Comparing ERP Systems with Traditional Computerized Accounting Software

In the Philippines, Enterprise Resource Planning (ERP) systems are now widely considered to be an improvement over earlier generations of computerized accounting software. Thanks to their system integration capabilities, ERP provides a massive leap in efficiency and data accuracy, not just in accounting departments but throughout entire organizations. 

These improvements are largely due to how data is handled in an ERP framework. To understand why ERPs can do so much, it’s helpful to explore the way older accounting software handles data.

Legacy accounting software typically only handles data within an accounting or finance department. Under traditional data management frameworks, any data that is stored in the accounting system database that is needed in another department’s system would have to be copy-pasted or manually re-inputted, a tedious and often error-prone process, even when software automation is available. 

True ERPs solve that issue by providing a central database and integrating multiple department systems, allowing seamless data transfers from one department to another. In practice, this means that an ERP is far more a fully-fledged accounting system as it also performs other business processes across departments, including human resources, supply chain management, manufacturing, and more. The modern ERP’s data framework effectively enables real-time data access, smoother collaboration, and superior data accuracy, resulting in faster, timelier decision-making.

Practical Differences between ERP and Traditional Accounting Software

On paper, older types of computerized accounting software may seem to have broadly similar record-keeping capabilities as accounting modules in ERPs. In reality, several key differences make ERPs the best choice for accounting, regardless of the size of the business.

Integration

●        ERP: ERP software draws data from a single unified database and serves them to different specialized modules, allowing seamless integration over multiple departments.

●        Traditional Accounting Software: These legacy systems operate as self-contained, standalone solutions. Integration with other business systems often requires manual data entry or special integration software to permit reconciliation with other systems, raising the odds of input errors.

Scope

●        ERP: Full-fledged ERP solutions cover the whole gamut of business functions —not just accounting. They typically also include modules for inventory management, customer relationship management (CRM), supply chain management, payroll, and all other important business areas that matter regardless of an organization’s industry.

●        Traditional Accounting Software: This type of software narrowly focuses on financial transactions and basic accounting processes. However, despite this focus, these older software options do not necessarily offer any functional benefits over a comparable ERP accounting module.

Complexity

●        ERP: These solutions tend to be much more complex than traditional accounting software due to their wider scope and more extensive customization. This complexity, however, is not necessarily felt from users' perspectives.

●        Traditional Accounting Software: Older accounting software is typically simpler, with limited customization capabilities.

Scalability

●        ERP: ERPs’ unified databases mean that it takes less effort to scale up business systems since there is only one database to manage. Better ERPs are even designed to scale up, right out of the box, with some featuring modular setup and cloud-based storage that further improve on scalability.

●        Traditional Accounting Software: Traditional systems usually offer far more limited room to scale up, especially in cases where they’re built on outdated tech frameworks. These systems may also require replacement or hardware storage upgrades as a business’s needs evolve.

Cost

●        ERP: Initial implementation costs for ERPs can be significant but the time savings and other benefits of these systems often outweigh the investment.

●        Traditional Accounting Software: These solutions are generally more affordable upfront. However, their downsides relative to ERPs can mean that they cost more over the long term.

Benefits of Using Modern ERPs for Accounting

As the various comparisons demonstrate, ERPs offer organizations various advantages:

•              Integration: ERPs’ use of unified databases eliminates data silos and allows truly seamless communication between departments—often in real-time.

•              Automation: ERPs cut down on copy-pasting and ad hoc data reconciliation solutions, reducing manual effort and minimizing the risk of errors. And unlike with automated Excel or Google Drive spreadsheets, regular users cannot easily “break” a system while using it.  

•              Real-Time Insights: Since manual data transfers are minimized in ERP systems, organizations can access real-time data analytics and reporting across departments.  

•              Scalability: Modern ERPs are designed to be scalable. When using an appropriate cloud service, they can easily accommodate increasing transaction volumes without any downtimes.

•              Customization: Contemporary ERPs can be tailored to meet the specific needs of different industries and businesses. Outside of accounting, most options allow for the customization of modules, workflows, and other functionalities.

The Evolution of ERP from Legacy Computerized Accounting Software

These days, when you hear an accountant or a business owner talk about “accounting software” or “accounting systems,” they probably aren’t referring to the traditional standalone accounting solutions. Rather, they are most likely talking about accounting modules on more expansive ERP solutions such as SAP Business One.

While there are still some holdouts sticking with legacy accounting systems, the massive benefits of ERP software mean that they are seeing widespread use across a variety of industries. With their integrated approach, scalability, and advanced functionalities, ERPs go beyond facilitating accounting tasks towards enabling organizations to wield data in a profound way. Any organization that wants to remain competitive must now consider ERP integration as a necessity, not just for accounting but also for maintaining relevance in today's data-driven business environments.