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
What is an ERP?
An enterprise resource planning system manages all elements of a company’s operations. It removes the need for handling paperwork and automates business processes.
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?
In some sources, current ERP systems can be called ERP II. This name has raised many questions and increased searches about the meaning and derivation of the term.
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?
Customer relationship management software handles all customer data. It manages all the ways in which customers, current or future, interact with a company. A CRM can improve an organization’s ability to build strong relationships with customers, keep customers and prospects engaged, close deals, and generate leads.
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
What ERP and CRM have in common is that they both deal with contacts, orders, quotes, and forecasts. Another similarity is that they both control delivery schedules, line item configuration, and invoices. Enterprise resource planning and customer relationship management are both critical systems that enable your company to manage, execute, organize, and take action on various business functions. They’re both designed to automate and streamline your business processes and help you grow and increase your profits.
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
Software focus
The first key difference between these two systems is that an ERP mainly focuses on and helps you with internal processes and management, while a CRM focuses on external processes: customer service and sales.
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
While CRMs and ERPs both work on increasing profits, they do so in different ways. An ERP strives to reduce overhead and cut costs through automation, while a CRM works to boost profits by generating higher sales volumes.
Performance indicators
The way in which companies measure success is also different depending on the system. An ERP’s success metrics extend across various business departments, from order procurement to vendor management. A CRM’s success metrics are clearer to calculate, as they revolve around the acquisition and retention of clients. Therefore, you can use metrics from a CRM to set transparent and measurable goals. For instance, you might aim to close 20% more sales than in the previous quarter or increase social media engagement by 30%. Your CRM then can start tracking and analyzing these goals and fuel your progress.
End users
Users of CRM and ERP systems are also different. ERP systems are typically used by decision-makers, such as department heads, to monitor business processes. CRM users are generally sales and support employees who deal with customer-related operations.
ERP vs CRM — Common features
Both ERP and CRM can have numerous modules and features depending on the vendor. Some vendors let you pick the modules you require, while some offer pre-packaged software. For the ultimate customizability, you can have your ERP, CRM, or both custom-built.
Here are the most common features to look for when evaluating ERP and CRM software.
ERP features
#1 Data analysis
Brainyard’s 2020 “The Future of Business” report demonstrates that using data is a major priority for business leaders. Thanks to data analysis, a wide assortment of information can be turned into actionable insights, new business opportunities, and chances to optimize current processes, provide better customer service, and reduce costs.
#2 Financial management
Financial management is one of the most crucial tools an ERP can offer.
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
Vendors of top ERP systems understand the value of customer relationship management. Hence, many offer CRM functionalities inside their ERP packages. Such CRMs are not the most comprehensive or advanced, but they’re a good option for companies that do not require a robust CRM.
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
A human resources module serves as a complete employee management platform, assisting with hiring, onboarding, payroll, timekeeping, and compensation management. ERP-connected HR software can automate processes like tax and benefits deductions, avoiding errors and saving time and money.
#5 Supply chain management
A supply chain management module offers a rich set of tools for inventory management, distribution, purchase order management, regulatory compliance, manufacturing, and quality monitoring.
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
Modern ERP systems streamline manufacturing processes by helping with production monitoring, product planning, forecasting, and materials sourcing. A manufacturing module has multiple useful functions for manufacturing processes, such as product tracking, shop floor control, distribution planning, and assembly management. In tandem with a manufacturing module, supply chain management tools enhance a company’s ability to handle and automate forecasting decisions and inventory planning.
CRM features
#1 Contact management
This CRM component enables users to divide their contacts into groups for improved organization and to provide better service. Thanks to contact management, you can efficiently collect all vital customer data to use during marketing campaigns or the introduction of new products. It can help you with personalization, which enhances the customer experience and increases customer satisfaction.
#2 Interaction tracking
An interaction tracking feature allows users to track client interaction histories to improve sales processes. This data can also be segregated according to buying behavior, purchase intention, and customer interests. An interaction tracking tool also allows for monitoring payments.
#3 Sales forecasting
A sales forecasting tool allows users to generate revenue predictions based on present and past trends and data. With the help of this tool, you can evaluate whether potential results justify your team’s efforts. This evaluation can be used to understand whether your current work is effective enough or whether you need a new direction.
#4 Marketing management
A marketing management tool allows you to find target groups for future campaigns and evaluate campaign performance and effectiveness. Depending on your vendor or if you’re building your CRM with developers, you can integrate email applications where you can upload contacts, allowing you to send email marketing communications more efficiently.
#5 Lead management
This feature allows users to convert prospects to customers by identifying, evaluating, and shifting leads through the sales pipeline.
Do you need an ERP, CRM, or both?
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
