Greetings from Upin Ipin, May Allah always bless you with health and happiness. Aamiin.
This time, we will learn more about ERP system and Accounting Information System (AIS) in order to find the differences between them.
What is Accounting Information System (AIS)?
An accounting information system (AIS) is a structure that a business uses to collect, store, manage, process, retrieve and report its financial data so that it can be used by accountants, consultants, business analysts, managers, chief financial officers (CFOs), auditors and regulatory and tax agencies. In particular, specially trained accountants work with AIS to ensure the highest level of accuracy in a company's financial transactions and recordkeeping and to make financial data easily available to those who legitimately need access to it, all while keeping data intact and secure. (source)
There are so many Accounting Information System (AIS) softwares used by companies. Here are some of those softwares and applications:
1. Zoho Books
Zoho Books is an online accounting software that allows you to easily manage the money flowing in and out of your business. Manage your customers and invoices, while keeping expenses in check. Record, monitor and reconcile your bank accounts and transactions, and collaborate with your accountant in real-time.
2. QuickBooks
QuickBooks is the leading accounting software for small businesses. Manage all your finances with either our licensed or online version. Instant access to customer, vendor and employee information. Free support and upgrades with online version. Comes with a 30 day free trial and $12.95/Month thereafter.
3. Accounting by Wave
Wave offers 100% free, real double-entry accounting for small businesses. As a cloud-based software, Wave allows you to access your data from anywhere, add unlimited collaborators and work on all of your businesses from a single login. Wave eliminates data-entry and puts the financial reports you need at your fingers tips, allowing you to spend more time doing what you love. Your accounting is also seamlessly integrated with invoicing, receipt scanning, payment processing and payroll.
4. Mind Your Own Business (MYOB)
MYOB is an Australian multinational corporation that provides tax, accounting and other services to small and medium businesses.
5. Microsoft Office Accounting Express (MOAE)
Microsoft Office Accounting Express was the freeware version of Accounting, made available for download and also being distributed in certain editions of Microsoft Office 2007, including Professional, Small Business and Ultimate editions. This free version did not support local requirements outside of UK and USA.
6. Accurate Accounting
Accurate Accounting is AIS software which is commonly used by Indonesian companies.
7. DacEasy Accounting
DacEasy has a streamlined workflow presentation that experienced accounting software users can master easily. It follows traditional accounting methodologies and provides numerous insightful reports. It also provides a comprehensive accounting module and extensive payroll and inventory capabilities. In addition, Sage provides a free year of Gold support and tax updates.
8. Zahir Accounting
Zahir Accounting is AIS software which is also commonly used by Indonesian companies.
What is Enterprise resource planning (ERP) ?
Enterprise resource planning (ERP) is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources. ERP software integrates all facets of an operation, including product planning, development, manufacturing, sales and marketing.
ERP software is considered an enterprise application as it is designed to be used by larger businesses and often requires dedicated teams to customize and analyze the data and to handle upgrades and deployment. In contrast, Small business ERP applications are lightweight business management software solutions, customized for the business industry you work in.
AIS vs ERP
Recent years have brought a sea of change to business management software. While businesses have long considered accounting software a necessity, that mantle is increasingly taken by enterprise resource planning (ERP) software. So much so, in fact, that many are starting to use the terms interchangeably. While there are worse crimes in the world than using the wrong term for a given software package, understanding the difference can help you compare accounting software and ERP software.
In order to fully illustrate the difference between accounting software and ERP software, let’s look at the range of functionality traditionally offered by each.
Accounting software, as indicated by its name, deals with accounting transactions such as payroll, accounts receivable, accounts payable, and trial balances. Common modules bundled with accounting software include billing, sales order, purchase order, general ledger, timesheet, expense, and electronic payment.
While there is some crossover with ERP functionality, the two are slightly different. ERP software is a resource management system, tracking tangible and intangible assets, materials, human resources, and financial resources. Financial resources may jump out at you, but note that ERP software covers a range of functionality not generally offered by accounting software, often factoring in intangibles like human work hours, product lifecycles, performance units, and customer relations.
Simply put, accounting software, as it is traditionally known, is a subset of any ERP bundle. Let’s take the Microsoft Dynamics GP modules as an example. The suite offers financial services such as financial management, planning, and budgeting. This collection by itself may have been considered accounting software ten years ago, but now can potentially interface with a number of other modules. Business operations like project and supply chain management, reporting and analysis, human resource management, and even IT management are all services that can be coordinated and managed under the Microsoft Dynamics GP software.
However, all of this is semantics. Sure, accounting software and ERP software may be two different things, but does it really matter in today’s environment? The answer is not really – accounting software as an entity unto itself has been steadily contracting. Recent years have seen many accounting software vendors cease operations or be acquired by larger groups. Additionally, with so many ERP platforms offering the same accounting functionality but with scalable growth potential, why would you choose a traditional accounting software bundle?
The reason that accounting software and ERP software have come to mean the same thing in today’s market is that accounting software as we traditionally understand it is fading away. Larger, more comprehensive software suites are replacing its function. As the industry moves on from this dated concept of accounting software, it’s possible that ERP software may completely co-opt its meaning as well as its functional place in the market. Given that the two are unlikely to exist simultaneously in the market now or in the future, referring to ERP as accounting software is unlikely to cause confusion.
