Curious about QuickBooks an ERP system? Get the facts in our comprehensive guide. Discover whether QuickBooks can fulfill your enterprise resource planning needs. Explore the capabilities and features to make an informed decision about QuickBooks an ERP system.
As far as financial accounting is concerned, QuickBooks is certainly one of the most popular choices in the software industry. Ever since it was launched, it has carried businesses and enabled them to run in a more functional manner.
There is a tendency to use the terms accounting software, and ERP interchangeably. Although, at a practical level, the two are not the same. It may be said that accounting software is actually a subset of QuickBooks an ERP system.
While there is no doubt that QuickBooks is an accounting software, does it also come under the umbrella of an ERP software? In this article, we shall discuss the procedure of distinguishing an ERP from an accounting software, and which category QuickBooks falls under.
What is an ERP System or is QuickBooks an ERP system?
An ERP system is designed to give the manager a holistic view of the whole business. It would manage all the critical processes related to various aspects of the business. An ERP provides real time insights into the various functions that keep the business running. Also, ERP software are typically modular in nature. This means that as the business grows to a new scale, the ERP software would allow the manager to add new modules for newer departments that would be required with the growth.
It includes not just the details related to financial management, but also includes supply chain management, customer relationship management and so on. Other sides to an ERP include financial reporting, sales, inventory management, warehouse and quality management and so on.
The verdict on Quickbooks
The consensus by and large, is that QuickBooks is not an Enterprise Resource Planning software. While there is no doubt that Quickbooks has gone beyond the traditional role of an accounting software – it has expanded much of its functions to provide additional features; nevertheless, it does not qualify as an ERP software.
For instance consider the process in a regular manufacturing company:
Once the sales team confirms a sale, an order information would be passed to the accounting department for processing. A customer record is generated, which is then sent to the warehouse.
The worker picks the items from the inventory, and it is sent to shipping. From there it is packaged, and the warehouse inventory is updated. Finally the shipping informs the accounting department, and an invoice is generated for the customer.
In the above example, Quickbooks would be relevant only at the very beginning and at the end. For the rest of the process involving the warehouse, the worker, and the shipping, it would not be useful like a usual ERP software.
How to differentiate an ERP System?
ERP is useful in planning resources required for the operation of your business. For instance, it can be used to analyze the raw materials that would be required to run the production line. However, an accounting software will not be able to provide functionality to that level.
Apart from this, ERP would have options allowing you to analyze the volume of inventory and also to track it. It would also help you keep a tab on the costs incurred on the labour side of your business.
An accounting software can be managed by a single person, in this case, the small business owner. On the other hand, the ERP software would require a dedicated team of professionals to run it.
ERP System vs. Accounting Software
Accounting softwares are relatively cheaper, to the point that smaller businesses too can easily afford it. On the other hand, ERP can be quite expensive to acquire for larger businesses. Warehousing and inventory management will
In the case of accounting software , the focus is upon the general ledger, account receivable and payable, and expenses. On the other hand, ERP covers much broader functions such as tangible and intangible assets, costing performed on the job, number of orders fulfilled and so on.
The demand for ERP is largely due to the need felt to integrate plant operations with actual accounting practices. In order to root out discrepancies between the two, it is felt that there should be a uniform and simultaneous operational process.
The main difference between comes in, when you compare the size of different industries that are using the software. For instance, accounting practices are generally the same across industries, in the sense that they need to be mainly GAAP-compliant. On the other hand, ERP systems are typically customized – based on the industry for which they have been designed. Otherwise, they may accommodate specific capabilities as provided by third party software.
Should you use Quickbooks or an ERP System?
This decision depends upon the vision that you have for your business. In case you intend to keep your business at a limited scale, Quickbooks can be considered to be a good enough resource.
For instance, in case you are running a departmental store that has only one outlet, the customer base, movement of goods, inventory and warehouse requirements are all substantially lower. Consequently, you mainly need to keep a track of your expenses and revenues, as well as tax compliances. For this requirement Quickbooks is sufficient. It does not make sense to employ personnel separately, as well as purchase expensive ERP software – when the scale of operations is not substantially larger.
With larger businesses, of course, there is a need to maintain visibility of all the business processes. Tracking the resources of the company, when it is of substantial size, as well as maintaining cohesion and discipline across departments, from manufacturing, to inventory, to sales, would necessitate the use of an ERP.
In conclusion, it may be stated that Quickbooks cannot justifiably be called QuickBooks an ERP system. At its core, it is an accounting software that mainly provides financial data and analysis to small and medium sized businesses.