What is the difference between Accounting software and ERP software?

Why is it important to know the different? Simply because knowing and recognising when you need to upgrade may be the difference between your business or Not For Profit struggling on as is or succeeding in reaching the next level of success.

The IT industry is full of acronyms and multiple terms for the same or very similar things. You may have heard the terms:

·        Accounting Software

·        Enterprise Resource Planning Software (ERP)

·        Business Management Software (BMS)

·        Enterprise Software (ES)

·        Management Information System (MIS)

·        Industry (Vertical) Software

·        Customer Relationship Software (CRM)

·        Customer Information System (CIS)

And the list can go on till I get tired of typing. Most of the terms have been created to make understanding it all simpler but has, in fact, made things potentially more complicated for those not in, or regularly dealing with, the software industry. To complicate things further the various terms you use or know may be related to your generation. Even in this short article you will find me interchanging the terms #Software System or Software Solution or Software System Solution.

What is an Accounting Software Solution?

What does Accounting Software cover?

Most people in Australia and New Zealand automatically think of products like MYOB and QuickBooks when they think of Accounting Software. That is because they are Accounting Software Solutions aimed at the small and micro business market. Traditionally they have handled the financial or accounting requirements of a small business such as:

·        General Ledger;

·        Accounts Payable;

·        Accounts Receivable;

·        Cash Management;

·        Bank Reconciliations and the like

Accounting Software is able to produce limited financial reporting such as:

·        Balance Sheets;

·        Simplistic Cashflow reports;

·        Income Statements; and

·        Profit & Loss Statements.

Limitations

To remain relevant and grow with their customers, software providers have been pushing the boundaries of accounting software solutions by linking them with other software solutions to add in functionality such as payroll, human resource management, CRM etc. These vendors who provide these applications are sometimes called Independent Software Vendors or ISV’s. This has allowed them to successfully push up into the small to medium small business sector particularly through the use of “apps”.

The other limitation to accounting solutions is that they often have limited functionally compared to their “bigger brother” ERP systems. They may not handle foreign currencies, large numbers of companies within the group or large transaction volumes.

When is Accounting Software appropriate?

Accounting Software Solutions are excellent for their part of the market. Generally they are extremely good at handling small simple business types and are more cost effective than ERP systems at the smaller end of the market, however, this reverses as businesses and organisations grow. Accounting Software products tend to be quite generic and can work well across a multitude of businesses provided that the business is prepared to alter its way of doing things to follow the requirements of the software. Accounting software products tend to be out of the box solutions with limited scope for customisation.

What is Fully Integrated?

Now is an appropriate juncture to discuss the term “fully integrated”. There is deliberate confusion generated by some software suppliers over this term. A truly fully integrated software solution means that all of the software, suites, modules or functionality is working from a single integrated database. Many software providers that cannot offer this true integration define “fully integrated” solution as their primary product (often just an accounting software solution, but not always) integrated with other products such as CRM, HR, Payroll, Project Management and the list goes on. It is not unusual for some of the Accounting Software providers to offer a fully integrated solution being their accounting package with 13 or more ‘apps’ &/or software options in order to meet the prospects needs. Now this may be a perfectly acceptable and appropriate solution however it does add in potential issues of compatibility or integration and allows for more points of failure than a true fully integrated product would allow.

Accounting Software Solutions are normally the best option for small businesses with limited IT support, knowledge or business complexity. They are also far cheaper.

What is Enterprise Resource Planning Software (ERP)?

Most people in Australia and New Zealand, who have heard of ERP, still automatically think of products like SAP and Oracle when they think of ERP Software Solutions. These applications are aimed at very large, listed and multi-national corporations.

Where does the term ERP come from?

The term Enterprise Resource Planning dates back to 1990 and was first used by Gartner as a broad term for “a broad suite of integrated business management tools”. It represented the storing, management and interpretation of data from multiple parts of a business including operations, planning, human resources, accounts, sales etc. In other words it generally refers to an integrated Business Management Software System.

For many years, ERP Software Systems were seen to be relatively expensive and so financially accessible to larger, listed and multinational organisations. Since the mid – late 1990’s ERP system pricing has become increasingly more accessible to smaller and medium sized organisations who may have traditionally only been able to justify an Accounting Software System.

What does ERP Software cover?

Traditionally ERP Software Systems have handled a very broad cross section of an organisations needs such as:

·        Financial Management (aka Accounting Software for small companies but with far more functionality and capacity);

·        Customer Relationship Management (CRM);

·        Workflow;

·        Human Resource Management (HRM) and Payroll;

·        Supply Chain Management (SCM);

·        Distribution;

·        Job Cost and Project Management;

·        Manufacturing;

·        Service & Asset Management (SAM);

·        Reporting;

·        And lots more…..

From the above abridged listing you can easily see that Accounting Software functionality is therefore only part of one subset of software “suites” within a typical ERP solution.

ERP Systems:

·        Cost more than Accounting Systems;

·        Take more skill to understand than Accounting Systems;

·        Are more complex than Accounting Systems;

·        Take more time to implement than Accounting Systems;

·        Can do more than Accounting Systems;

·        Can provide more detailed information on a business or organisation than Accounting Systems;

·        Require more of an intellectual leap of faith when moving from an Accounting System; and

·        Are across the whole of business whereas an Accounting System is not.

What now?

Simple, if your organisation is adequately service by an Accounting Software package then stay as you are. If not then talk to Joanne Collinson or Phaneesh Kailas from Star Business Solutions on 1800 415 315 about a new ERP system how they can to take you from where to are now to where you need to be using either MYOB Greentree or MYOB Advanced.

Appendix:

a)  API: Application Program Interface. It is the code that allows difference software programs to communication directly with each other. Different types of API allow either a single direction or duel direction of information to flow.

b)  APP: An abbreviation of application (or application program). It is a self-contained program designed to perform a specific function for the user or for another program.

c)   Cloud: Ask 20 experts and you will get 20 different answers, however this basically means a program that you access over the internet that is hosted by someone such as AWS and that you pay for on a monthly subscription basis. However it does have many broader definitions.

d)  Configure: Configuration about applying the specific operating functionality required by an individual business or organisation within what is already developed within the program. This term should not be confused with” customise”.

e)  Customise: Means to make changes to the “out of the box” functionality of a program or tool to meet a particular client’s needs. It generally requires additional development (program coding) to be completed and is generally specific to your particular implementation of the software.

f)   Gartner: Gartner Inc. A global research and advisory firm based in the USA.

g)  Implementation: The process post sale until the software goes live.

h)  On Premise: Also call on-prem, it’s where the software is installed and physically runs on computers on the premises of either the person or organisation using the software or a physical server that is located at another location, ie a server farm.

i)    Out-Of-The-Box: Software that is ready to use “out of the box” and can perform without further configuration or customisation.

j)   Perpetual Licence: A perpetual licence allows the customer to use the software indefinitely. You pay a one off fee, up front and you hold the right to access the software form that point. It doesn’t include any related support services or the ongoing maintenance and upgrades you will need to ensure the software remains up to date.