ERP vs Accounting Software – What are The Major Differences?

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SoftwareSuggest

Senior editor

Parul Saxena

Chief editor

Last updated: May 15, 2021

ERP software and Accounting Software – these are two important software for a growing company. After the growth of the digital way of business, ample companies started offering these two software with a lot of varieties. But because of the long-list features of accounting software, the difference between ERP software and accounting software has been blurred for many users. It is important to understand the difference between the two software before deciding to make a purchase.

In this article, we will understand why both of these software are used and why there’s a confusion between the two.

Major Differences Between ERP Software and Accounting Software

Enterprise Resource Planning Software (aka ERP software) is a huge suite of applications that covers various departmental features like human resources, finance, inventory management, reporting, material management, customer relationship management, and many more.

So a large enterprise ERP software will cover every area of the business and bring all the data to a single platform so the enterprise can be managed seamlessly.

Accounting software, as the name suggests, manages the incoming and outgoing of your money. An online accounting software records various business transactions like AR/PR, journal entries, and general ledger to produce balance sheets.

You can say, the accounting software is a small part of an ERP. But both of these software are important to any business.

So, let’s understand the individual importance of ERP software and accounting software.

Why Do Companies Use ERP Software?

Here are some of the applications of an ERP software:

  • Handle distribution process management
  • Manage supply chain management
  • Create and maintain company knowledge base
  • Manage and improve the financial figures of a business
  • Predict project outcomes and create better project plans
  • Automate employee life-cycle
  • Reduce repeating and useless processes
  • Create and improve company process plan
  • Manage human resources and payroll
  • Handle accounting and financial transactions
  • Closely observe company costs and help in cost-cutting
  • Reduce overhead costs

Why Do Companies Use Accounting Software?

Here are some applications of an online accounting cum billing software:

  • Perform automatic calculations and make the process easier for users from a  non-finance background
  • Take control of the revenue framework; save money and time
  • Avoid common human errors and make financial flow transparent for audits
  • Based on previous year data, predict future profits
  • Understand the incoming and outgoing of the cash and save a lot of employee time by making the process easier
  • Easily send and receive invoices and estimates
  • Assist the business in tax compliance and process
  • Secure financial data and prevent fraud and misconduct
  • Manage and automate the payroll process
  • Observe asset costs and save from overhead costs
  • Manage inventory

When To Choose ERP and Accounting Software?

Because of the numerous offerings of both ERP and accounting software, buyers find themselves in a state of confusion. Moreover, many of their features kind of overlap. 

So as a buyer when exactly should you purchase an ERP?

Well, ERP is a big package of applications covering almost every need of the business. Mostly, enterprises with overwhelming staff and clients choose to go with ERP software. ERP is definitely a tough selection and a big investment.

So, if you’re looking for a tool that can streamline your entire business covering every department (including accounting), you should start looking for a suitable ERP software.

But, if you’re simply looking for a tool that can manage and automate your accounting and billing needs, you should go with accounting software. With dedicated accounting software, you can automate recurring processes.

For example, accounting automation will send certain invoices after a desired interval making necessary changes.

Though ERP software includes many accounting features, it’s a huge investment to make. ERP is such a huge suite of applications that it can be overwhelming if you’re only looking for an accounting solution.

Additionally, some of the automation features in an individual accounting software may not be found in an ERP.

Conclusion

ERP and accounting software are two important software that can definitely help any business. Almost every enterprise in the world is implementing an ERP system. But, for a small business or a startup, every investment has to be well thought out. In such cases, choosing the right accounting software would be a mindful investment.

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