QuickBooks vs. ERP: Choose the Best Solution

Comparison of QuickBooks with enterprise resource planning (ERP) software comes down to one word: growth. Companies should know that accounting software alone comes with limits that growing companies must surmount. Take, for instance, the complex but necessary issues of GAAP compliance and globalization. QuickBooks requires workarounds to achieve compliance with Generally Accepted Accounting Principles; and growing companies that have international markets in their sights will need accounting software to support additional currencies, tax jurisdictions and languages.

But the key difference between ERP and simple accounting software, like QuickBooks, goes well beyond such specific features — which often fluctuate. The true value of ERP lies in its comprehensive nature: Yes, it's got accounting software at its heart, but with ERP, that accounting software serves as the hub of broader resource planning for the entire business.

The inherent limits of QuickBooks, however, also make it simpler to manage and use than ERP software. So, QuickBooks may be a good choice for many small businesses that are just starting out and don't need much more than basic accounting software — a fact attested to by QuickBooks' user base and community of supporting consultants.

What Is an ERP System?

Enterprise resource planning software manages critical processes across an entire business. ERP places accounting and financials first but is designed to operate across accounting, manufacturing, inventory management, professional services management, customer relationship management, project management, commerce, human resources and more. ERP is able to provide real-time insight into the diverse and broad functions that make growing businesses run, because the operational information for all those departments is housed in a single database — the same one in which accounting information is stored.

In addition, ERP systems are typically modular. That means a business that initially deploys only ERP accounting software can add modules for other departments as the organization grows and new requirements emerge.

Is QuickBooks an ERP System?

There are three main versions of QuickBooks: QuickBooks Desktop, QuickBooks Desktop Enterprise and QuickBooks Online, which is the only native cloud-based version. QuickBooks Desktop and QuickBooks Online are accounting software, only, and don't include the broader range of business functions that ERP software typically offers. To illustrate the difference, consider the following series of simplified steps a manufacturing company needs to take to fulfill a sale of an item.

1. The sales team makes a sale.
2. Order information is passed to the accounting department for the order to be processed, which include creating a customer record if this is a first time sales with details of the order.
3. It is then sent to the warehouse where a pick list is generated so a worker can pick the items ordered off the shelves.
4. The picked order moves to shipping, where it is packaged and sent to the customer.
5. Warehouse inventory is updated.
6. Shipping informs accounting that the order is fulfilled and can be invoiced.
7. Accounting invoices the customer.

Of these steps, QuickBooks Desktop and QuickBooks Online might handle, at most, No. 2 and No. 7. Because they are exclusively accounting software, they do not contain additional integrated functions to help run the non-accounting components of a business. The other steps need to be managed manually or through completely separate software systems. Often, data must be re-entered from one system to another, creating a slow process prone to the risks of human error.

An ERP system, on the other hand, could automate every step, following the order from sale to invoice. Because the CRM, warehousing, inventory management and accounting modules of an ERP system are integrated and share a common database, each step instantly informs the next. No data needs to be re-entered and nothing comes as a surprise.

Furthermore, remember that the P in ERP stands for "planning." It's easy to see from this example how the warehouse and sales departments in an ERP-enabled organization could use pipeline data for supply planning. If those departments know about the flow of orders coming through, they can make sure they have the right staff on hand at the right times to get the job done quickly and efficiently.

What about QuickBooks Desktop Enterprise?

This version includes the basic accounting functions of QuickBooks plus several added functions designed to compete with ERP, particularly inventory management, pricing and time-tracking. That leaves out many of the benefits of an ERP system, which empower organizations to plan for, integrate and automate business processes across supply chain, manufacturing, human resources, sales and marketing, among other non-accounting functions.

Perhaps the biggest limitations of the enterprise version, though, are related to cloud support and the maximum number of users. QuickBooks Desktop Enterprise is not natively cloud-based, though it can be purchased on a hosted basis with hosting provided by a third party. In addition, the maximum number of users per instance is 40, making it a meaningful option primarily for small to midsize businesses that are not planning for large-scale growth. The native cloud structure of ERP software means that it can support many more users.

Digging deeper, QuickBooks Desktop Enterprise does not readily accommodate business processes like subscription billing, revenue recognition, asset management and multidimensional reporting. Instead, businesses would need to bring in additional software solutions to address those and other functions, resulting in difficulties like inconsistent reports, manual rework, redundant processes and a growing profusion of Excel sheets. Lastly, the enterprise version offers a standard hard-wired chart of accounts, which has the virtue of minimizing complexity but limits an organization's ability to capture and organize transactions into its own specific financial structure of assets, liabilities, revenue and expenses.

Accounting Software vs. ERP System

The big difference between accounting software and ERP is how ERP systems embrace virtually all aspects of running a business, whether that business is relatively small or very large. While that's simple to say and to understand, in practice it translates into a very large number of detailed differences.

For example, accounting practices are essentially the same for most industries, despite a few notable exceptions such as construction. So accounting software is essentially the same regardless of industry, while ERP systems are either customized from the ground up for a given industry or, like NetSuite's software, have an ecosystem of industry-specific capabilities provided either by NetSuite or third parties.

