The layman may use the terms Customer Relationship Management (CRM) and Enterprise Relationship Management (ERP) interchangeably. And understandably so, considering how the two systems tend to overlap each other regarding services offered.
Both systems are responsible for handling contacts, quotes, facilitating orders and forecasts to mention a few. It doesn’t help that several vendors suggest that CRM is incorporated under the ERP systems.
But are they the same?
If you’re looking to purchase either of the two, then differentiating them is the first step. Only then can you pick the right software to meet your business needs.
Fortunately for you, the guessing and assumption game is over. We’re here to outline the main differences between these two software programs. We’ll also take it a step further by advising you on which system you may need. But of course, we can only recommend; the final decision is yours.
There might be confusion on how the footprints of both systems are more or less the same, but there’s no uncertainty regarding who uses them. So, we’ll make this our first differentiating factor.
The main users of the CRM systems interact directly with customers. These are people involved in the sales and marketing function of organizations. They aren’t involved in the logistics and fulfilling of orders. Their job is to convince prospective customers to purchase the company’s products or services.
So, who then deals with the actual processing and logistics of fulfilling orders? The ERM system users. Personnel that fall under this bracket include:
- Factory managers
- Production schedulers
- Supply chain personnel
- Finance personnel
The above-mentioned staff don’t work in a customer facing environment. They seldom have to call a customer—unless of course they’re responding to a complaint regarding logistics.
A CRM system user won’t even know how to operate an ERP system—and vice versa. And yes, that’s how different the systems are. Usually IT staff are the only people who can probably access and use both systems for maintenance or upgrades.
Core Functions & Features
As alluded to earlier, one of the core functions of ERP software is financial management. The following categories fall under the finance category:
- Transaction journaling
- Accounts payable
- Accounts receivable
- Quarterly statements
- Reporting and decision support
The core function of CRM is sales. Therefore, the only financial management systems you’re likely to find on the software include:
- Revenue recognition
- Tracking sales figures and leads
Planning and Logistics
Anything you can think of that involves factory planning and productivity is incorporated under the ERP system. Here we’re looking at tasks which involve:
- Production schedules
- Inventory management
- Distribution and shipping
- Supply chain management
Since the main emphasis of CRM users is on the number of customers interested in the organization’s products or services, features on the system will include:
- Which product or service has been ordered?
- Who ordered the product?
- How many products are likely to be ordered in future?
Additional Services Offered by CRM
As the name suggests CRM personnel are interested in looking for new customers and building ongoing relationships. They’re always trying to devise new strategies on retaining these customers. This is why CRM software has the following features:
- Lead qualification
- Quote generation and order configuration
- Contract establishment and termination
- Ongoing account management
- Renewals and repeat orders
Which One Do You Need?
You have the basic information regarding what the two systems entail, so which one do you need? Quite frankly, you need both. You only need to figure out exactly how much of each software program you need to buy. And this will depend on the following factors.
Size of Organization
Are you a small or large company? If you’re a large organization, the decision has already been made for you. You need a full-fledged ERP system that can manage all aspects of the production and finance functions. You’ll also need a fully-fledged CRM system to handle all your sales and marketing functions.
Smaller companies can afford to pick and choose the features they want from both the ERP and CRM systems. Chances are small businesses rarely have all departments from production to sales up and running.
Case in point; there’s no need for a small accounting firm to go all out by investing in a fully -fledged ERP and CRM system. Such a firm can easily thrive on just an accounting package and contact management system. Additional features from both systems can always be added on with time as the business grows.
What Does Your Company Need?
Your business needs will also determine which features of CRM or ERP software are needed. Of course, there are certain functionalities that all businesses need regardless of size such as an accounting package.
Even if you’re a small business and don’t have an accounting function, you’re still going to outsource the service. Otherwise how else will you reconcile your accounts?
On the other hand, there are some functions that you can do without as a business depending on your area of speciality. If you don’t deal with inventory management, then a data warehousing feature on your ERP isn’t necessary.
As a business owner, you know that you don’t operate in a vacuum. There are laws and regulations you must adhere to if you expect to remain in business.
The General Data Protection Regulation (GDPR) requires you to respect customer privacy and keep your financial information in as few systems as possible.
The system you pick must have features that adhere to the above-mentioned regulations. Either that or you risk being on the wrong side of the law.
Sure, both the CRM and ERP systems handle contacts, companies and orders as mentioned earlier, but the contexts are different. It’s clear that you need both systems—what you’ll need to determine are the exact features to incorporate.
Needless to say, your budget will also influence the system you pick.
Have we cleared the confusion for you regarding these two systems? If you have more questions, please leave a comment below.