While on the surface it may sound like these software systems overlap in terms of features and functionality, these are entirely separate types of systems. Which is most useful? Which is easier to implement? Which will deliver the most value for the expenditures of time, money, and effort?
Defining and Describing Enterprise Resource Planning
ERP is focused on transactional processing and coordinating the company’s resources, providing operational data to the organization.
Enterprise Resource Planning, or ERP, is a system that is designed to process transactions and keep track of the resources within an organization. For instance, ERP tracks materials from the procurement phase through production to the paid-in-full deliverable product. ERP helps the organization determine the best ways to use given resources within the company on a day to day basis. ERP includes a general ledger which summarizes all of the details from other modules like purchasing, accounts payable, and accounts receivable. And it can perform some actual vs. budget reporting, so it does overlap EPM in some areas of financial planning and decision making.
Defining and Describing Enterprise Performance Management
EPM supports the management processes that the enterprise can use to improve profits, and performance.
EPM assists the CFO and finance department in creating initial targets or budgets, and to coordinate planning across the organization. It allows for rapid, periodic collection of financial and operational results for fast and effective decision-making – weekly, monthly, quarterly and annually. The right EPM solution is flexible and supports modeling and advanced analytics, which can help the CFO and other executives perform “what if” analysis that improves decision-making. A good EPM solution will also make the financial auditing process much simpler and faster. So while there is some overlap with ERP, EPM is more strategic in nature and can work across multiple ERP systems.
The Differences Between EPM and ERP
ERP systems are very complex in nature and can take from six months to a full year or more to implement. Despite the fact that an EPM system can integrate and work with multiple ERP systems, (as well as HCM and CRM) a cloud-based EPM system can be implemented in three months or less. Most organizations start off by implementing an Accounting or ERP system to handle day to day transactions, and will often use Excel spreadsheets to manage EPM processes such as budgeting, forecasting and financial reporting. However, as the organization grows and expands, they quickly outgrow spreadsheets and will implement EPM applications as a replacement.
If an organization is considering an upgrade of its ERP and spreadsheet-based EPM system, then implementing an EPM suite ahead of the ERP upgrade can be beneficial. This approach provides a stable reporting and planning system before – during – and after the ERP upgrade. Optimally, the enterprise will invest in both an EPM and an ERP to ensure they have solid transactional as well as management processes and systems. See related blog article on this topic.
To learn more about utilizing EPM and ERP software together, download the free white paper, “Best Practices: ERP and Enterprise Performance Management” today. This is a free gift to you from Host Analytics.