Other examples of how that difference manifests in practice include warehousing and inventory management. These functions are entirely outside the scope of accounting software. But they're key operational aspects of any manufacturing or retail business, so ERP systems usually include comprehensive capabilities for automating and managing them efficiently and make it possible for the information output to flow from those operations directly into the ERP's accounting module. ERP systems similarly integrate CRM, supply chain and HR functions, among others.

Going further, another set of capabilities that are in ERP but not accounting software come from ERP's focus on growing businesses that will ultimately have more complex requirements than a typical mom-and-pop shop. Customized, role-based dashboards, for instance, become extremely useful as organizations grow and work becomes more specialized. Even in accounting functions, ERP systems typically provide better controls and, therefore, tighter compliance with GAAP regulations in the U.S. and International Financial Reporting Standards (IFRS) elsewhere.

The accompanying chart includes many more specific differences.

Key Differences of ERP & Accounting Software

Why ERP Is Better for Your Business

Not every business has big ambitions. But companies that plan to grow — and want the most effective tools with which to manage their growth — will be better off with an ERP system than a stand-alone accounting software package.

Here are some of the key features ERP systems provide that accounting software typically cannot, and the benefits those features create:

• ERP systems streamline and automate a wide array of business processes across the enterprise. This leads to many kinds of benefits, from a faster order-to-cash process to more efficient vendor management.
• With ERP, managers get complete visibility into all their core business processes. That visibility empowers business managers to identify opportunities for process improvement throughout the organization.
• Resource tracking and reporting is an ERP feature that helps organizations deploy their resources more accurately and efficiently — which usually means more profit.
• The integration of business disciplines that ERP provides — from product development to manufacturing to inventory and even sales and marketing — translates into faster time-to-market execution and better planning for production, marketing and sales.
• Synchronization across departments leads to increased productivity and operational efficiency. That, in turn, reduces costs and enhances competitiveness.
• Because ERP modules share a single common source of data, they provide more accurate real-time reporting.
• Cloud-based ERP systems reduce or eliminate hardware purchases and maintenance costs and provide better access from remote locations.

Why You Should Choose NetSuite ERP

NetSuite ERP is a suite of applications designed to work together as a business management solution for growing organizations. Core processes can be automated and key departments can have visibility into operational and financial performance. The suite of applications provides a world-class accounting system, along with modules that integrate key business processes such as order processing, inventory management, production, supply chain and warehouse operations.

From advertising and apparel to transportation and wholesale distribution, NetSuite ERP has a solution tailored to meet the specific needs of any organization. NetSuite taps into nearly two decades of experience to solve the problems faced by many different industries and make sure clients are quickly up and running with the tools that will help their businesses most.

Of note, surveys show NetSuite ERP customers have realized impressive results. Business visibility has helped them reduce the time and resources it takes to produce financial reports by between 40% and 55%. They've reduced the time required for financial closes by 45% to 70% and reduced IT support costs by 40% to 65%.

Results like these come, in part, from NetSuite's modular format, which lets a business choose components that best meet its needs and add modules as complexities grow. With NetSuite ERP, businesses can:

• Make better decisions by tapping into financial, operational and transactional data from across the organization.
• Simplify a whole range of business processes by looking at them through a single application. Manual processes can be automated to save time and serve customers better while simultaneously creating a competitive advantage by identifying new opportunities.
• Go global, with built-in capabilities to manage multiple subsidiaries. NetSuite ERP serves business worldwide in 27 languages and 190 currencies.

Conclusion

When a business grows beyond what it can accomplish with a few rows and columns in Excel, its next step is often toward accounting software — usually QuickBooks. That's the right choice for businesses with low-growth policies, such as a family-owned local store with no desire to open a second location. Businesses anticipating rapid growth, product extensions, geographic expansion — or all of the above — are far more likely to prosper with an ERP system that offers a unified view of the organization that enables automation of operations across the enterprise, as well as superior accounting functions and compliance.

QuickBooks vs. ERP FAQs

Why is QuickBooks not an ERP?

QuickBooks is not an ERP because it provides only accounting functions — just one of the components of an ERP system. ERP systems help businesses manage a wide variety of business processes, including sales and marketing, production, inventory management, procurement and more.

What is QuickBooks CA Enterprise?

QuickBooks Enterprise is on-premises software that manages a broad range of business processes. As installed software, users are responsible for maintaining and upgrading the software. It can also be purchased on a hosted basis.

What is the difference between QuickBooks Pro and QuickBooks Enterprise?

QuickBooks Pro is the simplest version of QuickBooks Desktop software, designed for smaller businesses with only a few users. It provides only accounting functions. QuickBooks Enterprise provides other functions beyond accounting and is designed to compete with ERP. It is the most expensive version of the desktop software and is sold as an annual subscription.

What type of system is QuickBooks?

QuickBooks is a desktop system, meaning that the software is hosted on your own computer. As such, QuickBooks users are responsible for service and maintenance of the computer, installing and managing software upgrades, and data security and backups. A hosted version is also available.