FINANCIAL ANALYTICS AND CONTROL- Unit - I ~ Part 2

 What is Enterprise Performance Management?

Enterprise Performance Management (EPM) is a process supported through planning, reporting, and business intelligence software that enables an organization to connect its strategy with planning and execution. This approach came to fruition in the mid-90s and incorporated past, present, and forward-looking information—in addition to business drivers—for a more comprehensive method of financial and operational planning. Some of the key components of EPM systems include planning, budgeting, and forecasting capabilities and the ability to monitor performance measures (KPIs), provide analysis, and manage reporting.

Enterprise Performance Management also encompasses the financial close, consolidate, and report process. Ultimately, these suites of solutions are to support the business by linking the strategic plan with the annual budget and the periodic forecast using both bottom-up and a top-down methodology.

EPM software is designed to integrate with ERP systems to provide a management layer on top of the transactional ERP modules. EPM systems can support practices that align finance with operations for integrated business planning and establishes the foundation for aspirational, enterprise-wide Connected Planning.

Successful use of EPM software in the finance function allows financial planning and analysis (FP&A) teams to anticipate performance gaps and drill down into root causes, collaborate strategically with the business, and execute timely and reliable planning, analysis, and reporting.

Top three Enterprise Performance Management technology trends

1. Deployment models remain a challenge. When rolling out an entirely new EPM solution with different deployment models (cloud vs. on-premises) at a global operation, it can mean replacing some large legacy systems and processes. This effort is no small feat and can result in one to three-year on-prem implementation times (or longer). Fortunately, solutions such as Anaplan can be implemented in a fraction of the time it typically takes to get an on-premises solution up and running due to the agility of the platform and the natural language syntax putting modeling in the hands of the business.

2. All innovation is not created equal. In addition to the move toward cloud solutions, EPM innovation is evolving along four vectors: user-experience simplicity, social collaboration, advanced analytics, and integration with other business applications. However, these four are often not equal in importance, and many Anaplan customers indicate a preference for the following order:

·         Integration. Robust and straightforward data and metadata integration are critical.

·         Experience simplicity. Users have experienced many technology rollouts, and adoption increases when technology aids their work and drives efficiencies.

·         Advanced analytics. In today’s fast-paced world, organizational leaders need insight and flexibility in their planning platform to evaluate scenarios and best courses of action quickly.

·         Social collaboration. When planning doesn’t include the right people at the right time, decision making is delayed and misinformed.

3. Flexible modeling is “The King.” As SaaS solutions have become prevalent in EPM, widely acknowledged differentiators provide competitive advantages, such as the robustness and flexibility of modelling, reduction in IT dependence, and management reporting capabilities.

 

EPM VS. ERP: DIFFERENT BUT WORK WELL TOGETHER

Organizations needed software which could help in accounting, so they developed a software named enterprise resource planning.

Enterprise resource planning is a software that has been there for decades now helping many companies in their accounting and business transactions.

ERP is mainly focused on organizational resources and transactions while also reflecting the operational and economic condition of the organization.

But with companies growing and expanding, it gave birth to new complexities and challenges.

Few new things came into existence like forecasting, analytics, and reporting and it became difficult for ERPs to suffice the growing demands of the organizations.

After a few years, new ERP systems were developed with a new set of capabilities that could address the growing complexities of organizations.

This gave rise to another software application which we know today as enterprise performance management (EPM).

Starting off, EPM did the job it was supposed to do. Thereafter, the software evolved and started to address all the shortcomings in the previous ERP systems such as budgeting, managing the business process, and more.

Now EPM is at the stage wherein it handles core business challenges like strategic planning, reporting, tax provisioning, and more.

EPM vs ERP: Comparison of features

Key features of ERP

• Processing of core financial transactions like A/R, A/P, cash management.
• Provides accurate insights into enterprise performance through integrated reporting.
• Enterprise budgetary management.
• Reporting.
• A robust cloud technology platform.

Key features of EPM

• Building plans with a significant amount of detail.
• Support for budgetary, financial plans, capital asset planning, and financial statement planning.
• Intuitive user interface.
• Faster deployment with minimum IT support.
• Addresses complex enterprise planning and modelling across multiple systems.
• Complex budget maintenance and development.

Integration of EPM and ERP

Well, after knowing the origins of both the software systems, we can say that these two systems weren’t actually designed to work in the alliance as they were designed to address different objectives.

While ERP addresses the operational processes, EPM works to streamline the management processes.One of the notable differences between this two software is that ERP takes close to a year to get fully implement while EPM systems can be implemented within a few months.

What we think is that, if integrated, ERP and EPM can work better and provide all-round benefits for the organizations.

If an organization wants to upgrade its ERP system, why not implement an EPM suite before the ERP upgrade. It’ll not only address the organization’s operational complexities but also streamline the management processes. Wouldn’t that be great? Need a bit more material? No problem! Let me put it this way.

Almost all organizations, at the inception stage, use ERPs to manage their resources while also using spreadsheets and excels to manage functions such as budgeting, reporting, and forecasting. But these exact functions are performed by the EPM software. Yes, investment-wise it would be a bit more elaborate but it guarantees solid efficiency in the long run. Isn’t that the right thing to do?

Well, I think the best way for organizations to address the growing complexities is the integration of ERP and EPM software.

The only way the organization will negate the challenges is when it is EPM and ERP instead of EPM vs ERP.