ERP vs accounting – what’s the difference?

Although enterprise resource planning (ERP) systems have been around for quite some time, there is still a common misperception that they’re one and the same as accounting systems. And, there are still companies which believe that if the accounts are in order, there’s no requirement for ERP.
But, Paul Marketos, Managing Director of Bluekey Software Solutions, which specialises in implementing SAP Business One, says that while accounting is central to any business, it is not what differentiates it.

“Without integrated systems, accounting only offers after-the-fact reporting. But, there are so many factors other than what’s happened in the past influencing where your business stands today and where it will be tomorrow and in a month’s time.

“An accounting package cannot help you forecast demand for products, reduce stock handling, keep goods flowing or improve stock management. Nor will it allow you to set up business rules which prevent stock from being sold or shipped at the wrong price or to customers who owe you more than 90 days; or ensure that managers are alerted to operational exceptions.

“Where an accounting system assists in tracking the finances to provide an overview of where the company stands from a financial perspective, based on historical data; ERP can be used to plan, control and streamline all aspects of business in real time, into the future.

“ERP integrates your key operational and customer-centric divisions, from production through to sales and service, enabling them to operate more efficiently. In fact, ERP is so effective in planning, integrating and controlling the business that good accounting is just one of the by-products of ERP,” says Marketos.

He believes that ERP is becoming a competitive necessity for companies of all sizes.
“Having made the shift from manual ledgers and Excel spreadsheets, companies that have automated their accounting processes are starting to realise that they need something bigger and better to improve efficiencies and profits because an accounting package simply cannot do it for them.

“The fact is that even with the best accounting package in play, that one source of the truth – that complete and accurate view of the business – remains elusive, and the only way to get it is with an integrated ERP solution.

“Many larger enterprises are also beginning to put pressure on their supply chain to implement ERP, not only to automate and speed-up administrative processes, but to streamline communication and other transactions as well,” says Marketos, adding that very often, the implementation of an ERP system leads to a complete re-engineering of many business processes, resulting in a leaner, meaner, faster and more profitable version of the business.

“We’ve had clients that have reduced their stock holding by over 35%, reduced administrative head counts and improved stock management to the extent that they now have working capital available to plough back into growing the business rather than having it tied up in stagnant stock on the warehouse floor.

“With better inventory control, costing and operational efficiencies, ERP can actually help to drive profits, and so it quickly pays for itself,” says Marketos.

Marketos lists the following as signs that your accounting package isn’t cutting it and that it’s time for ERP:
·         The number and complexity of databases and Excel spreadsheets being used to run the business is becoming unwieldy and unmanageable.
·         Users are complaining about system performance.
·         The system is prone to failure.
·         There are too many systems in play that aren’t integrated, resulting in high licensing and technical support and labour costs.
·         Information is hard to find and access, impacting on employees ability to make decisions and take timely action.
·         Customers are complaining about service and reliability.
·         Goods are being delivered to customers late, or not at all.
·         There’s too much stock gathering dust on the warehouse floor.
·         There’s never enough of the right stock to satisfy customer demand.
·         Invoices are not going out on time, resulting in delayed payments.
·         There’s poor control over debtors.
·         There’s no single source of customer information.
·         There’s no control over who is able to implement changes to stock codes, customer details etc
·         Items are being sold at the wrong price, impacting on margins.

“The time to upgrade has come if, in general, a need for better control of the business is apparent,” states Marketos.
He concludes saying that when the competitiveness, health and longevity of a business is at stake and the only way to increase profits is through improved efficiencies and cost cutting, the investment in ERP can be easily justified.

“ERP is actually more affordable and accessible than it has ever been, with solutions geared specifically at the lower and mid-tier markets. So it is no longer a luxury reserved for big corporates. Small businesses can now harness and leverage the power of ERP to increase profits and be more competitive. They cannot rely on accounting systems to do that for them.”