Accounting software is often one of the first pieces of software that architecture and engineering (A&E) firms implement. As organizations scale and become more complex, they can quickly outgrow their basic accounting software and wind up needing a more advanced solution, like an ERP.
Accounting software is specifically built to manage the finance function in a business. It allows A&E firms to streamline accounts payable and accounts receivable processes. This includes sending invoices, collecting payments, tracking expenses, and managing bank accounts.
ERP software stands for Enterprise Resource Planning. It’s integrated software that includes all the same features that account software offers, plus much more. A&E firms use ERPs to manage business processes across all functions—finance, HR, operations, marketing, sales, service, procurement, and more.
At the very minimum, every A&E firm should have accounting software. Larger firms with hundreds (or thousands) of clients, multiple divisions, and scaling operations can often benefit from an ERP. Here’s the difference between the two.
Accounting Software vs. ERP Software
Both accounting software and ERPs cover core accounting and financing processes. You can use either of these systems to track project expenses, send invoices, and collect payments. Both also include reporting capabilities, though reports from accounting software are strictly limited to financial data. That’s where the similarities end.
Account Software Features
- Accounts receivable
- Accounts payable
- Expense tracking and management
- Bank account management
- Sales and revenue tracking
- Profitability tracking
- Financial reporting
- Financial reconciliation
Some accounting tools also include additional capabilities like:
- Payroll processing
- Tax compliance
- Inventory management
- Quotes and estimates
ERP Software Features
ERP software includes all the same basic accounting features as accounting software. ERPs offer a suite of other capabilities that can be used to manage not only finances but also the operational aspects of the entire organization. This type of software is typically modular and is used to create end-to-end processes across the business, tailored to industry needs.
Depending on the nature of their projects, some A&E firms need a standard ERP system, while others benefit more from a project-based ERP system. Either way, the modules A&E firms find the most relevant include:
- Project management
- Sales and marketing automation
- Workforce management
- Human resources management
- Inventory management
- Supply chain management
- Business intelligence
As you can see, ERPs add value across the entire business. Even their financial capabilities are more robust than standard accounting software, giving firms more control over cash flow, expenses, costs, revenues, payments, and billing.
How to Know if Your A&E Firm Should Be Using an ERP or Accounting Software
Accounting software is ideal for smaller firms or those just starting. It’s also well-suited for organizations that like a best-of-breed approach, meaning they don’t want an all-in-one system but would prefer to have a top-tier account system, HR software, CRM, etc.
ERPs are by nature enterprise tools. They’re suited for large firms with multiple divisions and custom processes. Small and mid-sized organizations that manage a high volume of projects are turning to ERPs more frequently, particularly as more cloud-based solutions become available.
It’s worth noting that accounting software is generally lower cost, easy to implement, and easy to learn. On the other hand, ERPs tend to be more expensive, require a full needs analysis before implementation, and have a substantial learning curve.
Signs Your A&E Firm Might Need an ERP
So how do you know if you do need to upgrade to an ERP? Here are some signs to look for.
Accounting processes are inefficient and/or ineffective
Financial information often winds up getting stored in multiple places. Some pieces might be in your project management tool, time-tracking software, or even in proposal tools. Not to mention all the invoices and scanned receipts emailed from each employee.
If this sounds familiar, your accounting team is wasting countless hours manually rekeying numbers, reconciling data, and cross-posting information. Plus, all this manual work results in numerous data discrepancies. An ERP can change all of that.
Data isn’t easily accessible
Let’s say someone came to you and asked what your utilization rate or on-time delivery rate was last month. How long would it take you to get the answer? What if they wanted to know the revenue per team member on the last big project you completed? Or your existing project support cost?
If you can’t get these key numbers quickly, because your data lives in too many systems, you might need an ERP. It will centralize all data from marketing, sales, service, finance, and more in one place so you can get the answers you need, when you need them.
Not enough insight across the business
For many firms, forecasting sales is based on guesswork. This is a risky approach to business. It leaves the entire stability of your firm hanging on a hunch.
Firms that understand the importance of reliably projecting revenue and growth for the next quarter and beyond turn to ERPs for their forecasting capabilities. These platforms can synthesize sales and project data to forecast demand, supply, and finances to give your firm a more secure future.
Too many silos
The bigger a firm grows, the harder it is to maintain connections across the organization. Departments, teams, and business units can all become siloed. Each office operates like its own company, with its own P&L, and its own individual resources. This leads to a lack of collaboration and minimal shared resources. It gives the illusion that individual department financials are more important than the completion of a client’s project.
If it seems like everyone is using their own tools and processes, there’s little collaboration across the organization, and client satisfaction is starting to suffer, you might just need an ERP.
ERPs can keep everyone on the same page, working towards the same goals.
An ERP isn’t your only option
If you have a strong tech stack you really like, but your current accounting software isn’t cutting it, it doesn’t necessarily mean you need an ERP. You might just need different accounting software. Or you could consider another best-in-class solution that will give you the capabilities you’re missing without duplicating the systems you already have in place.
Resource management software solves many of the same challenges for A&E firms as ERPs without the need to replace all your systems or change all your processes. It’s much easier to implement and doesn’t come with the same hefty price tag. Plus, the right resource management software will integrate with your financial tool (or even your ERP if you decide you do need one).
Many A&E firms choose a tool like Mosaic to increase efficiency, collaboration, utilization, and profitability while delivering the insights they need to build smarter, better, faster firms. The average 100-person firm saves 4,000 hours and generates an additional $1.23 million in revenue. Not too many ERP vendors can guarantee those kinds of results.