QuickBooks vs ERP: what ERP does better

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We all know that ERP is a set of software tools that provide an enterprise with financial, operational, business intelligence, and other systems that completely integrate and act as a single, common system.  Many of us are also familiar with QuickBooks, which is a popular low-price and easy to use accounting system.  QuickBooks comes as an accounting only system or there are upgrades available including one known as QuickBooks Desktop Enterprise.  Does QuickBooks have enough power to meet the needs of a business that might consider an ERP system?

We can find that there are many third-party software vendors and developers selling add-on applications using QuickBooks as the accounting module.  If we look at a few we might see ERP features those developers feel can promote QuickBooks plus their software will yield a complete ERP.

Here are four areas in which ERP provides a bit more functionality than QuickBooks, and how this can impact your business.

1. Average cost inventory

QuickBooks, by default, values inventory at average cost. There is nothing wrong with this method but tax laws and the nature of your business could suggest another method is better. Standard cost, where items have a static value throughout the year makes sense for many. Many businesses manage their physical stock using first in, last out (FIFO) so that inventory items do not get old. ERP allows FIFO valuation for your accounting books too. Last in, first out (LIFO) of next in first out (NIFO) might fit your many business better and ERP gives you choices. ERP systems provide choices not available in QuickBooks.

Switch from QuickBooks to ERP with this comprehensive, step-by-step guide

2. Negative inventory

How is it possible to have less than zero of anything on hand in your inventory? QuickBooks allows you to post a sale of items not in your inventory. If you sold it, it must have been physically on hand so some transaction error is behind the problem. ERP systems give you choices to prevent a transaction leading to negative inventory forcing you to correct the transaction error first. ERP can also be set to allow the negative inventory but provide a warning. Reconciling inventory must be done regularly so, no matter what accounting you use, the problem has to be solved.

3. General ledger and sub ledger

Your inventory value in your accounting books is the general ledger balance. Your inventory records, each part on-hand quantity times the value of that part also provides a total value of your inventory. QuickBooks allows posting of a transaction to your general ledger balance without the same transaction to your detailed inventory records. Now your general ledger balance will not equal the sum of your inventory detail.

4. Cash or accrual

QuickBooks uses a cash basis for accounting. When you write a check, you post the amount of that check as an expense in that period. But often, you received value for that expense last month and are paying for it now because the vendor gave you credit terms.  Accrual accounting systems in ERP systems will post the expense in the period when you got the value and post an offsetting accounts payable on your balance sheet. Next period when you pay the bill, the only transactions are in the balance sheet between cash and accounts payable. Either method is legal but one will fit your needs better.

 

ERPs that integrate with QuickBooks

Oodles ERP provides ERP development and integrations that work with QuickBooks.  Oodles can add warehouse management, human resources management, customer relations management, e-commerce, supply chain management, financial management, and workforce management to the basic accounting package yielding an ERP system.

MIE Trak Pro is another system that uses QuickBooks as the accounting part of their ERP.  They cater to manufacturing, job shops, and custom fabricators.  With this software, you can have sales management, quality control, and customized dashboards while still using QuickBooks.

QBO ERP is a hybrid service that has developed and tested a set of modules that can help run your business. They all integrate with each other and with QuickBooks Online.  Their website indicates it works with food and beverage as well as manufacturing.

So what is the bottom line?  QuickBooks is a fine, simple accounting application that works well for many smaller businesses and some not so small too.  QuickBooks includes a simple inventory application that links to sales orders.  You can use QuickBooks to enter new customer orders and write new purchase orders.  But many businesses need a little bit more.

If you sell retail, you probably want a point of sale system that links to your inventory and your accounting.  POS is available from third-party sellers.

If you are a manufacturer, you will need work in process inventory at a minimum.  You also probably need the ability to issue inventory at specific bill of material levels and to know there is an inventory demand for that inventory item in the future.  Shop floor routings can provide your business with labor demands in the future and help control your production.  These, too, are available from third-party sellers.

Would it help your business to know which customers bought which products?  How about if you could link those purchases to specific promotions.  Are you looking for a way to provide quotes directly from your inventory and even allocate that inventory until the customer places an order?  You can get CRM or customer relations management tools from third-party developers too.

But, consider if you got all these benefits and more from an ERP system.  Making this choice gets what you need today and in the future and it all comes from a single source that probably uses a commonly available database.  QuickBooks uses a proprietary database which makes integrating any other software problematic.  Take the easy path and look for an ERP that does what you need.

 

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Tom Miller

About the author…

Tom completed implementations of Epicor, SAP, QAD, and Micro MRP. He works as a logistics and supply chain manager and he always looks for processes to improve. He lives near San Francisco Bay in California and can be found on the water in his kayak or on the road riding his motorcycle. Contact Tom at customerteam@erpfocus.com.

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Tom Miller

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