One of the first business software purchases a small company will make when starting out is to get a basic accounting software package like QuickBooks. Often they are unaware of the existence of or are under the impression that more powerful management systems like Enterprise Resource Planning (ERP) are only appropriate for larger companies.
However, as business complexity and competition have increased, that once easy decision is not so clear-cut. The decision to choose cloud-based accounting software, or a cloud-based ERP solution, no longer depends on size. It depends on your business needs and expectations for growth.
Let's take a look at what's involved in each approach.
Typically, accounting software provides businesses with a way to manage all of the data involved in accounting and financial operations. It covers both financial and cost accounting including general ledger, accounts payables and receivables, and fixed asset accounting together with financial reporting. The aim of consolidating these functions in a single piece of software is to improve the efficiency and accuracy of the financial functions within your business.
Delivering this service via the cloud allows a business to realise the cloud's significant benefits. Because the accounting software is run on the cloud vendor's servers, users don't have to invest heavily in the purchase and maintenance of on-premise hardware or servers. The vendor is responsible for upgrades so the software is always up to date with the latest regulatory requirements and enhancements. The service is easily accessible from different locations and devices at anytime. Use of the software is conveniently scalable.
ERP software helps manage core accounting processes, similar to accounting software. But an ERP system also goes much further to include more business processes, streamlining and automating operations and greatly improving visibility across the company. Typically, ERP software integrates order management, supply chain and inventory management, distribution, human resources and supplier and purchase order management. Many of the more modern ERP system extend financial management to integrate budgeting and forecasting capabilities and enable multi-company and multi-national division management. Some ERP systems also encompass core front-office functions include sales, ecommerce, customer self-service, and Point of Sale. With ERP software, you get a single system and database to manage your business from lead to cash through procure to pay.
This provides visibility across the whole business, not just the financials. It also enables more accurate and efficient business processes and better customer responsiveness.
The benefits of having a cloud-based ERP solution are similar to those realised by the cloud-based accounting software. As with any cloud application, investment in hardware and servers is reduced. The vendor is responsible for upgrades and patches and also keeps the data secure and accessible. Users can scale their use of the application and access all information at any time, from anywhere. With cloud-based ERP software, it's easier to get a new subsidiary up and running, or to grow your system with the needs of your business.
As we've seen, a major advantage of ERP software in the cloud is that different parts of your business are integrated and made visible to every team. This also highlights a disadvantage of the accounting-only solution.
With accounting software, your accounts teams have a clear view into the GAAP financial functions, but not into inventory management or the purchase and ordering system, for example. Those functions are still necessary, however, even for a small business. To meet these needs, companies frequently buy separate pieces of functional software as they grow. That creates a patchwork of different vendor solutions. Those businesses then rely on their IT teams to help the systems work together, and on multiple spreadsheets to extract and integrate company-wide data. This results in people spending time and effort creating overlapping spreadsheets, often duplicating work done elsewhere and introducing a higher risk of error.
Software applications delivered via the cloud are not immune to this issue. If your systems reside on separate databases with different code bases, there is a limit to how well cloud applications will talk with one another and it's as easy to fall into creating cloud silos as it is with in-house software. This can lead to the same need for manual extraction and consolidation of data. The IT team has to devote time and effort to integration workarounds.
With the single source of accurate data that you get with ERP software, your people spend less time entering data repeateadly in to multiple systems and also don't need to constantly integrate information via spreadsheets. They waste less time sorting out IT problems, and more time focusing on growing their business. Cloud computing makes ERP software more accessible to smaller businesses. With ERP software in the cloud, you can start small and easily make use of more functionality over time without introducing complications into your IT environment. It's much easier to scale and grow your use of a system, implementation is easier, and ongoing management is much less time-consuming and costly. This is making ERP software a more practical choice for businesses of all sizes.
Cloud computing is allowing companies to gain access to far more comprehensive ERP business systems than would have been the case with traditional in-house software. This lets your business scale as it grows, while giving your team the information they need to make better, faster business decisions. That makes ERP software an attractive choice for businesses of all sizes.