ERP vs CRM: Which do you need?

If the acronyms ERP and CRM are familiar to you, chances are you’re looking for a way to digitally transform your growing business. But which should you choose: an ERP, a CRM, or maybe both? In this article, we address common questions, take a close look at both types of systems, and help you make a decision!

Strategy planning, resource management, and inventory monitoring used to be extremely time-consuming and error-prone tasks for business leaders. Data duplication, human mistakes, and miscommunication were daily obstacles managers had to deal with.

Fortunately, business software has evolved to make processes and communication inside companies clearer and more efficient. With the help of a centralized system that all your company’s departments can access, everybody can be on the same page and know what’s going on in the organization.

Enterprise resource planning (ERP) and customer relationship management (CRM) systems are both powerful tools that aim to boost a company’s efficiency, streamline business processes, and increase profitability. They are alike in many ways, but their core functions differ. To understand their true value and make an informed decision about which to adopt for your company, you should evaluate ERP and CRM as two separate systems.

ERP vs CRM

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What is an ERP?

An ERP lets employees and managers enter standardized data into a system and swiftly share it across an organization’s departments, creating an enterprise-wide and up-to-date overview of processes. An ERP also visualizes all of a company’s information, which helps workers quickly detect issues and resolve them at an early stage before they get serious.

Enterprise resource planning software performs the role of a central database for the entire company. It can contain information about finances, payroll, accounts payable and receivable, financial reporting, and so on. ERP software holds useful tools for managing multiple sectors of a business, such as tools for internal communication, data exchange, and customer-related operations.

What is ERP II and how is it different from ERP?

Let’s unpack this.

ERP II is the successor of ERP. It’s the name given to ERP systems developed after 2000. The major difference between an ERP and ERP II system is that the latter is much more focused on web-based operations and the use of web-based technologies as well as customer relationship management, business intelligence, and supply chain management.

What is a CRM?

A CRM system holds the personal details of customers and prospects, such as names, phone numbers, addresses, and purchase histories. It collects and analyzes customer data, which then can be used to provide clients with better recommendations. For instance, if a customer buys more than an average number of cargo pants, your system can use that information to make great suggestions of other items the customer might enjoy or be interested in.

A customer relationship management system can help you build stronger relationships with leads, ensure stable high-quality services, and offer a smooth transition from leads to customers — and then to loyal customers — boosting your long-term profitability. A CRM provides companies with consumer insights they can use to identify target audiences and develop marketing strategies to stay in customers’ minds.

CRM systems can be integrated with ERP and other systems. You can also share data between an ERP and CRM — for instance, to make shipping dates or ERP data on invoices available to customers.

Key similarities between ERP and CRM

Many people confuse ERP with CRM in terms of what they are for and their core functionalities. Most ERP systems will have CRM components, however, these are often less robust than analogous components in a standalone specialized CRM platform. You also have the option to integrate a third-party CRM into your ERP. Usually, a CRM that’s built into an ERP provides sales and marketing automation but may lack such features as social media management and a customer support center. A lack of these features won’t cause very serious harm, but it can lead to a worse user experience.

Key differences between ERP and CRM

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Software focus

A CRM system emphasizes customer management, customer satisfaction, and customer interactions, which leads to an improved marketing presence. An ERP envelops the entire business, aiming to improve back-office functionalities while automating and managing almost all considerable management activities.

Methods of increasing profits

Performance indicators

End users

ERP vs CRM — Common features

Here are the most common features to look for when evaluating ERP and CRM software.

ERP features

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#1 Data analysis

#2 Financial management

Financial management is the engine that drives various business processes. Organizing, planning, determining the best use of assets — all this and more is involved in financial management. Leaders of finance departments track data from all departments and analyze it to make informed decisions.

An ERP system can help your finance team track, analyze, and report on high-priority business data. It can also assist with sticking to budgetary requirements. Other functions that can be found in this module include general ledger, accounts payable, accounts receivable, financial forecasting, tax calculations, and fixed asset management. Modern ERP systems offer financial leaders dashboards for quick and clear real-time overviews of a company’s finances. A good ERP solution also reduces wasted time by automating daily tasks and tracking capabilities.

#3 Customer relationship management

A CRM module displays all customer relationship details in an accessible database, such as order histories, purchase orders, contacts, addresses, and prospect statuses. It also automates various processes like generating accounts receivable reminders, sending notifications to follow up with a prospect, and filling out purchase orders.

#4 Human resources

#5 Supply chain management

An ERP provides helpful insights into a company’s supply chain management by tracking inventory, demand, manufacturing processes, distribution, and logistics. When fully integrated with business processes, an ERP can improve your operations by suggesting work, purchase, or transfer orders across locations. A supply chain management system assists with setting inventory goals and streamlining distribution resource planning. And thanks to real-time data, you can quickly notice errors or areas of inefficiency.

#6 Manufacturing

CRM features

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#1 Contact management

#2 Interaction tracking

#3 Sales forecasting

#4 Marketing management

#5 Lead management

Do you need an ERP, CRM, or both?

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If you’re considering enhancing your company’s sales and marketing process and you’re pleased with the existing software you use for financial management or human resources, then you should just get a new CRM system.

On the other hand, if your current business processes are inefficient, your software tools do not communicate with each other properly, and you struggle to meet clients’ requests, you should consider investing in a comprehensive scalable ERP system.

There are multiple aspects you need to evaluate while choosing which software is best for your business. Preferably, companies should have both systems — a CRM for customer data management and an ERP for managing the entire business.

CRM systems are a good first choice for small and medium-sized businesses. Until a business grows out of its CRM or wants to expand, it probably won’t need a robust ERP system. If you do reach this point and want to invest in ERP software, remember that many built-in CRM modules are quite basic and won’t be equal to a standalone CRM. Fortunately, many ERPs offer easy integration with third-party CRM systems, and if you’re going to develop a custom ERP, you can integrate any CRM with it.

Both ERP and CRM solutions strive to increase a company’s profits, albeit in different ways. Once you’re ready to choose your system, your judgment should be based on what your business currently requires and where you plan to go with it. If your current software becomes a factor that obstructs your growth and your ability to fulfill requests, then it’s time to invest in a new one.

If your business is ready for this next step and you would like a full ERP suite or a robust CRM system, contact us for a quick free consultation!

— Originally published on Steelkiwi.com