Just starting to look for a business management system? Confused by the jargon of the business system world? Still trying to figure out the difference between an accounting system and an ERP?
The world of technologies is complex, and experts sometimes forget their jargon can be hard to decipher. It’s normal to be confused as a result! As such, many people erroneously think that “ERP” is simply a different name for an accounting system, but they’re indeed two distinct types of systems.
Here are a few key differences between the two to help you determine whether your organization needs an accounting system or an ERP.
Accounting system
As the name indicates, an accounting system is usually limited to accounting features. It’s mainly used by the finances team to meet basic financial needs and provide the necessary financial reports. Other operational needs, such as inventories or purchases, are usually managed manually with paper documents or Excel spreadsheets.
Here are some of the features of an accounting system:
- General ledger
- Accounts payable
- Accounts receivable
- Bank reconciliation
- Financial statements
- Cashflows
- Invoicing
The accounting system is often the first software that small businesses implement. It helps them increase their visibility on their financial operations, take better decisions, and decrease administrative costs.
ERP
On the other hand, an ERP (for Enterprise Resource Planning) not only provides the same features as an accounting system, but also advanced features to manage the entirety of an organization’s operations.
Here are a few examples:
- Inventory management
- Supply chain management
- Customer relationship management
- Project management
- Resource planning
- eCommerce
- Purchase orders
The ERP integrates all of an organization’s operations and provides users with specialized tools to complete their tasks. The members of the organization also have access to up-to-date data as all information is centralized within the ERP system.
When to choose an accounting system or an ERP?
The answer mainly depends on your business needs. Some organizations only need to capture their financial data and obtain basic financial reports, for example young or small businesses that have a low volume of orders and transactions. In these situations, an accounting system may be enough to meet your needs.
However, as your organization grows, you may hit the limits of your accounting system. As your operations become more complex, Excel spreadsheets and paper documents can cause errors and delays. If you need more advanced features than those offered by your accounting system, for example management tools or industry-specific features, an ERP is what you need. It’s also possible to opt for an ERP system right off the bat so that it evolves together with your needs and growth.
Want to know more? Read our articles When to replace your accounting system by an ERP and Looking for an ERP? Looking further than the price! You will have all the information you need to continue your research and make an informed decision. Don’t hesitate to contact JOVACO if you have any questions.
