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Jan 31, 2024 11:15:23 AM7 min read

ERP vs. CRM: Which Is Best for Your Company?

Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) software systems can help your company streamline processes, increase productivity, and grow revenue. 

Yet how do you choose between them when wanting to grow your company? Or should you incorporate both?

Here's the truth: They're not interchangeable. Choosing between the two without considering a few factors could mean lost opportunities and wasted resources.

Read on to learn the differences between ERP vs. CRM, to see which best works for your company.

What Is an ERP System?

Enterprise Resource Planning (ERP) is a comprehensive business software solution that integrates and streamlines different back-office processes. Its main purpose is to help companies effectively manage finances and resources, thereby controlling costs while achieving production goals.

ERP functionalities include:

  • Financial Management: Supports budgeting, financial analysis, and transaction tracking
  • Resource Management: Allocates human and material resources efficiently
  • Cost Control: Monitors and regulates costs across business functions
  • Production Goal Management: Assists in planning and executing production targets

ERP systems also address supply chain management, project management, risk management, and human resources processes. 

In short, ERP is much like a centralized hub, connecting and optimizing various financial- and resource-allocation functions to ensure operational excellence.

How ERP works

When a healthcare organization puts up an ERP, it can improve its patient care by ensuring medical staff have access to real-time data on patient records, appointments, and resource availability. 

Specifically, the ERP system can seamlessly integrate with Electronic Health Records (EHR), providing a comprehensive view of a patient's medical history. This integration further facilitates financial management, procurement, and patient care processes. It can also track associated costs of each procedure performed on a patient, manage procurement for necessary medical supplies, and update the billing system. 

This approach not only streamlines administrative tasks but also enhances patient care by providing healthcare professionals with timely and accurate information.

What Is a CRM System?

Customer Relationship Management (CRM) is designed to enhance customer interactions and streamline the sales cycle. It operates as a sophisticated framework, seamlessly integrating with various customer experience (CX) applications such as marketing, advertising, e-commerce, and customer service solutions. 

Key CRM uses include:

  • Sales Cycle Management: Helps you track and optimize every step of your sales process, from lead generation to deal closure
  • Customer Experience Enhancement: Creates a personalized experience for customers through effective communication
  • Lead and Contact Management: Keeps track of leads and customer contact information to facilitate communication
  • Data Analysis and Reporting: Analyzes data to gain insights into customer behaviors, assess sales and marketing effectiveness, and recommend strategies
  • Automation of Customer Processes: Streamlines routine tasks to improve customer-related workflow efficiency
  • Customer Service Improvement: Integrates with customer service solutions to improve customer satisfaction and resolve issues quickly

How CRM works

CRM systems help organizations adopt customer-centric practices, enabling better communication and responsiveness to customers' needs.

For instance, a growing e-commerce business might use a CRM system to help target specific customer segments based on their buying history, ensuring personalized promotions. Meanwhile, the customer service team can quickly resolve issues by accessing comprehensive customer profiles. A well-implemented CRM system fosters customer loyalty and helps grow your business.

The Key Difference Between ERP vs. CRM?

The big difference between ERP and CRM systems is their business focus. ERP software is predominantly used for managing financial data and back-office operations, encompassing accounting, procurement, HR, and compliance functions.

On the other hand, CRM software is specifically designed to improve sales and customer service aspects of the business. It concentrates on front-office operations, including marketing, sales, and service.

Imagine ERP as the backstage manager and CRM as the frontman on stage.

Sometimes, ERP systems have a bit of CRM in them, but CRM systems don't handle the financial side. Take Salesforce, for example: It's not an ERP system because it doesn't handle transactions. While it has Commerce Cloud for creating and managing storefronts and e-commerce apps, it relies on connections with ERP systems to obtain order history or invoices. 

Which Is Best for Your Business: CRM or ERP?

There are two questions you need to ask yourself:

First, what are your company goals?

