What is the Difference Between CRM vs ERP?

What is the Difference Between CRM vs ERP

Two main software options are available to businesses looking to automate core business processes: enterprise resource management (ERP), and customer relation management (CRM). ERP allows companies to run profitable businesses by linking their financial and operational systems into a central database. CRM manages how customers interact with the business.

Both are vital data repositories. Both are used by multiple departments. Although they may be built on the same platform at times, many software products can be purchased separately and then integrated as needed.

This article will discuss the key characteristics of CRM as well as ERP. It will also explain how they differ, and whether a company needs either CRM, ERP, or both.

What is CRM?

CRM software manages all customer interactions with a company. CRM features were initially developed for sales departments. They were also known as sales force automation (SFA) at one time. Many other systems were quickly developed to manage customer service and marketing interactions, especially in the call center. The contact center was once just another channel for customer support.

Software vendors have begun to merge all these areas under one umbrella through acquisitions and development. This is called customer relationship management. Some CRM systems also include sales performance management and sales incentive commission, but these are often sold separately due to their complexity.

CRM Benefits

CRM’s central promise is to provide a central repository for all customer data and track all customer interactions. Using this information, combined with analytics, businesses can make better decisions about which customers to pursue to increase revenue, what sales teams are doing, and how to serve customers efficiently and effectively.

Sales reps can know if customers have outstanding customer service tickets by using a central CRM system and respond accordingly. Alternately customer service can determine if a caller has high-value customers or potentially high-value customers and route them to appropriate service tiers.

What is ERP?

Enterprise resource management (ERP) evolved from material needs planning (MRP), which was a method for manufacturers to understand, manage and control all the resources required to run a successful company. ERP is a shared database that connects all parts of an organization. This includes finances (GL), accounts payable, receivables, payroll, and financial reporting.

ERP can also be used to manage inventory, order management, supply chain management, and other data related to service organizations. ERP can also be used to manage production, distribution, and fulfillment. Many ERP systems offer Human Resources Management Systems, CRM, and eCommerce.

ERP Benefits

An ERP system has many benefits. It shares a single database that stores all operational and financial data. This has a significant impact on reporting, both monthly reports and any ad-hoc reports required by leaders. Employees can also drill down into reports to find financial insights from a single source of operational and financial data, Without the need to have IT or finance staff conduct the analysis and report. Businesses can make data-backed decisions faster that could impact everything, from profitability to new growth opportunities and efficiency.

Moving to an ERP system companies often cite as a benefit is a quicker financial close. The process of closing the books is commonly performed by finance teams. They typically keep track of all income and expenses and then tabulate the results at each quarter’s end. Close the books with spreadsheets or entry-level systems requires extensive manual work, data entry, and contact with different departments for financial information. Companies have reported a reduction in the time it takes to close their books. This task can now be done in a matter of days.

ERP systems can also provide greater financial controls for an organization. A centralized system with role-based permissions allows only the job function holders to access sensitive data. This improves audit trails and reduces financial risk.

What’s the difference between ERP and CRM?

Although the whole organization will rely on both ERP and CRM systems, there is one fundamental difference between ERP vs CRM systems. ERP is used primarily by financial data and the finance department while CRM is used by ERP sales and customer service. The former is often referred to as the “back office”, while the latter is called the “front office”.

While some ERP systems have a CRM component, others don’t. However, CRM software systems often do not contain ERP components. Salesforce ERP system, for example, is not an ERP system as it does not manage transactional data. Although it may have access to order history and invoices, that information is obtained through integration with an ERP system.

Also read: What is Vendor Risk Management? A Full Guide for Your Business

What are the similarities between CRM and ERP?

Both enterprise resource planning and customer relationship management are business applications that store, analyze and manage data in relational databases. These CRM vs ERP models are either delivered on-premises or as software as a Service (SaaS) where the vendor maintains the software in its data center and customers can access it via the cloud.

Although NetSuite and Salesforce were both pioneers in SaaS ERP, and CRM, they were founded around the same period. This was because CRM systems proved easier to build, and businesses were initially hesitant about storing financial data in the cloud.

Do I need CRM or ERP or both?

Nearly all companies growing, from small and medium businesses (SMBs) to large enterprises, will eventually require both an ERP system and a CRM system. When they feel that their current accounting tools, such as spreadsheets or QuickBooks, are limiting their growth or are inefficient, companies often switch to ERP systems.

Businesses managing customer relationships can do the same in their email clients, spreadsheets, or contact management systems. The business model of a company will determine whether it invests in ERP or CRM. An ERP system might be more attractive to a company that has a limited number of high-value customers or complex financials than one with many customers who are simple in financials. However, a company that has a lot of customer contact and requires frequent communication might choose to invest in CRM.

Integration of ERP Systems and CRM Systems

CRM and ERP systems must be able to share information. This is more efficient than having two sets of data that must be kept separate.

For example, a sales representative might need to see a customer’s credit history, order history, and outstanding payments in order to cross-sell or upsell. Finance departments might also need to have access to the CRM system in order to calculate sales commissions for bulk orders discounts or payroll. Business leaders may also benefit from a CRM system that is built on top of an ERP platform. This allows them to consolidate pricing structures and manage KPIs such as customer acquisition costs and customer life expectancy.

Configuring, price and quote (CPQ) is a common process that requires close integration between ERP and CRM. Many businesses need CPQ tools, which require information from both the ERP and CRM systems. Larger CRM and ERP vendors often have prebuilt integrations that they offer or can be accessed through a third-party partner. These integrations can become expensive and hard to maintain after an upgrade of the CRM or ERP system.

Choose a solution that unifies ERP & CRM

ERP companies often place emphasis on the finance module. This automates basic accounting tasks and allows stakeholders to view cash flow and available cash. However, a CRM that improves customer communications is the next step.

There are many benefits to ERP systems that integrate CRM with the platform. Unified ERP systems and CRM systems are generally less expensive than buying point solutions separately. The unified data model also means that all information can be updated immediately without the need to wait for batch uploads and middleware connections. ERP systems built from the ground up can handle transactions better, which means that they are easier to program, customize and use third-party tools.

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