If you've spent any time in the business world, you're bound to hear the terms ERP and CRM bandied about every so often. These acronyms stand for Enterprise Resource Planning and Customer Relationship Management. However, many people aren't sure where the differences between CRM and ERP lie. This is understandable, as these two types of business software have many similarities. With that said, there are important and easy-to-comprehend differences as well. In this article, we'll take a look at the differences between ERP and CRM software.
ERP and CRM: similar, but different
In order to understand the difference between ERP software and CRM software, first you need to understand their similarities. They are both software applications that can be installed within an organisation, allowing its employees to share and coordinate data. Additionally, they both produce detailed reports based on this data – reports that can help business owners to make decisions relating to the business.
The fundamentals on which CRM and ERP operate
If business owners want to succeed, they need to ensure their business is as profitable as possible. When you think about it (and at the most basic level), there are only two ways to achieve this – either by improving sales or decreasing costs. When it comes down to it, these two outcomes are the best way to define CRM and ERP too – CRM software concentrates on improving sales, and ERP software turns its attention towards reducing costs.
Looking at CRM more closely
When a business is still considered small-to-medium sized, its primary focus is on increasing sales so that the customer base can widen and the business can grow. CRM is software that's designed to assist in this regard. After all, the process of building your business customer base can be an expensive one, so it makes sense to combine everything into one solution that takes care of all customer-related activities.
A typical CRM, for example, allows salespeople to enter all their leads into the database, and also provides them with a workflow for controlling each subsequent step in the sales relationship. CRM also automates marketing processes, allowing salespeople to cross-sell products where appropriate. With such a software application in place businesses have a better chance of improving sales.
ERP, on the other hand...
As the customer base increases and your business expands, there comes a time when the best way to improve profits is no longer to increase sales. Instead, it becomes far more efficient to cut costs. After all, over the course of your business growth, inefficiencies and poor processes are bound to creep into the picture, stifling your margins.
This is where ERP software steps onto the scene. It takes an overall look at the business picture, creating an automated business environment that promotes more effective communication. There is a smoother flow of information between departments, which leads to greater productivity levels overall. The reports generated by ERP also lead to better decision-making from executives and management, improving return on investment in the long term.