to carry out their operations. As they mature, this must be altered. It may be impractical to continue storing products or fulfilling orders from the founder’s garage. Additional resources, located one mile away, in a different state, or even on the other side of the planet, are now responsible for managing various areas of the firm. Furthermore, it is imperative to effectively oversee and control those resources.
Due to its numerous modules, ERP is frequently the most scalable choice for a developing organisation. For example, let’s say your company has just developed and obtained a patent for an office supply product that is now distributed by numerous distributors and sold by various retail providers. Managing orders, shipments, and supplies on an accounting system would be challenging for you. If the data you have is limited to what you just mentioned, it is quite probable that it will be organised into separate spreadsheets. However, possessing an ERP system provides a means to effectively arrange and promptly retrieve the relevant sections of this information as required.
ERP software not only facilitates the management of various operational methods as your firm expands, but also provides a unified perspective of your business by consolidating all business operations and functions into a single database. This can greatly enhance the operational efficiency of a corporation. Upon shipment of the product, the accounting department is required to dispatch an invoice. If these activities are documented manually, the procedure will be sluggish and prone to a significant likelihood of mistakes. An ERP system enables the automation of several aspects of the order-to-cash process.
Conclusion
The Accounting module standalone is not as beneficial as integrated with an ERP system. The inherent integration of ERP allows you a comprehensive view of all facets of your organisation consolidated in a single platform, facilitating seamless connectivity and perhaps yielding additional enhancements. To enhance your proficiency in production planning and scheduling, consider CherryBerry ERP for implementing automation techniques to streamline some areas of your supply chain.