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Accounting | Versus

ERP vs Accounting Software: Which Is Best for Your Business?

Published March 1, 2024

Published Mar 1, 2024

Tim Yoder, Ph.D., CPA

REVIEWED BY:
Tim Yoder, Ph.D., CPA

Danielle Bauter

WRITTEN BY:
Danielle Bauter

This article is part of a larger series on Accounting Software.

Table of Contents
  1. 1 Quick Comparison
  2. 2 Use Cases and Pros & Cons
  3. 3 When To Choose
  4. 4 Light ERP Solutions
  5. 5 FAQs
  6. 6 Bottom Line

Enterprise resource planning (ERP) software and accounting software serve different functions within an organization, although there can be some overlap in functionality depending on the specific features of each system. While ERP systems often include accounting modules, they can also integrate with standalone accounting software to provide more specialized financial management capabilities.

ERP vs Accounting Software at a Glance

ERP System
Accounting Software
Scope
  • It’s a comprehensive system that integrates various business processes and functions across an entire organization.
  • Besides accounting and financial management, it typically includes modules for inventory management, human resources (HR), supply chain management, customer relationship management (CRM), manufacturing, and more.
  • It is focused specifically on financial management tasks, such as accounts payable, accounts receivable (A/R), general ledger (GL), invoicing, billing, payroll, and financial reporting.
Functionality
  • It provides a centralized database and allows for real-time data sharing and collaboration across departments.
  • While it may include some basic features for managing other business processes, its primary function is to facilitate accounting and financial tasks.
Integration
  • It is designed to integrate all aspects of a business, including accounting, into a single unified platform.
  • This integration enables seamless data flow between different departments and functions.
  • It may offer some integration with other business systems, such as CRM or inventory management software, but its integration capabilities are
  • typically more limited than ERP systems.
    It primarily focuses on financial data and may not provide the same level of integration with nonaccounting functions as available in ERP systems.

 

Customization and Scalability
  • It is often highly customizable and scalable to accommodate the needs of large and complex organizations.
  • It may offer extensive configuration options and support for customization to tailor the software to specific business processes and requirements.
  • It may offer some degree of customization but is generally more limited than ERP systems.
  • It is often suitable for small and medium-sized businesses (SMBs) Small and midsize businesses with simpler accounting needs.
  • There are enterprise-level accounting solutions available for larger organizations.
Cost
  • It may involve higher upfront costs for software licensing, implementation, training, and ongoing maintenance.
  • It is often more accessible to SMBs with limited budgets and resources.
Complexity
  • ERP implementations tend to be more complex and resource-intensive compared to accounting software due to its broader scope and integration requirements.
  • It is typically more straightforward to implement and use, with lower upfront costs compared to ERP systems.

Use Cases and Pros & Cons

  • Executive leadership: Executives—including CEOs, chief financial officers (CFOs), and chief operating officers (COOs)—rely on ERP systems for strategic decision-making and overseeing the overall operations of the organization. They provide executives with real-time access to key performance indicators (KPIs), financial metrics, and operational data, enabling them to identify trends and allocate resources.
  • Supply chain and operations managers: These managers rely on ERP systems to optimize supply chain processes, including inventory management, procurement, production planning, and logistics. ERP systems provide visibility into supply chain activities, facilitate demand forecasting, streamline order fulfillment, and enable efficient resource allocation.
  • Sales and marketing teams: These teams leverage ERP systems to manage customer relationships, track sales pipelines, execute marketing campaigns, and analyze customer data. ERP systems with integrated CRM modules enable sales and marketing teams to improve customer engagement, drive sales growth, and enhance customer satisfaction.
PROS CONS
Streamline business processes into a single platform, improving efficiency Can be costly to implement, involving expenses for software licensing, hardware
Give access to a centralized database that stores all relevant business data Are often complex and time-consuming due to the need for customization and configuration
Provide real-time visibility into KPIs and business metrics Require dedicated resources, including skilled information technology (IT) personnel and project managers
Facilitate collaboration and communication among different departments and teams May require changes to workflows, roles, and responsibilities, which could be met with resistance from employees and stakeholders
  • Entrepreneurs and freelancers: Entrepreneurs, freelancers, and self-employed individuals often manage their own finances and may benefit from using accounting software to track income and expenses, invoice clients, monitor business performance, and prepare tax filings. They don’t need an ERP system because the company is small enough for them to see everything that is happening without an integrated information system.
  • SMBs: Accounting software is particularly well-suited for SMBs that may not have dedicated accounting departments or extensive financial resources. SMBs can use accounting software to streamline their financial processes, track expenses, manage cash flow, and generate financial statements without the need for manual bookkeeping or complex accounting procedures.
  • Project managers and team leads: Those involved in budgeting, cost tracking, and resource allocation can use accounting software to monitor project expenses, track project budgets, and analyze financial performance.
PROS CONS
Automate many repetitive tasks such as data entry, calculations, and report generation Can have a learning curve for users not familiar with accounting processes
Improve accuracy in financial record-keeping, reducing likelihood of errors Offer limited customization options as compared to ERPs
Provide real-time access to financial data and reporting, enabling business insights May lack advanced features or functionality required for complex accounting tasks
Can help businesses comply with tax regulations and accounting standards Come with potential security concerns, including risk of data breaches
Are you ready to purchase accounting software but are unsure where to begin? Check out our guide on how to choose the right accounting software for your business.