Opt for an ERP system if you aim to boost production, financial management, and inventory control for internal operational efficiency. 

If your priorities are increasing sales, attracting and engaging leads, and cultivating customer relationships for repeat business, a CRM system is a more suitable option. 

Overall, your decision should align with your business's specific objectives. If it's about refining internal processes, opt for ERP; if it's geared toward increasing sales and customer satisfaction, opt for CRM.

What is your business model?

ERP is a better choice if your company operates with a compact yet high-value customer base and deals with tricky financial operations. This is because ERP systems are great at handling nitty-gritty financials and making tasks like accounting, procurement, and HR a breeze.

ERPs are also best suited for:

  • Manufacturing businesses: Helps with production processes, inventory optimization, and supply chain efficiency
  • Retail businesses: Assists with inventory management, order fulfillment, and back-office financial processes
  • Healthcare industry: Handles financials, procurement, and inventory while ensuring personalized patient care
  • Financial services: Manages financial transactions, compliance, and back-office operations
  • E-commerce: Helps with inventory management, order fulfillment, and financial processes

On the flip side, honing in on a CRM system can be more beneficial if your business has simple financial operations but a huge customer base that needs lots of attention. CRM systems amp up your connections with customers, can handle sales, and deliver top-notch customer service. 

Tailored for front-office functions, CRM systems make the perfect fit for businesses that focus on customer interactions.

CRMs are well-suited for businesses such as:

  • Retail businesses: Manages customer relationships, tracks purchasing patterns, and personalizes marketing efforts
  • Professional services: Deals with client relationships, tracking communication, and streamlining sales processes
  • Hospitality and tourism: Assists with guest relationships, service personalization, and tailoring marketing efforts
  • Education: Streamlines admissions processes, manages student relationships, and personalizes communication

Now, what if it's not always a simple either-or decision?

You might think some companies can benefit from both, such as those involved with the following:

  • Healthcare Industry: Healthcare organizations benefit from both ERP and CRM systems. ERP assists in managing financials, procurement, and inventory, while CRM ensures personalized patient care, appointment scheduling, and efficient communication.
  • Technology and Software Development: In the tech sector, both ERP and CRM play important roles. ERP streamlines internal processes, facilitates project management, and optimizes resource allocation. CRM, on the other hand, aids in understanding customer needs, managing sales, and providing ongoing support.
  • E-commerce: ERP manages inventory and financial processes, ensuring operational efficiency, while CRM focuses on customer interactions, personalization, and strategic marketing initiatives.

For most growing companies, whether small or large, there comes a point where you need both or even a single platform that does both things seamlessly. As businesses get more complicated and extensive, having both ERP and CRM systems becomes not just an option but something necessary for smooth operations.

This involves an integration between CRM and ERP systems to share information seamlessly, preventing the need for separate data sets. 

For instance, when someone books a virtual medical consultation on an online platform (CRM), the finance team records the transaction and revenue (ERP). These systems should work together to avoid discrepancies in financial records and potential disruptions in providing accurate healthcare services.

But this integration isn't just about avoiding errors. It's also about understanding customer habits better. By analyzing data from both CRM and ERP, companies can improve budgeting, offer faster and more personalized customer experiences, and predict future needs.

Here's the big win: Integrating ERP and CRM systems can boost profits. You get a clear picture of pricing structures and can manage significant numbers like customer acquisition costs and customer lifetime value. In short, this integrated approach makes the business run smoother, with fewer errors and more profit.

When Is the Right Time to Get a CRM or ERP System?

Deciding when to get a CRM or ERP system depends on what's happening in your business. If your company is continuously growing, dealing with complex operations, or expanding globally, it's time to consider an ERP system. 

But, you should prioritize a CRM system first when you're currently working with a big customer base, struggling with sales or customer service, or if your marketing efforts need to better connect with your audience.

Regularly checking how your business is doing will help determine when these systems will be most helpful. You can also consult with Provisions Group to help you decide which system is best for you.