ERP includes functionalities of the accounting software, plus other functional modules like supply chain, inventory, eCommerce, order processing, customer management, human resources, etc. These modules are integrated with the accounting module and each other.
This integration of accounting functions with other modules helps to increase the efficiency of the overall process for business management.
It’s because if any module of ERP performs some function, it’s reflected in another functional module if applicable. For instance, if ERP is updated with higher sales orders, the system checks the forecasted production.
So, suppose the system’s business intelligence finds that the business may not be able to meet the demand with the current production level.
In that case, it sends an alert on the manager’s screen to review the fact that they can accept the order on the same terms (it requires the use of the business intelligence module implemented in the software).
It’s important to note that ERP contains a wide area of functionalities, including accounting. However, accounting software is limited to some functionality for accounting operations.
For instance, accounting software generally provides the following functionality.
- Financial reporting
- Banking management
- Modules for accounts payable
- Module for account receivables
- Sales module for tracking sales quantity and amount
Small businesses usually opt for accounting software that can be used to manage the accounting function effectively. However, they have to manage other aspects of the business with a spreadsheet.
Importance of accounting module in ERP implementation
Accounting is the first module to be activated when organizations implement ERP. That’s because ERP implementation has been observed to enhance the accuracy and speed of the accounting function.
Further, today’s corporate world is facing increased financial and operational compliance regulations, which require highly accurate and structured financial data, which can be expected from ERP as there is more integration and fewer chances of error.
In addition, the accounting module is considered a central module of the business with a central dashboard and audit trails to track, monitor and control overall business performance. It’s also important to note that improvement in business efficiency can be best estimated with the changes in the level of profit.
For instance, profit is expected to increase if the business performs well and vice versa. So, this makes accounting modules one of the essential modules in the complete set of ERP.
Benefits of accounting module in the ERP
The accounting module of ERP is advanced and capable of generating reports on the basis of real-time data. Further, it offers modern features of managing accounting and finance that helps to initiate audit trail for revenue, expenses, assets, liabilities, equity, and other accounting aspects.
So, it not only increases the credibility of the financial data but helps to communicate the financial information to external parties clearly.
Let’s discuss the main benefits of the accounting module in the ERP.
- Overall transparency in accounting and finance management – The accounting module is integrated with other operational modules. It means there are fewer chances of error. Further, ERP offers an advanced dashboard for tracking and managing the figures that help to improve business profitability.
- Better planning and budgeting – Comprehensive analytical reports can be obtained from the ERP system that helps the business to produce budgets more accurately. It’s important to note that better planning in terms of working capital management helps reduce cost and increase the business’s profitability.
- Greater centralization– ERP helps in business centralization as all the data can be accessed on the screen and in just a few clicks. So, it helps central management in controlling the centralized business structure.
- Higher integration
ERP implementation ensures different business modules are highly integrated; this integration ensures the accuracy of the financials with immediate availability.
- Tracking and organizing financial documents – The source documents can be stored in the ERP while performing some business operations. Hence, storing the documents in digital format can help avoid the risk of loss or misplacement.
Features of the ERP Software
ERP is a highly integrated software that is designed to automate the back-office functions of the business. These functions may be in different business areas, including sales, financials, operations, purchases, customer relationship management, warehouse management, inventory management, supply chain management, production management, and every aspect of the business depending on the industry and nature of the work.
Further, ERP is highly customizable and can be modified as per the needs of the business.
On the other hand, accounting software is limited to recording and reporting activities, and other aspects of the business need to be connected manually.
So, if you have ERP implemented in the business, it’s sufficient to execute both financial and non-financial aspects.
However, if your business has accounting software, the work of accountants becomes comparatively easy, yet they have to obtain details from other departments and execute their reports.
ERP is a software of enterprise-level designed to aid the management of the company. On the contrary, accounting software is designed to create ease in the functions of an accounting department.
Frequently asked questions
Which types of reports can be obtained from the accounting module of ERP?
Comprehensive accounting reports can be obtained from the ERP system, including the following.
- Essential accounting reports including balance sheet, income statement, cash flow statement, statement of changes in equity.
- Reports containing GST details.
- Comparative balance reports – report on the customized account balances.
- Reports on the budget, cash, figures analytics, and different controls.
- Customized reports/personal reports through the integration of desired account balances.
- Reports on desired comparative figures.
Please note given list is not exhaustive, and several other reports can be generated from the ERP system.
What are the main differences between accounting software and ERP?
The following are the main differences between accounting software and ERP.
- Accounting software is about accounting management, and ERP is about business management.
- ERP is highly flexible and can be customized to meet the needs of your business while accounting software are designed to aid in accounting-related posting and reporting.
- ERP is a one-stop database for all of the business records while accounting software are limited to accounting.
- ERP includes customer-related integration while accounting software does not.
What’s the difference between on-site and cloud-based hosting?
The main difference is that data storing servers are placed on the premises for on-site hosting, and the business has to carry out certain maintenance.
On the other hand, cloud-based hosting is when a business’s data storing servers are placed in a remote location and need to be uploaded and downloaded via the internet.
What are the benefits of cloud-hosted ERP?
Following are some of the benefits associated with cloud-hosted ERP.
- Updates and upgrades for the ERP system can be made quickly.
- The system is expected to have reduced the time of deployment.
- Low cost for the infrastructure.
- It saves the cost of servers maintenance
- Great flexibility for customized business needs.
- Greater data encryption
- Greater protection from malware and viruses.
- Regular back-ups and greater protection from intrusion.
- Access to enhanced business intelligence that provides timely information for decision-making.
- Data can be fetched from any location. Hence, more flexibility helps improve the overall business’s collaboration, accessibility, and agility.
Is it better to move on to a cloud-based system of ERP?
Cloud-based ERP seems to bring technical innovation, enhanced security of the data, and more advanced features of the resource planning software.
What is the disadvantage of the cloud-based system of ERP?
The following are some of the disadvantages of cloud-based ERP systems,
- The cloud service provider can access your confidential data. That’s one of the reasons that organizations with sensitive information tend to avoid cloud-based hosting.
- Sometimes, there may be problems with internet connectivity, which might make it difficult for you to access the data on a timely basis. However, it’s a clerical matter but can be a cause of great hurdles in business management.
- On-site hosting requires a one-time investment in the servers and other infrastructures. However, you’ve to make a monthly payment for cloud-based hosting that might exceed a one-time cost of investment.