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ERP vs CRM: What’s The Difference?

Businesses looking to automate their core processes generally look at two software solutions: Custom Relationship Management (CRM) and Enterprise Resource Planning (ERP). Although the two systems are similar in many ways, they offer different core functionalities. In order to understand the requirement of your business, it is important to understand the key differences between the two systems. This will help you understand how ERP and CRM each play a role in enhancing sales and improving efficiency within an organization. In this article, we will dive into the key differences between ERP vs CRM and understand how each can provide value to your company.

ERP vs CRM: A High-Level Difference:

ERP software help organizations run their businesses efficiently by connecting their operational and financial systems to a central database. On the other hand, CRM software helps manage customer interactions with their businesses.

What Is Enterprise Resource Planning (ERP)?

ERP stands for Enterprise Resource Planning. It’s a software solution for managing, improving, and enhancing business processes, such as finance, human resources, inventory management, and distribution. It is configurable and customizable allowing users to add functionalities according to their business needs and requirements. Furthermore, it allows rapid sharing of standardized information across departments within an organization.

Typically, ERP solutions are implemented in large-scale enterprises, however, some small businesses opt for these solutions as well. It offers tools to manage front and back-office information, improve internal data exchange and communication. In short, ERP offers a solution for streamlining business processes across the board by allowing organizations to focus on the data rather than the operations. As a result, there are fewer errors enabling an organization to make better decisions.

What Is Customer Relationship Management (CRM)?

While ERP manages your business processes, CRM manages customer interactions with your business. In the beginning, CRM features were particularly designed for sales departments and were known as “Sales Force Automation (SFA)”. It is a front-office tool that records and stores information regarding customer interactions. The data is standardized making it easily shareable throughout the organization. For example, if an inside sales representative makes a call with a new prospect, they might enter new information, such as conversation notes or contact details.

After this, the marketing team might use this information to design a unique personalized newsletter. To do this, they only need to pull up the record from the CRM system. With the right system, businesses can organize and segment every aspect of their customer experience. Apart from this, CRM systems can manage invoices and communication, nurture prospects through the sales funnel, and create sales projections. In short, a CRM system improves efficiency, offers accurate customer data, and increases sales. As a result, it helps to enhance customer relations.

ERP vs CRM: The Difference in Functionality

Although ERP and CRM are similar in multiple ways, you’ll be better able to understand the difference between the two by comparing their functionalities, functions, and uses.

Common Functions of ERP

  • Financial Management: Financial management and accounting tools are at the core of an ERP system. It serves as the engine behind the facilitation of multiple business processes. These tools allow the solution to be sustainable and comply with budgetary requirements.

  • Human Capital Management: Human Capital Management (HCM) tools provide the ability to schedule employee hours, approve PTO and sick leave requests, and distribute wages efficiently.

  • Customer Relationship Management (CRM): Some ERP vendors offer CRM functionalities within their system. Although it is not as advanced as a standalone CRM system, it can provide a valuable solution for companies with basic CRM needs.

  • Inventory Management: Inventory management includes the ability to set automatic reordering and low stock alerts. It is usually paired with warehouse, distribution, or manufacturing management to offer a more comprehensive solution.

  • Supply Chain Management: SCM is a key component of ERP systems that offers tools for distribution, quality monitoring, management of purchase orders, manufacturing, and regulatory compliance.

Common Functions of CRM

  • Contact Management: These tools can enable users to keep a track of customer information and edit it accordingly. With this feature, you can allocate contacts to different representatives and add them to multiple accounts. The system can store invoices, contracts, and relevant documents associated with a customer.

  • Client Interaction Tracking: This can allow users to track information regarding a client’s history to enhance the sales process.

  • Database Management: Everyone within an organization can access the same information in an easy-to-navigate centralized location. Some systems offer data cleaning functionalities to remove data redundancies to avoid incorrect insights.

  • Marketing and Campaign Management: This tool allows users to identify potential campaign targets and measure the effectiveness of these campaigns.

  • Lead Management: This feature allows users to set up lead routing and understand how leads progress with pipeline tracking, territory management tools, and hierarchy relationships.

ERP vs CRM: The Difference Based on Benefits

Let’s take a closer look at the differences between ERP and CRM based on the benefits and value they provide to a business.

Benefits of ERP:

ERP systems can benefit your organization in the following ways:

  1. Simplifies Business Processes: It allows organizations to simplify and automate common business activities. It enables businesses to streamline and connect every aspect of their enterprise.

  2. Improved Performance: ERP systems improve project management and organization performance by enabling organizations to plan, budget, and report on their financial health and processes.

  3. Informed Decision-making: ERP software provides an accurate and detailed report on the performance of the overall organization, making it easier to make informed, strategic decision-making.

  4. Enhance Communication: It helps organizations enhance their communication and collaboration between employees and departments.

Benefits of CRM:

The main goal of a CRM system is to nurture leads, enhance client experience as they develop into prospects, and, ultimately, into returning customers. CRM provide value to your business in the following ways:

  1. Customer-focused Approach: It enables businesses to become more customer-focused, which, in turn, yields increased profits.

  2. Standardized Customer Information: It helps you gain a clear, bird’s eye view of your customers, and drill down their individual needs, issues, and preferences in a single easy-to-navigate database.

  3. Better Decision-making: With a centralized repository of customer data across an organization, businesses can make better decisions regarding which customers to pursue additional revenue, how sales teams are performing, and how to provide a personalized and consistent experience to customers.

  4. Better Customer Understanding: CRM tools allow sales and marketing departments to have a better understanding of the incoming prospects and optimize marketing campaigns according to customer information.

ERP vs CRM: Which System Do You Need?

The majority of developing companies, from small and medium-sized businesses (SMBs) to large-scale enterprises, will eventually require both an ERP and a CRM system – or a single platform that caters to both. Companies that operate their finances using entry-level accounting tools like QuickBooks or even spreadsheets frequently turn to an ERP system when they discover that those methods are limiting their growth, are inefficient, or just require something more robust.

The same can be true for organizations that handle their customer interactions in email clients, spreadsheets, or contact management systems used by individual sales reps. The business model of a company will determine whether it invests initially in CRM or ERP. A company with a small number of high-value customers and complex financials may be more likely to invest in an ERP system first, whereas a company with relatively simple financials and a huge client base that requires frequent contacts might do the reverse.

How can we help?

So, the ultimate question of ERP vs. CRM: What’s the difference is finally answered. Now, the real question is how to implement ERP or CRM into your existing business landscape. Well, worry not, we have an answer for that too. At IIInigence, we have a wonderful team of tech experts that helps businesses achieve their true potential by enhancing their business processes and workplace efficiency. We stand proud as one of the best software development companies in the USA having expertise in developing ERP, CRM, and several other SaaS Programs. Simply schedule a call with our experts to understand how we can provide value to your business.