How Can Enterprise Performance Management Take Your Business to The Next Level?
Enterprise Performance Management (EPM) is one of the decision-support systems which enable organizations to model, monitor, and analyze their business performance across the enterprise – sales, finance, operations, and HR. Using EPM systems organizations can create their business plans/AOP and use it to track the progress through the year with rolling forecasts. EPM solutions can sharpen your demand forecast and optimize your supply plan. It can help you improve the productivity of your sales teams by smarter territory planning and smarter incentive plans. Business analysts and users can analyze the performance across various metrics, respond to changing business dynamics, and ensure all the functions are working towards meeting the annual or long-range business plan. One of the salient features of EPM is its ability not just analyze past data but also predict future outcomes and scenarios.
How Enterprise Performance Management Software Works
In order to support the above mentioned outcomes and functionality, EPM software brings together multiple elements in a cohesive and scalable manner.
It starts with bringing all the relevant data together – budget from spreadsheets, actuals from ERP, forecasts from CRM, inventory/orders from ERP, and human resource data from HRMS. Once the relevant data is brought together, it enables to model the data in a multi-dimensional environment so that it can mimic your business plan – e.g targets by product by territory. You can create organizational structures, rules, assumptions which can be applied across the plans e.g. per diem costs by territory. It will allow you to create different versions of your plan e.g. domestic business. And it will also help you create multiple business scenarios e.g. best case, worst-case. Which is the next stage i.e. enabling analysis and MIS. And then the EPM software can also make future predictions for you – demand, cashflow, inventory, or workforce. It does this by applying statistical algorithms to historical, seasonal or external data.
Let’s dive in to the EPM software capabilities that get this work done.
First up is the user interface because that’s the first thing anyone will see about the EPM software. Most business planning users are heavy users of spreadsheets. Sheets, formulae, look-ups, filters are just some of the common features of spreadsheets. So for the users to be able to easily adapt to the EPM software the Best EPM Software have user interfaces which are very similar to spreadsheets. Most planning users interact with the application in the form of sheets. This way they find it familiar and quick to learn and adopt.
Second important element of an EPM software is multi-dimensionality. We all are familiar with the 2-dimensional view which spreadsheets provide – X and Y axis, rows and coloumns. But the moment we need to analyze a third dimension e.g. sales by products by time and territory, we need to create another sheet/tab within the spreadsheet. Thus one of the fundamental building blocks of EPM software is a multi-dimensional data processing ability. And this differentiates a good EPM software from a great one. The ability to process large volumes of data, complex formulae and business rules, across multiple dimensions and give out the results in real-time - a calculation engine that can support all the above across multiple versions, multiple subject areas (finance, supply chain, etc.), and of course multiple users (modelers, contributors, read-only) is the most important capability of the EPM software.
The next element is the ability to analyze this multi-dimensional data as and when needed. The EPM software should provide user friendly, dashboards, charts, and visualizations. More importantly, it should also provide the ability to drill-down, do historical analysis, compare multiple versions, and conduct ad-hoc reporting. Next, the analysis should lead to actions. The ability to share the analysis, collaborate towards the diagnosis or a solution through alerts and messaging is crucial. And lastly automation of monthly reporting packs. In addition, EPM solutions also help customers to define their budgeting or forecasting processes such that they can be assigned, and tracked to completion for a given schedule.
Why your Business needs EPM Software?
Actually you don’t. If your business is static, has limited drivers, is not a competitive market, and is in an economy where the market forces are not changing dynamically.
Otherwise you do.
Put simply, EPM solutions allow organization to display the business scorecard of their performance. As in sports, without a scorecard the employees will not know how the organization is performing and what they need to do in order to meet their objectives.
All organizations do planning. Some do it in their mind, some on paper, and most on spreadsheets. However as the scale, complexity, and velocity of the business increases running the entire process on spreadsheets becomes time consuming and impacts the quality of decision making.
An EPM solution enables organizations to model their business plans at the most granular level, track the progress, manage the impact of any new scenarios, and predict future business state.
How Can Enterprise Performance Management Helps your Business
● Aligning Strategy and Execution – Translating business strategy into an actionable commercial plan is the starting point for every financial year/period. This may be in the form of a 3-to-5 year long-range plan (LRP) or an annual operating plan (AOP). This plan lists down the key strategies and initiatives the organization will take to meet its financial objectives. The plan details the funds that will be allocated to each of the initiatives, and the targets and goals that each of the function/BU will have to meet in order to justify the investment.
EPM software allows organizations to model their business strategy and goals so that everyone is able to understand their role and measure the success on an ongoing basis.
● Enhancing Financial Planning and Budgeting – The financial plan includes – (a) the budget and target given to each unit/function (b) the actual performance by month (c) the forecast for the upcoming month/quarter and (d) the variance between target and the actual/forecast. The above is broken down by product, segment, plant, etc. The downstream outcome of this is the P&L, balance sheet, and cashflow statements which illustrate the health of the business.
An EPM software’s multidimensional capability enables organizations to model all these elements at the minutest of the levels e.g. Product-group, business unit, sales channel, etc. So the decision makers can get profitability and target achievement status in real-time.
● Improving Decision-Making with Data Analytics – The most important change in the business environment in recent times has been - speed and velocity. Customer preferences, raw material prices, employee expectations – all are changing faster than ever. The ability to monitor the trends, identify gaps, and take corrective action in near real-time therefore becomes paramount.
By using the analytical capabilities of the EPM solution organizations can quickly spot variances, adjust the demand forecast, and predict their workforce requirements.
● Promoting Collaboration and Communication – Achieving organizational goals and objectives requires 2 key elements – one is a clear communication of the goals and two transparency about the current state, across stake holders. Only then can root-causes can be un-earthed and accountability established to meet or exceed the organizational objectives.
EPM solutions inherently provide both these capabilities. Using EPM solutions organizations can create and share organizational and divisional goals and compare it against daily/weekly/monthly achievement. Any overperformance can be appreciated whereas the gaps or variances can be diagnosed and corrective actions implemented.
● Mitigating Risks and Ensuring Compliance – Not all strategies go as per plan. The capability to spot a problem or a risk early can help bring-in interventions which can assist in course-correction. A low Q1 coupled with a low forecast for Q2 can warn an organization of a demand slowdown. This can potentially impact its annual plan. In response, the organization can either plan marketing campaigns, sales programs or new product introductions which can help stem the de-growth and bring the numbers back to the expected levels. Or the organization may reduce its raw material procurement plans so that their costs get in line with the muted demand. The ability to spot such issues early is crucial.
EPM solutions enable organizations to bring together data to spot, analyze, and compare scenarios which can help them take appropriate actions – should we reduce the price of our products or increase the spend on marketing. Should we expand into a different territory or improve distribution in the existing ones, should we manufacture this product in-house or take over a competitor. EPM solutions facilitate such critical business decision in near real time.
Best EPM Software for Your Business
An EPM software is a decision-making tool. And decision making is a dynamic process, when you get the required info, you want to look sideways at other related factors before arriving at the final decision. Thus its essential that the planning tool has easy to use analysis capabilities. Secondly the EPM solution needs to be flexible to map to your unique business processes and not the other way round. Three it should be easy for the end user to use and adopt. Lastly it should drive action, communication and change so that it can result in real outcomes.
Most organizations remain in the BAU (Business as Usual) mode until they get hit by a lightning. Taking yours to the next level means demoting current practices that are slow and curtail decision making e.g. spreadsheets and other legacy tools. EPM tools will set the organization free of any dependency – data, tools, information – which can come in the way of faster and better decision making. And in turn a faster and better business.