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What are the differences between ERP and CRM?


difference-erp-crmHow ERP and CRM differ and what advantages are provided by each of these management tools.

Some entrepreneurs confuse the two terms and think that when they talk about ERP or CRM, they mean the same tool so to speak. The ERP is Enterprise Resource Planning and CRM is Customer Relationship Management. Therefore, ERP software is an enterprise management tool and CRM is the tool that manages the relationship with customers. Both can be perfectly integrated and this makes many companies succeed in optimizing processes, among other advantages.

The main objective of both applications is to optimise resources, improve the efficiency of the company and include a work system based on the maximum possible profitability. They are complementary systems that drive the digital transformation of small businesses. They can be implemented separately but if they are implemented together, they are two very powerful tools that will give the company better results in less time and also saving costs.

The ERP is the Back Office of a company

An ERP is a software of back office, that is to say of use and internal procedures that do not affect directly in the relation with the clients. An ERP works on the exchange of information between departments and the control of them, helping to reduce production costs, a control of stock and storage, a supervision of sales (not in the management of them, but for example in seeing which products are the most sold), a control of invoices and an administration of accounting or payroll. That is to say, an ERP controls a great part of the internal processes of a company, for example, giving input to the production department on the most sold products and at the same time sharing information with the financial department on costs, profits, etc.

In short, an ERP, which is usually a modular tool, acts on the following dimensions of a company:

  • Production
  • Payroll
  • Sales control
  • Stock control
  • Accounting and finance
  • Supply and Suppliers

The final objective of an ERP is to centralize the integral management of a company in a tool, looking for a better interdepartmental communication and a better access to data.

However, an ERP is a complex software that requires complex actions and decisions. When so many departments are brought together, their hiring is often costly; when many times customised, maintenance is also costly; when so much information is brought together, learning and training is often long and complex. When so many parts come together, or the same happens with the implementation of the software, requiring time, effort and money.

Therefore, an ERP is usually a software that is installed in medium and large companies because we are talking about an important investment in economic aspects, as well as time and personnel. At the same time, not all companies manage stock or manufacture products (such as agencies, consultancies and other professional services companies, essential modules when it comes to taking advantage of an ERP). There are many questions that a company has to ask before undertaking an implementation of this magnitude and equally, think that not all companies either by size or nature need it.

But we do not believe misunderstandings, both an ERP and CRM are tools that usually have a positive impact on a company and an ERP given its breadth, can contribute great things to the balance of a company.

The CRM, front office of a company and a software to create objectives and set strategy

Once the ERP is reviewed, it is the CRM’s turn. A software that is also considered a “front office” because it is a tool that does affect the relationship with customers and external processes. The purpose of the CRM is to order customer information, put it in the center of the company, assist in the management or commercial monitoring and to be able to draw up strategies both sales and marketing.

Unlike an ERP, the CRM contains customer information, so it is a more dynamic and agile tool both in use and implementation, learning, functionality and price.

The CRM is not a new concept, what can be it is the technology behind one or another tool and its democratization to SMEs, but it has been inscribed for some time in all the manuals and examples of management. CRM refers to a business model that seeks to identify the most valuable leads for the company and to manage their relationships in an efficient and resolute way in order to achieve not only sales but loyalty.

The main functions of a CRM and what you can expect from it are:

  • Automation of sales processes, from lead creation, lead tracking, alert system or task management.
  • Store and trigger customer information such as mails, posts, company interactions, meetings, attribution source, etc.
  • Creation of segments for different objectives in marketing or sales, such as strategy planning, communications segmentation, sales forecasting, person buyer construction…
  • Commercial follow-up and creation of processes in the same.

The implementation of a CRM is essential to perform a refined and accurate marketing that, in a context such as the current one, promotion or communication actions should be segmented as much as possible to increase conversion ratios and minimize costs per lead and per customer.

Needless to say, CRM is also key to the proper performance of any company’s sales department. Especially in SMEs, accustomed to working with excel, as it helps to professionalize the sales cycle and make an accurate and personal monitoring of each lead to end up offering better results in sales.

Ultimately, CRM is customer-centric software that aims to improve your relationship with the company (both before and after the sale) and increase sales. And in this case and unlike ERP, CRM is useful in all types of companies because what company can afford to do without sales?

Can companies work with ERP and CRM at the same time?

It will depend on the nature of each company and on the suitability of implementing two tools with such a deep impact on it. In fact, traditional ERP implementations used to incorporate a CRM module. However, the same ERP developers usually have an external and independent CRM as it is recommended to have a software dedicated especially to the commercial task.

That said, ERP and CRM are fully compatible. They are different and have to be measured by different scales, but their work in the company is complementary. Both tools are designed to make better use of the resources of the company so the issue will be more of needs, and especially economic capabilities of the company or SME that wants to implement.

In conclusion, CRM is the software that optimizes the relationship with the customer and manages the business relationship between the company and the customer himself (also potential). And ERP is the complete business management solution that automates all the internal processes of the organization.