In recent years, business management software has undergone profound changes. Until recently, companies viewed accounting software as a necessity. These programs are increasingly being replaced by enterprise resource planning (ERP) software today. So much so, in fact, that many are beginning to use these terms interchangeably. Although there are worse crimes in the world than using the wrong term for a software package, understanding the difference can help you compare ERP and accounting software.
ERP and accounting system
To understand what an ERP is and know the difference with accounting software, let's look at the characteristics that each of them traditionally offers. Accounting software processes accounting transactions such as payroll, accounts receivable, accounts payable, and balance sheets. Common modules included with the accounting software include electronic invoicing, purchase orders, ledgers, timesheets, expenses, and payments.
Although there is some overlap with ERP functionality, the two are slightly different. ERP software is a resource management system. It tracks tangible and intangible assets, materials, human resources, and financial resources. Note that ERP software covers a range of features that accounting software generally does not provide, such as product lifecycles, performance units, and customer relationships.
In short, accounting software, as it is traditionally called, is a subset of any ERP system.
Take the example of the Microsoft Dynamics 365 modules. The suite offers financial services such as financial management, planning, and budgeting. These modules themselves could have been considered an accounting program ten years ago. Now as part of a package, they can interact with other modules. Business operations such as project and supply chain management, reporting and analytics, human resource management, and even IT management are services that can be coordinated and managed with Microsoft Dynamics 365 software.
ERP and accounting software are two different things, but does it really matter in today's environment? In recent years, many accounting software vendors have gone out of business or been acquired by larger groups. At the same time, with so many ERP systems offering the same accounting capabilities but scalable growth potential, why would you choose a traditional accounting package?
Do you know the difference between an ERP system and SAP?
Consolidation of concepts
The reason accounting and ERP software have come to mean the same thing in today's market is that accounting software, as we traditionally understand it, is on its way to disappearing. Larger and more comprehensive software packages replace their function. The industry is moving further and further away from the concept of "accounting software." There will come a time when ERP software will take on full meaning and be put on the market. Since the two are unlikely to coexist simultaneously in the market in the future, it will be very difficult for the reference to an ERP as accounting software to be confusing.
If you need to know some of the best programs on the market, you can check these posts with the best ERP and accounting software:
14 ERP vendors that will get your business off the ground
Best accounting programs