Background
Starting a new organisation can be challenging, particularly when it comes to identifying the best technology solutions to manage financial and operational processes.
In this article, we will focus on the two most commonly used software types by businesses: Enterprise Resource Planning (ERP) and accounting solutions. These systems have unique characteristics and advantages, which can make the decision-making process difficult for many companies.
To simplify this process, we will define what is an ERP and an accounting software and explore the main differences between those two.
Accounting Software
Accounting software is a powerful tool that primarily focuses on accounting and finance. It enables organisations to efficiently manage their financial transactions and operations, automating various financial processes, such as bookkeeping, bank reconciliation, financial statements, and more. As a result, it is mainly used by accounting and finance professionals.
With its centralised database for finance and accounting, it provides a clear view of the financial health of an organization, outputting reports that can be used to make business decisions or monitor financial performance but only based on legal and accounting reports . It may also involve exporting the data and using other tools (such as Excel) to reprocess it and build management reports on it.
Due to its more limited range of functionality and narrower scope, accounting software is often easier to use, typically offering a user-friendly interface that simplifies complex financial tasks, reduces errors, and saves time.
Understandably, the more limited range of functionality also has an impact on the cost, making accounting software more affordable. Additionally, the support required for this type of software is typically lower due to the low complexity of the system.
Or ERP ?
Enterprise Resource Planning (ERP) is a software that helps organisations manage most of their business operations and processes. It covers multiple business functions and offers a wide range of functionalities such as finance and accounting, human resources, inventory management, supply chain management, customer relationship management, among others.
One of the biggest advantages of an ERP is its ability to evolve and adapt to the growth and changes of a company. Features can be added as the organisation grows.
An ERP system provides a centralised and unified database that enables different departments and business functions to share information and collaborate more effectively. It provides real-time reporting, dashboards and analytics, allowing for effective decision-making.
In addition, an ERP system has the ability to manage international finances and accounting. It handles different tax laws, multiple currencies and exchange rates, making it easier to conduct business in different countries. This is not always the case with accounting software, which may only support one currency, lack the necessary functionality to manage complex international financial transactions and will require businesses to have accounting softwares for each country.
It also offers many possibilities in terms of customization. It is possible to precisely define the access and rights of the different users according to their role in the organisation. For example, the inventory manager will not have the same access as the CFO.
This type of system allows integration with a wide range of third-party applications, such as a CRM or a human resources management application.
It should be noted that an ERP can be expensive to purchase (licence and implementation costs) but also to maintain. In some cases, some companies hire a dedicated person to maintain the ERP system. Nevertheless, by automating many manual processes, an ERP system can help organisations save time, reduce costs, and improve their overall operational efficiency.
Conclusion
The choice between an accounting software and an ERP system depends on the unique needs and goals of your business.
An accounting software can be a more cost-effective option for smaller businesses that primarily require financial management capabilities, while an ERP system can offer more comprehensive functionality and scalability for larger businesses with more complex operations.
Ultimately, it is important to carefully evaluate the specific features and capabilities of each software solution, and to consider how they align with your business goals and growth plans. By selecting the right software for your needs, you can improve efficiency, streamline operations, and drive growth for your business.
