When businesses want to automate their core processes, they usually consider two main software solutions: enterprise resource planning (ERP) and customer relationship management (CRM). These tools are really helpful in making sure businesses run smoothly and effectively.
ERP is all about connecting a company’s financial and operational systems to one central database. This way, everything is kept organized and in one place. On the other hand, CRM focuses on managing how customers interact with a business. It helps track customer information and ensures their needs are met.
While ERP and CRM are important data repositories, they cover different aspects of a business. Sometimes they are built on the same platform but usually purchased separately and integrated where necessary.
We’ll go over the key characteristics of both ERP and CRM, how they differ, and help you figure out whether your business needs one, the other, or both. Let’s dive in!
What is CRM?
Simply put, customer relationship management (CRM) is software that helps businesses manage how they interact with their customers.
Originally, CRM features were designed for sales departments and were sometimes referred to as sales force automation (SFA). But soon enough, other systems were developed to manage customer service and marketing, especially in the call center (or contact center, as it’s now known since the telephone became another channel for customer service).
As software vendors acquired and developed more features, they combined all these disciplines under the umbrella term of customer relationship management. Some CRM systems also include sales performance management and sales incentive compensation, but they can be sold separately due to their complexity.
What is ERP?
ERP started out as material requirements planning (MRP), a way for manufacturers to manage all the resources they needed to run a successful business. But over time, ERP has evolved to become a shared database for all parts of an organization.
At its core, ERP helps with finances, like the general ledger (GL), accounts payable, accounts receivable, payroll, and financial reporting. But it also goes beyond that to include things like inventory management, order management, supply chain management, and data related to services organizations.
Basically, ERP covers everything from procurement to production to distribution and fulfillment. Some ERP systems even include Human Resources Management Systems (HRMS), customer relationship management (CRM), and e-commerce features.
The Benefits of CRM
The primary benefit of a CRM system is that it provides businesses with a centralized repository of all customer data, allowing them to track all customer interactions in one place.
This information is incredibly valuable since it helps businesses make more informed decisions about which customers to pursue for added revenue, how sales teams are performing, and how to provide better service to customers. Using analytics and insights gathered from customer data, businesses can make smarter decisions, leading to increased revenue, customer satisfaction, and brand loyalty.
Another benefit of using a CRM system is improving communication between different teams within a business. Since the system provides a single source of truth for customer data, sales teams can easily see whether a customer has any outstanding service tickets and adjust their approach accordingly.
Customer service teams can also quickly see whether a caller is a high-value customer and route them to the appropriate service tier. This helps ensure that customers receive the best possible experience with the business.
Finally, a CRM system can help businesses be more organized and efficient. By tracking all customer interactions in one place, businesses can easily keep track of customer needs and follow up with them at the right time.
This can help businesses build stronger customer relationships, leading to increased loyalty and repeat business. Additionally, by automating certain tasks, such as lead management and customer communication, businesses can free up their employees’ time to focus on more important tasks, increasing productivity and profitability.
The Benefits of ERP
An ERP system’s biggest advantage is having a single, shared database for all financial and operational data. This makes a big difference in reporting for regular monthly reports and ad hoc reports requested by company leadership.
With all the financial and operational data in one place, employees can easily dive into reports and find important financial insights without relying on IT or finance teams to do the analysis and reporting. This means companies can make faster, data-driven decisions impacting everything from profitability to new growth opportunities to creating efficiency across the organization.
Another big benefit of using an ERP system is that it can speed up the financial close process. Usually, finance teams have to account for all income and expenses and tabulate the results at the end of each month or quarter, a process commonly known as “closing the books.”
But doing this using spreadsheets or entry-level accounting systems can be incredibly time-consuming, requiring extensive manual work and data entry. With a centralized ERP system, many of these tasks can be automated, reducing the amount of time it takes to close the books. Some companies have reported being able to close the books in just a few days instead of a full week!
Finally, ERP systems also offer much greater financial controls since they can limit access to sensitive data to only those with the proper job functions. This helps improve audit trails and reduce financial risk, making it easier to maintain accurate financial records.
Overall, an ERP system can help companies be more efficient, make better decisions, and improve financial reporting accuracy.
The Difference Between CRM and ERP
When it comes to managing business processes, both ERP and CRM systems play an important role, but they focus on different areas. ERP is mainly about handling financial data; the finance department or the back office uses it. On the other hand, CRM is all about customer data and is used by sales and customer service teams or the front office.
