GUIDE

What is EPM?

Who it’s for
  • Finance professionals new to enterprise performance management and cloud FP&A and financial close software.
  • IT professionals looking to get a broad overview of enterprise performance management and how it could help finance ease the burden on IT resources.
What you’ll learn
  • Gain a cohesive, broad understanding of the basics of EPM and how it streamlines finance processes.
  • How EPM can unite the organization and enable cross-functional collaboration between finance and other budget holding departments.
  • The differences between ERP and EPM, and which should come first.

Introduction

There are a number of definitions of enterprise performance management (EPM) available in the market. There are also a number of competing terms that are used by various industry experts and vendors.

These competing terms include BPM (Business Performance Management), CPM (Corporate Performance Management) and FPM (Financial Performance Management). We prefer the term EPM, or financial planning and close software, since it signifies enterprise-wide application. We’ve touched on the definition of EPM on our blog, but we saw the need for a definitive guide to get financial teams up to speed. So here goes: Everything you need to know about EPM.

Need a deeper introduction?

As anyone who has worked in a business enterprise knows, finance processes can be challenging as an organization grows and evolves beyond its roots. Get an introduction to how enterprise performance management can help in the free white paper.

A Brief History of EPM

Forty years ago computers were just starting to catch on in offices, and finance teams across the globe fell in love with spreadsheets. Gone were the days of manual calculators, paper logbooks, and ledgers! Imagine the time savings. One day you’re manually typing each number on a printing calculator — the next, you press a button and BAM! The spreadsheet does it for you. A week’s work done in an instant! Who’s up for happy hour?

In the decades since, finance’s role has evolved as data, trends, and technology present new opportunities. Now, the very spreadsheets that were such a game-changer in the 70’s and 80’s have grown clunky and cumbersome. The technology just wasn’t built for today’s world. The  demands of the Office of Finance have changed drastically since 1985, when Microsoft introduced Excel. Small companies may be able to make do with spreadsheets and email for a time, but eventually  every company will outgrow Excel.  The cumbersome, error-prone results become too big of a liability, especially for fast-growing, mid-to-large, or leading companies.

It’s time for a new technology — one built for the demands of the modern Office of Finance. A suite of tools that once again condense weeks of work into minutes, and presents a whole new era of possibilities. Enter EPM. It’s not just a new tool, it’s the future of finance. Companies who have made the switch can’t imagine going back. So getting to know EPM is a key step in ensuring FP&A is future ready.

What is EPM?

Enterprise performance management (EPM) is a process and software system designed to help organizations (i.e., companies, government entities, educational institutions, and non-profits) link their strategies to their plans and execution.  Sounds easy right? As anyone who has worked in a business enterprise knows, this can be challenging as an organization grows and evolves beyond its roots. To support this, EPM includes the following management processes:

How it works

Organizations execute these processes in a “management cycle.”  This cycle is run at least annually and, in most cases, quarterly or more often. The objective of EPM is to ensure strategic goals and objectives are clearly communicated and understood by managers, and are reflected in their budgets and plans.  Getting all of the various departments of an organization aligned around goals and objectives is a critical starting point.

But effective EPM also requires periodic revisiting to ensure the organization remains aligned over time, especially as the business world has become more volatile and unpredictable.  This is handled through the periodic reporting and reviewing of results by internal stakeholders (i.e., the management team) and external stakeholders (i.e., board of directors, investors).  This typically occurs monthly, quarterly, and annually. But some organizations do this more frequently, such as weekly in retail or CPG manufacturing. The EPM process is even run daily in fast-paced industries, such as financial services and transportation.

Finance also is typically responsible for monitoring and managing key performance indicators (KPIs) that let managers in various departments and divisions of an organization understand key market and business trends on a regular basis (i.e., hourly, daily, weekly, monthly, quarterly).  Ultimately, this allows manager to respond quickly when the business or department is not performing to plan and to make adjustments to ensure they meet business objectives.

If that sounds like a lot of real-time collaboration, it is. Without EPM, companies might only plan and allocate resources once a year. After all, an annual budget often takes months in Excel! But with EPM, it’s exponentially easier and faster to plan, budget, and forecast. Companies that use EPM can be more responsive, giving them a competitive advantage. Now more than ever businesses are turning to finance to identify and drive the initiatives that support innovation agility and growth.

Why is EPM moving to the cloud?

Learn the top three reasons to move to cloud-based planning.

Who needs EPM?

Data collection and validation is completely manual for companies that use Excel for For companies that use Excel spreadsheets for all of their budgeting, forecasting, modeling, and reporting activities. The process are so time consuming and error-prone that the team is constantly in a reactive state. The team spends so much time delivering the basics – an annual budget, a required set of monthly reports, and a periodic snapshot of performance – there is no time left for more value-added activities like monthly forecasting, what-if modeling, and strategic partnering with line-of-business owners.

Many finance teams get stuck in this reactive state. Manual processes just feel like business as usual and it can be hard to realize there’s a better way. So how do you know if you’re abusing spreadsheets and missing opportunities? One sure sign is if you’re dreading the idea of planning for next year, you’ve likely outgrown the cumbersome, error-prone results that planning with spreadsheets and emails provide. Other telltale pain points to look out for include…

SIGNS YOU MIGHT NEED EPM:

  • It takes so long to produce budgets, plans, and reports that the data is out of date.
  • Too much manual work. Your team spends most of their time manually crunching numbers, and rarely has time to think strategically.
  • Lack of security.  Budgeting spreadsheets are sent via email, totally unencrypted, untraceable, and at risk for hacking or unintended sharing.
  • Spreadsheets are error-prone, low data quality. Your team has learned they have to double check everything, and the rest of the organization has lost trust in the numbers.
  • Limited reporting and analysis capabilities. You’re so caught up in the day to day that there’s never enough time for analysis. You know your team could contribute more — if only you had the time.
  • Compliance with US GAAP or IFRS is a constant struggle — or simply a pipe dream
  • Lack of controls and audit trails, and/or time-consuming and costly audit process

Wondering if your company is ready for EPM?

Check out our Readiness Assessment guide.

Business Benefits
of EPM Software

Each generation of EPM software has brought new benefits to users and organizations.  Spreadsheets helped accounting and finance staff speed the process of capturing, recording, and calculating data. Then email made it easier to share that data.

Packaged EPM software helps organizations increase efficiency by eliminating or augmenting spreadsheets, and improving planning and reporting processes through centralized databases, workflow, and process control.  This helps drive accountability across the enterprise by aligning strategic, financial, and operational goals, broadening budgeting participants, and empowering managers with more timely information.

EPM offers 3 key competitive advantages:

  1. It automates financial planning, reporting, and consolidation processes to eliminate errors and labor-intensive work
  2. It accelerates cycle times and creates more time for value-added strategic work and analysis
  3. It aligns finance and operations around a single plan

Cloud-based EPM software like Host Analytics is easier and faster to deploy, reduces the cost of ownership, increases innovation speed, and supports enhanced collaboration across the enterprise.  It helps organizations automate manual tasks, accelerate key finance processes, and drive better alignment between finance and operations.

In Summary

1

EPM is a process designed to help organizations link their strategies to plans and execution. EPM software is designed to support the EPM processes, including budgeting, planning, forecasting, financial consolidation, reporting, analysis, and modeling.

2

EPM software brings new benefits to Finance departments and the broader enterprise – automating and accelerating management processes and helping to improve alignment across the enterprise.

3

EPM software is complementary to other IT investments, such as ERP, CRM, and BI systems.

Questions? We are only an e-mail away.