General Considerations on How To Choose ERP vs Accounting Software

The decision to choose between ERP and accounting software depends on several factors, including the size and complexity of your business, your industry, your specific business needs, and your budget. Here are some considerations to help you decide.

Choose ERP software if you:

  • Have a medium to large-sized business with complex operations involving multiple departments and functions
  • Need integrated management of various business processes beyond accounting, such as inventory management, supply chain management, HR, CRM, manufacturing, and more
  • Require real-time data sharing and collaboration across departments to improve efficiency and decision-making
  • Operate in a highly regulated industry with strict compliance requirements and need a comprehensive system to ensure compliance with accounting standards, tax regulations, and other regulatory mandates
  • Are willing to invest in a more extensive and robust software solution and have the resources (financial and human) to support the implementation and maintenance of an ERP system

Choose accounting software if you:

  • Have an SMB with relatively simple financial management needs
  • Primarily need software for basic accounting tasks, such as bookkeeping, invoicing, expense tracking, bank reconciliation, and financial reporting
  • Don’t require integration with other business processes or departments beyond accounting
  • Are looking for a cost-effective solution that is easy to implement, user-friendly, and doesn’t require extensive training or customization
  • Prefer a software solution that focuses solely on accounting and financial management without the additional complexity of other functionalities offered by ERP systems

Light ERP Solutions for Small Businesses

It doesn’t make sense for most small businesses to invest in an expensive full-blown ERP system. However, there are several of what we call “Light ERP” solutions that provide useful information to small business owners without breaking the bank. However, they generally lack the customization available with the more expensive ERP software. Here are some examples:

  • SAP Business One integrates with various accounting software solutions, allowing for seamless financial management alongside its ERP functionalities. It provides features such as financial accounting, budgeting, banking, and financial reporting.
  • QuickBooks Enterprise offers advanced accounting features along with basic ERP functionalities. While QuickBooks itself may not have a full ERP suite, it can integrate with various third-party ERP solutions to extend its capabilities in areas like inventory management, CRM, and supply chain.
  • Xero is primarily an accounting software but can integrate with various third-party ERP solutions to add additional functionalities. It provides features like invoicing, bank reconciliation, expense tracking, and reporting, which can complement ERP features from integrated solutions.
  • Sage 50 offers accounting and ERP capabilities for small businesses. It can integrate with other Sage products, like Sage CRM and Sage Inventory Advisor, to enhance its ERP features, including inventory management, sales management, and customer service.
  • Acumatica is a cloud-based ERP system geared toward SMBs. It provides seamless integration with various accounting software solutions and offers comprehensive ERP features like financial management, project accounting, distribution, and CRM, alongside its accounting integration capabilities.
For more information on some of the providers discussed above, check out our list of the best accounting software for small manufacturing businesses.

Frequently Asked Questions (FAQs)

No, ERP is not the same as accounting software, although accounting functionality is often a component of ERP systems. While accounting software primarily addresses financial management needs, ERP software provides a broader suite of functionalities to manage all aspects of a company’s operations. However, some ERP systems may include accounting modules or can integrate with standalone accounting software to provide comprehensive financial management capabilities.

SAP—which stands for Systems, Applications, and Products in Data Processing—is an ERP software provider. While it offers a range of software solutions, including those focused on specific business functions, such as HR and CRM, its flagship product is SAP ERP. It includes robust accounting functionalities but is not solely an accounting software.

Yes, accountants often use ERP systems as part of their jobs, especially in larger organizations or those with complex business operations. ERP systems include accounting modules that allow accountants to perform various financial management tasks, such as budgeting and forecasting, compliance and regulatory reporting, and facilitating auditing processes.

No, QuickBooks is not typically considered ERP software. It is primarily accounting software designed for SMBs to manage their financial operations. While it offers a range of accounting features—such as invoicing, expense tracking, bank reconciliation, and financial reporting—it doesn’t provide the comprehensive suite of functionalities typically associated with ERP systems.

Bottom Line

Both ERP and accounting software play crucial roles in managing business finances and operations. However, ERP systems offer a more comprehensive solution that integrates accounting with other core business functions, whereas accounting software focuses primarily on financial management tasks. The choice between ERP vs accounting software depends on the specific needs, size, and complexity of the organization.

About the Author

Danielle Bauter

Find Danielle OnLinkedIn

Danielle Bauter

Danielle Bauter is a writer for the Accounting division of Fit Small Business. She has owned Check Yourself, a bookkeeping and payroll service that specializes in small business, for over twenty years. She holds a Bachelor's degree from UCLA and has served on the Board of the National Association of Women Business Owners. She also regularly writes about business for various consumer publications.