Those of us in the software industry tend to use industry jargon so much that we sometimes forget that not everyone knows what we mean by terms such as “ERP Software“. This was brought home to me when an acquaintance asked my advice regarding her company’s accounting software needs. She’d assumed that any accounting software package should be able to handle all inventory management, purchasing and other logistical requirements, yet she’d had several recommendations from industry insiders to look at software that turned out to handle all the basic accounting functions really well, but had limited or no functionality in the supply chain and logistical areas. She was not familiar with the expression “ERP Software”.
To many people the two terms are interchangeable. But if you’re in discussion with a potential vendor, or a consultant/recommender, they can mean very different things. The difference between ERP and accounting software is that accounting software generally covers areas like accounts receivable and payable, banking, financial reporting and some basic revenue/sales recording and tracking. Accounting software manages only a specific area of a business. ERP software on the other hand, will always include the functionality of accounting software, plus tools for managing the supply chain, logistical requirements, inventory, warehouse management, contact management, eCommerce and more. ERP is a fully integrated comprehensive, end-to-end solution that covers all (or almost all) facets of the business. Many businesses start out with basic accounting functionality when the company is young and order volume is low. However, as a business grows and the need for additional functionality arises, it will come time to start looking at an ERP solution.
If you’re in the market for new accounting software, consider whether an ERP solution would better meet your needs with our free Software Buying Guide.