Some ERP systems have a built-in CRM component, while others don’t. However, CRM systems don’t have an ERP component. For instance, you can use Salesforce.com to manage your customer interactions, but it’s not an ERP system because it doesn’t deal with transactional data. In fact, it can only access order history or invoices through an integration with your ERP system.
The Similarities Between CRM and ERP
CRM and ERP have some significant similarities despite their different purposes. Both business software applications use a relational database to store and analyze data. The systems can be delivered via traditional on-premises deployment or through the software as a service (SaaS) model, where the vendor manages the software in its own data center, and customers access it through the cloud.
Moreover, both CRM and ERP provide a shared database that multiple departments can use. This centralization allows different teams to access and share information, resulting in better communication and collaboration. For instance, the sales team can quickly access a customer’s financial history, such as billing and payment data, from the ERP system, allowing them to make informed sales decisions. Similarly, customer service representatives can access customer interaction history from the CRM system to better address customer concerns.
Which One Do I Need?
If you want your business to run smoothly, you need to have both an ERP and a CRM system in place. Sometimes, companies start off with entry-level accounting tools like QuickBooks or spreadsheets, but as they grow and need a more robust system, they turn to ERP. On the other hand, if a company is managing its customer relationships using individual sales reps’ email clients or spreadsheets, they might first invest in a CRM system. It really depends on the company’s specific business model.
But in the end, most companies need both ERP and CRM to succeed. ERP helps with managing financials and operations, while CRM is crucial for managing customer relationships and interactions. Without both of these systems, companies may struggle to keep up with their competition and experience inefficiencies.
Integrating CRM and ERP Systems
When a company uses both ERP and CRM systems, it’s important that they can share data with each other. This is because there are many scenarios where data from both systems are needed.
For example, a sales rep might need access to a customer’s order history, credit status, or outstanding payments to offer personalized recommendations for upselling or cross-selling. On the other hand, the finance department may need to use the CRM system to calculate sales commissions or bulk order discounts when they run payroll.
Furthermore, having a CRM system built on top of an ERP platform can provide significant advantages for business leaders. They can examine pricing structures and manage key performance indicators (KPIs) such as customer acquisition costs and customer lifetime value in a consolidated way.
One process that requires close integration between CRM and ERP is the configure, price, and quote (CPQ) process. CPQ tools use information from both the CRM and ERP systems, making them vital for many businesses. Typically, larger ERP and CRM vendors offer pre-built integrations for each other or through third-party partners. However, these integrations can be expensive and difficult to maintain, especially during system upgrades.
A Unified Solution
When companies start using an ERP system, their focus is typically on the financial module. This module helps automate accounting tasks and provides a view of the available cash and the flow of money. However, the next logical step is to implement a CRM system that can help improve customer communications.
ERP systems that come with CRM built on the platform offer a number of benefits. For instance, unified ERP and CRM systems tend to be more cost-effective than purchasing individual point solutions.
Additionally, the unified data model ensures that all information is updated in real-time without having to wait for batch uploads or middleware connections. Systems built for ERP from the ground up are also better equipped to handle transactional processes, which makes programming, customizations, and third-party tools simpler.
Several companies offer a unified CRM and ERP solution, each with its own strengths and weaknesses.
One popular option is SAP, which offers the SAP Business One platform that includes both ERP and CRM functionalities. SAP’s platform is highly customizable and can be tailored to meet the specific needs of a business.
It also offers robust reporting and analytics capabilities, making it a good choice for businesses that require detailed financial and sales data.
Another option is Microsoft Dynamics 365, which integrates ERP and CRM capabilities into a single platform. Dynamics 365 offers strong integration with other Microsoft products like Office 365, making it a good choice for businesses already using Microsoft’s suite of productivity tools. The platform also includes AI-powered analytics tools that can help businesses gain insights into their data.
Salesforce is another major player in the CRM and ERP space, with their Salesforce CRM and Salesforce ERP platforms. Salesforce’s CRM is one of the most popular options on the market, and its ERP system, known as Salesforce Financial Cloud, is designed to integrate seamlessly with the CRM. The platform offers a wide range of customization options, third-party integrations, and strong security features.
Finally, there is NetSuite, one of the first cloud-based ERP solutions and includes CRM functionality. NetSuite offers robust features for businesses of all sizes, including advanced financial management, inventory and supply chain management, and project management tools. Its CRM functionality is tightly integrated with the rest of the platform, making sharing data between the two systems easy.
Ultimately, the choice of a unified CRM and ERP solution will depend on a business’s specific needs and priorities. It’s important to carefully evaluate each option and consider factors like customization options, reporting capabilities, and ease of use before making a decision.