Advantages and Benefits of Accounting Information System (AIS)
1. Relatively Easy of Use
Most of the Accounting Softwares are designed for users to easily use them. Through sets of training, even though the users don't have speciality in accounting, users can just use the applications for daily work activity
2. Speed
The main benefit of information systems in accounting is the speed of processing tasks. Data is entered once and can then be used and reused in compiling reports by literally pressing a button. If a transaction needs correction, it is easily done, with reports generated afterward at speeds never possible with manual accounting systems.
3. Classification
When data is entered in an accounting system, manual or computerized, an accountant needs to classify it in a detailed fashion. For example, a transaction could be a sales revenue or an interest revenue. Using information systems, this classification process is easily accomplished with a drop-down menu from which you choose the proper category. You can also quickly generate reports involving classifications. With a manual system, this process takes much more time.
4. Safety
Once data is entered into a computer, it is safe. The chances of losing data are remote, especially when you perform regular system backups. In manual systems, paper pads can be lost or damaged more easily. You can save data on the Internet, where it will not only be accessible anytime you need it but will also still be secure even if your computer is lost or damaged.
5. Inexpensive Installation Process and Maintenance.
Most of the Softwares are easy to install and don't need annual maintenance.
Disadvantages of Accounting Information System (AIS)
1. Needs Extra Protection
Using a computerized accounting system comes with its own set of problems such as the need to protect against data loss through power failure or viruses, and the danger of hackers stealing data. Computer fraud is also a concern, and you need to instigate a system of controls for who has access to the information, particularly customer information. If there is a security breach and data is stolen, management can be held personally liable for the loss of data.
2. Needs more attention in Data Entering
Once data been input into the system, automatically the output are obtained hence the data being input needs to be validated for accuracy and completeness, we should not forget concept of GIGO (Garbage In(Input) Garbage out ( Output)
3. Doesn't meet the market needs
Accounting system not properly set up to meet the requirement of the business due to badly programmed or inappropriate software or hardware or personnel problems can caused more havoc.
Advantages and Benefits of Enterprise resource planning (ERP)
1. Complete visibility into all the important processes, across various departments of an organization (especially for senior management personnel).
2. Automatic and coherent workflow from one department/function to another, to ensure a smooth transition and quicker completion of processes. This also ensures that all the inter-departmental activities are properly tracked and none of them is ‘missed out’.
3. A unified and single reporting system to analyze the statistics/status etc. in real-time, across all functions/departments.
4. Since same (ERP) software is now used across all departments, individual departments having to buy and maintain their own software systems is no longer necessary.
5. Certain ERP vendors can extend their ERP systems to provide Business Intelligence functionalities, that can give overall insights on business processes and identify potential areas of problems/improvements.
6. Advanced e-commerce integration is possible with ERP systems – most of them can handle web-based order tracking/ processing.
7. There are various modules in an ERP system like Finance/Accounts, Human Resource Management, Manufacturing, Marketing/Sales, Supply Chain/Warehouse Management, CRM, Project Management, etc.
8. Since ERP is a modular software system, its possible to implement either a few modules (or) many modules based on the requirements of an organization. If more modules implemented, the integration between various departments may be better.
9. Since a Database system is implemented on the backend to store all the information required by the ERP system, it enables centralized storage/back-up of all enterprise data.
10. ERP systems are more secure as centralized security policies can be applied to them. All the transactions happening via the ERP systems can be tracked.
11. ERP systems provide better company-wide visibility and hence enable better/faster collaboration across all the departments.
12. It is possible to integrate other systems (like bar-code reader, for example) to the ERP system through an API (Application Programing Interface).
13. ERP systems make it easier for order tracking, inventory tracking, revenue tracking, sales forecasting and related activities.
14. ERP systems are especially helpful for managing globally dispersed enterprise companies, better.
Disadvantages of Enterprise resource planning (ERP)
1. The cost of ERP Software, planning, customization, configuration, testing, implementation, etc. is too high.
2. ERP deployments are highly time-consuming – projects may take 1-3 years (or more) to get completed and fully functional.
3. Complexity. Too little customization may not integrate the ERP system with the business process & too much customization may slow down the project and make it difficult to upgrade.
4. The cost savings/payback may not be realized immediately after the ERP implementation & it is quite difficult to measure the same.
5. The participation of users is very important for successful implementation of ERP projects – hence, exhaustive user training and simple user interface might be critical. But ERP systems are generally difficult to learn (and use).
6. There maybe additional indirect costs due to ERP implementation – like new IT infrastructure, upgrading the WAN links, etc.
7. Migration of existing data to the new ERP systems is difficult (or impossible) to achieve. Integrating ERP systems with other stand alone software systems is equally difficult (if possible). These activities may consume a lot of time, money & resources, if attempted.
8. ERP implementations are difficult to achieve in decentralized organizations with disparate business processes and systems.
9. Once an ERP systems is implemented it becomes a single vendor lock-in for further upgrades, customizations etc. Companies are at the discretion of a single vendor and may not be able to negotiate effectively for their services.
10. Evaluation prior to implementation of ERP system is critical. If this step is not done properly and experienced technical/business resources are not available while evaluating, ERP implementations can (and have) become a failure.
Hope today's article will be useful to those who are willing to learn moe about ERP :)
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