Many small businesses use QuickBooks or Microsoft Excel spreadsheets for accounting. When the topic of enterprise resource planning software (ERP) come up, the natural question arises: Is ERP necessary?
The short answer for most businesses is yes, ERP still is worth considering even if a business is happy with financial management using QuickBooks or similar. That’s because while QuickBooks and dedicated accounting software is built for handling basic accounting functions, there comes a day when growing businesses need more. ERP also extends far beyond just handling accounting; it is an integrated suite that ties together all parts of a business.
That’s why small businesses such as Rothy’s, a maker of woven, sustainable footwear, start with accounting software but then move to ERP.
“I think of ERP as a second-generation accounting system,” says Ulion Riebe, Rothy’s head of finance. “It is suited to ecommerce brands, direct brands, and provides all the multi-language, multi-currency stuff without a lot of the old-school processes and procedures that we as an ecommerce company aren't really set up to do.”
With that in mind, here are some of the key differences between ERP and dedicated accounting software.
Access Data from Across Your Entire Business
Accounting software has a limited purpose: it’s designed to focus on finances only.
That doesn't mean it's without value. Accounting software remains a helpful tool in its own right. It equips companies with insights into billings, financial management, profits, etc.
And that may seem enough for many entrepreneurs. But accounting software leaves you with blind spots.
These blind spots include inventory management, supply chain issues, shipping, marketing, and customer service, among others. These are crucial areas for running a successful business.
ERP handles the whole organization, not just finances. And it brings it all together.
Scale Your Software as Your Business Grows
Another benefit of ERP is its modular structure. That accommodates growing businesses with evolving needs.
You take on more employees. You incorporate new locations into your network. You double or triple your audience. Fast growth can mean data and customers get lost as changes occur.
ERP’s scalability allows you to increase or decrease yours based on shifting needs. You can add more integrations and customize your ERP to ensure you never fall behind. ERP scales with your business.
You still have your accounting tools. You still have access to critical financial details. But it's complemented by other applications serving your whole workforce.
Transform Your Working Processes to Achieve Real Benefits
Every company wants to boost its efficiency. But accounting software doesn’t help you do this.
ERP unifies data from across your entire business and centralizes it in one suite. Employees at all levels have access to valuable data related to almost any processes.
This helps them make on-the-spot decisions without hunting for information across different tools. They'll save time and effort—which adds up over months and years. Comprehensive permissions-settings keep access authorization controlled, too.
Further, ERP's unification and automation reduces manual input across many everyday tasks. Employees have more time and energy to channel into core duties. There’s no need to keep logging into different software systems or keeping dozens of tabs open.
Manage and Refine Your Customer Experience
A positive customer experience is fundamental for any successful company. It’s easy to lose sight of this when you become immersed in the minutiae of daily management.
But take your eye off the customer experience ball at your peril.
Almost half of consumers abandon businesses that are guilty of consistently poor service. They could warn friends and family to stay away from your brand, too. News could spread and cost you valuable customers in the long run.
Accounting software tells you nothing about your customer experience. Yes, it may show you’re boosting your revenue and suggest you're doing something right. But it doesn’t give you any valuable information upon which to base future decisions.
Financial growth could be the result of a solid marketing campaign, for example. Yet this would soon change as customers discover how poor your service is.
ERP provides you with insights into your customer experience and information on interactions through not only a comprehensive view of the business, but also with advanced analytics that make analysis easy. You can track interactions, view details on past problems and their solutions, and more.
Your employees can deliver a stronger customer experience when armed with this information. ERP cultivates a more organized, data-driven customer experience strategy. You can track and measure customer service to keep improving it over time.
Customer service is becoming the main brand differentiator. ERP can help you deliver a quality experience and increase retention in the most competitive markets.
Enhanced Workflow and Employee Collaboration
Accounting software has no real bearing on employee performance.
You might decide to reduce hours or scale back equipment if you see your finances dwindling. But accounting software doesn’t go beyond this to impact the way in which your workers behave.
Employees may work in silos and never collaborate. As a result, they won’t pool their respective skills and ideas for the greater good of the business.
Your team needs to work as a whole. ERP gives them fast access to comprehensive data pulled from across different departments.
A worker in the accounting department, for instance, can see how stock levels in the warehouse stand. Support agents can view delivery information to update customers waiting for a package.
ERP connects your whole company and streamlines most processes. Employees can make decisions based on accurate, up-to-the-minute information rather than guesswork. This boosts your efficiency and reduces the risk of poor organizational information.
Accounting software is not interchangeable with ERP. Businesses must be aware of these differences when deciding if what they have is enough, or if they need a better, more comprehensive backend system.
To learn more about cloud-based ERP, download our Understanding Cloud ERP for Non-IT Executives guide.