Today a small business can connect a number of third-party cloud programs to their accounting software that will replicate many of the functions of an ERP. While there may be similarities on paper, an ERP has several advantages.
1. Multiple interfaces vs single interface.
A well-designed ERP system will track all key information relating to resources in an organisation in a single interface.
Accounting software focuses on financial transactions, so non-financial information – such as notes essential to proper customer relationship management – is usually not stored in the accounting software. Instead, users must access multiple systems in order to retrieve information necessary to accomplish their work.
Impact: Switching between multiple interfaces to carry out a core business task can reduce efficiency.
2. Full access vs approval workflows.
Accounting software is designed for small organisations so approvals are often minimal or non-existent, and typically cannot be customised. In contrast, ERPs allow for customisation of sophisticated approval workflows.
Here’s an example: In Xero, any user with “Standard” permissions has full access to sales invoices, quotes, bills, and purchase orders.
These users can both enter and approve any transactions in these modules.
Impact: Accounting software doesn’t require users to seek approval by an administrator. Access is either all or nothing.
3. Multiple sync vs single database.
ERP systems are designed to handle all aspects of the business, so it is not usually necessary to integrate with third-party applications (although this is now possible with ERPs as well). A significant benefit of an integrated system is that information is stored in a single database. This ensures that information is current and up-to-date across all functions within the ERP.
Accounting software often needs to integrate with third-party applications to add in-depth inventory, CRM, and other business functions. While this extends the viability of the accounting software, the business has to now deal with multiple databases.
Information may not flow quickly and evenly among applications connected in this way. Especially if you’re attempting to integrate more than one business application with the accounting system, as is often the case.
Impact: A business may need to wait for multiple databases to sync data, or deal with occasional glitches in syncing caused by updates to connected applications.
One of the most important factors in a growing business is making sure it has systems that can support it as it expands. Read our blog, 'Timing the Switch From Accounting Software to an ERP System' to learn about the tipping points in accounting software and when a business needs to step up to an ERP.
