Today, businesses have to manage multiple types of data from multiple sources, all while managing a myriad of business processes. To meet these challenges, businesses rely on software to support their accounting and process requirements. In this article we will discuss the differences between software choices; specifically, Accounting software and Enterprise Resource Planning (ERP) software, as well as how this relates to the difference between “reporting” and “analytics”.
Accounting software simply provides core financial information; basically, a snapshot of “what happened”. This software is tailored specifically for accounting, to be used by the Accounting and Finance departments. Enterprise Resource Planning not only records the accounting of “what happened”, but also incorporates this data into a holistic system that can be used to manage an organization. ERP systems include data from – and are used by – all departments, not just Accounting and Finance. This provides Accounting and Finance with much deeper visibility into the data because the ERP not only stores information across an organization but is the source of that information itself. ERP systems support third-party integrations which extend the visibility and access to external sources of data (e.g. payroll or sales taxes). Since the ERP system is holistic, organizations can leverage automated workflows that support interconnected business processes across departments (e.g. approvals).
Accounting software provides “reporting”, while ERP systems allow for “analytics”. The difference between “reporting” and “analytics” is that reporting provides just a snapshot of data, while analytics provides insight into that data. Because accounting software provides only a snapshot of data, it is limited to reporting. The integrated and holistic nature of ERP systems supports analytics, which provides the ability to answer questions about a business and view trends across data points.
In short, the capabilities of an ERP extend beyond that of accounting software because it allows organizations to consolidate their data and business processes and perform true analytics.
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