ERP Solution vs Accounting Software: A Comparison
Today, many businesses rely on accounting software to help them manage their financial and accounting operations. A typical accounting software solution comprises various modules which help accounting staff generate basic reports such as income statements, balance sheets and so on.
Accounting software helps to provide the management team and key stakeholders a snapshot of the company’s financial health at any point in-time. Yet, accounting software still falls short due to various limitations including the need of intensive manual entry, which likely results in data errors.
Furthermore, many accounting software operate as a silo stand-alone system and are not capable of integrating with other sources to quickly retrieve the most updated data. This is a significant advantage for business organizations that handle large volumes of financial transactions data on a daily basis. Implementing an ERP system can help businesses overcome such a challenge as well as providing other functionalities which help business scale and grow its operation effectively.
In this article, let’s take a deeper look into the necessary role of ERP systems in the Accounting field and see how ERP solutions can provide incremental benefits for various Accounting activities.
ERP vs. Basic Accounting Software
In the new era of digital economy, business organizations need access to real-time financial and accounting information to make informed decisions, keeping their businesses growth and staying competitive. It’s extremely expensive if organizations missed out on potential opportunities to increase their revenue and profitability due to delay in waiting for the most up-to-dated and aggregation of financial data.
Generally speaking, basic accounting software helps businesses handle its finance, including tax and payrolls. Basic accounting software systems usually deal with the following areas:
- Financial reporting
- Accounting transactions: Payroll, accounts receivable, account payables
- Other functionalities such as: Expenses, Timesheet, Sales order, ledger etc.
For small and medium enterprises (SMEs), accounting software is one of the most important systems to manage all the financial and accounting activities as well as operations. Yet, many organizations still operate on spreadsheets and/or desktop/stand-alone accounting systems that are outdated, inefficient, and inflexible - ultimately deterring business organizations to meet their business expansion requirements as well as market demand.
In comparison, an ERP (enterprise resources planning) system is a resource management system which covers financial resources, human resources, assets and inventory, as well as other various functions which are essential to business operations. In fact, ERP systems cover a wide range of functionalities that are not available in accounting systems, and ERP focuses on other aspects of a business as a whole, including Accounting and Finance.
More importantly, ERP systems tie together multi-sources of data from different systems to ensure one single source of data truth, eliminating errors such as data duplications and gaining business insights in a timely manner from real-time data and reports.
ERP systems consist of various tools and features for managing Sales, Inventory and Warehouse Operations, Logistics, Contact Management and many other facets of business.
Benefits of ERP for Accounting
ERP offers many advantages compared to a basic accounting software.
Let’s take a deeper look into the comparison to understand more about the various benefits of ERP for accounting:
1. Real-time Data
ERP systems can help companies including SMEs improve their business insights from real-time information and reports.
Spreadsheets, or emails that are not updated in days, or even hours can make information become incorrect or incomplete, leading to ill-informed decision making that can threaten the financial viability of an organization. Therefore, it’s highly important that decision makers, including accountants and CFO can have access to real-time or near real-time financial data, to keep track of and manage accounting processes.
For example, anytime accountants or decision makers need further financial data and other relevant information in details, they can access ERP systems to quickly retrieve such required information to help fulfill their roles in various functions such as planning production, managing and optimizing inventory level, scaling business growth.
2. Reduce risks
Many basic accounting software systems still require a considerable amount of manual entry and input, which is time-consuming and inefficient. Manual entry increases the likelihood of errors such as inaccuracy and duplications.
With ERP automating a wide range of tasks, businesses can significantly reduce risks through improved data integrity and controls..
3. Better Reporting
Even though basic accounting software allows you to generate reports, those are still insufficient at best with limited insights and up to date information to quickly make decisions.
The problem with stand-alone accounting software or spreadsheets is that many of those are operated on separate databases, which are disjointed and require users to perform multiple extraction and analysis. ERP systems, on the other hand, can streamline the process - enable all users from accountants, to sales representatives, and executives to create, store, and use the same data through standardized processes.
ERP systems provide a secure, and centralized data source, where everyone can confidently generate reports from data that is accurate, complete, and up-to-date. Data integrity is ensured for all kinds of reports including financial ones, from a quarterly performance report to annual cash flow statement, without business users having to worry about errors from manual entry.
In addition, key stakeholders can combine various data coming from disparate sources to generate analytics reports of the company’s financial health, containing hidden insights that are not available in traditional accounting software. You’ll be able to gain an in-depth understanding of your current financial status, helping you manage your business effectively.
4. Increased Automation
As mentioned above, many menial and time-consuming tasks that are currently manually performed by accounting staffs can be automated through the adoption of an ERP.
Business organizations of all sizes can benefit from increased automation, for example financial reports can be automatically generated helping to free up the time of both executives and management spending analyzing and running reports.
5. Standardized Financial Processes
Having access to the most up-to-date financial information is critical to make informed decisions, especially when making critical business decisions, or must-win situations. Accessing such important data and information becomes easier when business processes are streamlined and standardized.
In particular, with ERP solutions where different applications are integrated to work interoperable across businesses. All information is readily available without having required users to manually extract and move from one system to another. Many accounting activities such as auditing compliance and reconciliation, are now automated.
6. Improve Collaboration
Today, no business should operate in a silo, especially when the accounting department works with separated and disconnected spreadsheets databases. Accounting function requires financial data from other departments to keep track of all the financial transactions in the entire organization.
Again, ERP solutions provide the advantage of one single source of data truth, allowing accounting staff to access all the necessary information from other departments from the same central shared database. Furthermore, whenever employees from a department perform an update of data, all will be immediately reflected in the system, keeping stakeholders informed so that nothing will be missed.
Besides, if a business organization handles a large volume of data daily, only an ERP solution is capable of managing, processing, and analyzing all sorts of data input coming from different end-points in a way that is efficient and makes sense.
What can You do with Real-time Data?
Adopting an ERP system allows businesses to gain access to real-time data and offers a more proactive approach to operations. In particular, real-time data provides full visibility into business at any point in time, allowing
Here are a few ways you can exercise this newfound visibility:
- Make better, informed business decisions that are data-driven;
- ERP is much more than an accounting software that only tracks transactions' journey from sales order to invoice, ERP is capable of looking after a customer after sales, thanks to its CRM module.
- Run forecast business reports and prediction.
Not only implementing an ERP solution for your business and accounting function is necessary for keeping up with market conditions and business growth, it also means improved accuracy, gaining business insights, as well as financial stability and growth. ERP provides a comprehensive look into business as a whole, with full visibility into processes and resources which equip decision makers to understand their business from different perspectives.
TP&P Technology is a leading IT services provider in Ho Chi Minh City, Vietnam. We provide end-to-end professional ERP services, from ERP selection to implementation, as well as training and maintenance. With accumulated experience, our team of consultants will help guide you through the process of evaluation in selection of ERP systems that is best suitable for your business needs. Get in touch today!
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