ERP vs. CRM: What’s the Difference, and Which One Does Your Business Need?
By Vladana Donevski
June 19, 2023
Both the enterprise resource planning system and customer relationship management software are valuable business solutions that help increase profitability and productivity. And although these are complementary technologies, they have different core functionalities.
As part of our ERP vs. CRM showdown, we’ll tell you more about what those differences are. We’ll also delve deeper into some of their key characteristics, enabling you to decide which of these systems your business needs.
What is ERP?
ERP is a process that companies use to integrate and manage the most important parts of their daily business activities. As such, ERP software solutions are highly useful when it comes to the implementation of resource planning.
ERP serves as a shared database that employees with relevant job functions can access and use to complete their daily tasks. Nowadays, it’s used for everything from risk management and compliance to procurement and accounting.
Perhaps the most accurate ERP definition would be to describe the system as the glue that holds together all the financial and operational data. This is also one of the main benefits of using the system, as all of the data can be retrieved from a single source, making it easier to compile ad hoc and static monthly reports. Moreover, it gives employees access to financial insights, speeding up the decision-making process.
It’s worth noting that ERP grew from the material requirements planning system. This probably helped immensely when it came to creating ERP as a software that can also handle inventory management and provide help with production and distribution.
Another one of the more commonly cited examples of how ERP systems benefit businesses relates to the software’s role in closing the books. That’s because companies no longer have to waste time on data entry and consulting different departments. The ERP system automates many of those tasks, reducing monthly close times to just a few days.
It can also provide an additional level of security, as having role-based permission – one of the key features of every sound ERP system – reduces financial risk.
What is CRM?
This is another system designed to streamline business operations. But unlike ERP, this software manages how customers interact with your company. Of course, this CRM software definition is somewhat broad.
In peeling back the layers, you’ll quickly learn that CRM can assist your marketing, sales, and support teams in ensuring your clients are as happy with your services as they can be. Just like ERP, it provides businesses with a central database. This one is used for customer data, tracking all customer interactions while providing the aforementioned teams with the necessary information. The teams then use the analytics part of the software to identify important metrics within the CRM database, meaning the sales team gets the details it needs to improve sales and customer support services.
Initially, this software was developed exclusively for sales departments and was known as sales force automation or SFA. Over time, other systems were designed and integrated into the original software to create an all-in-one solution for growing your business.
Some CRM systems include sales performance management or sales incentive compensation. However, these add an additional level of complexity and are often sold separately.
Ultimately, the CRM system, by definition, is created to cover all areas of customer interaction, and CRM statistics show that it’s more than helpful to small businesses. Keeping customers happy with your services and products guarantees returning customers who are much more valuable to a business than new ones.
That’s not to say that CRM can’t help you find new clients – lead generation and identifying potential prospects is another feature of every CRM. From there, the system helps you lead the new customers through the sales process to close the deal – and then helps you bring back these customers for more.
What Does Your Business Need?
The objective of this CRM vs. ERP showdown isn’t to pick the better system. Identifying the key components of these business solutions is intended to help you decide what your company needs. In most cases, the answer is both.
The two typically go hand in hand and complement each other. In some instances, they even overlap – there are platforms that allow the easy integration of both systems.
Big corporations probably don’t think twice about using both. However, small and medium-sized businesses have to consider the cost. And this is where knowing the difference between ERP and CRM comes in handy.
CRM systems start at $12 per user/month but can go as high as $300 per user/month. Meanwhile, the average ERP project costs $7,200, and depending on the number of employees, the total cost can be anywhere between $150,000 and $750,000 for a mid-sized business.
So if your business is yet to scale to the point where you can afford these services without batting an eyelash, you might have to settle for either one or the other. A thorough ERP vs. CRM comparison will help you decide which one is more suitable for your business model.
If your business revolves around your customer base and its success depends heavily on obtaining new and maintaining old customers, then investing in CRM and delaying the implementation of ERP is probably the best course of action. For example, real estate brokerages would undoubtedly benefit from a real estate CRM instead of dishing out a ton of cash for an ERP system. In this situation, having CRM software that can handle customers and spare you the cost of employing a lead generation company could prove invaluable.
Of course, you might already be asking: what does ERP stand for? If that’s the case, your company probably has a small number of customers but a complex financial system. In these instances, integrating an ERP system is a better solution than relying on QuickBooks or other accounting software designed for small businesses.
But as your business grows, both systems will become equally valuable. Until then, choose the software that will elevate your business to the next level.
All in All
It’s no secret that every business benefits from having all the relevant data in one place that’s easily accessible to all those who need it. That’s why having this ERP vs CRM software debate is crucial in establishing whether the integration of one or both solutions is required to grow your business.
One can provide guidance for establishing relationships with customers, while the other helps you boost your finances and behind-the-scenes operations. While CRM manages interactions with your customers, you can rely on ERP to handle all your financial and operational data.