Enterprise performance planning

Learning outcome statements

The learning outcome statements relevant for this section are:

1. define enterprise performance management (EPM) (also known as corporate performance management (CPM) or business performance management (BPM))
2. discuss how EPM can facilitate business planning and performance management

Enterprise Performance Management (EPM)

Definitions

Enterprise Performance Management (EPM)

The processes, methodologies, metrics, and systems used by organizations to monitor and manage their business performance. It is also known as Corporate Performance Management (CPM) or Business Performance Management (BPM).

EPM helps businesses align their strategies with execution by integrating financial planning, budgeting, forecasting, and performance measurement.

Examples of EPM solutions:

• Oracle Hyperion
• SAP EPM
• IBM Planning Analytics, and
• Anaplan.

These systems assess both financial and non-financial metrics, providing a comprehensive view of organizational performance by integrating operational data, workforce analytics, and market trends with financial results.

EPM versus ERP

Although closely related, Enterprise Performance Management (EPM) and Enterprise Resource Planning (ERP) serve different purposes in an organization:

EPM (Enterprise Performance Management):

Focuses on planning, analysis, and performance management. It helps organizations align strategies with execution by integrating budgeting, forecasting, scenario modeling, and performance measurement. For instance, an EPM system might analyze sales and cost trends drawn from ERP data to forecast next quarter’s performance or adjust budgets in real time.

ERP (Enterprise Resource Planning):

Focuses on the day-to-day operations of an organization. It manages and records transactions across core functions such as finance, supply chain, human resources, sales, and procurement. For example, an ERP system might record a customer order, automatically update inventory levels, and generate the corresponding invoice, ensuring that operational processes are integrated and consistent.

The key distinction is that ERP is about running the business efficiently by managing operational transactions, while EPM is about improving business performance by analyzing information, planning ahead, and guiding strategic decisions.

Business planning and performance management with EPM

EPM plays a critical role in enhancing business planning and performance management through:

• Strategic alignment: EPM ensures that corporate objectives are aligned with operational activities, allowing for better execution of business strategies.
• Budgeting and forecasting: EPM provides tools for effective budgeting, rolling forecasts, and predictive analytics to help organizations adapt to changing market conditions.
• Financial consolidation and reporting: EPM simplifies the consolidation of financial statements across business units, ensuring compliance with regulatory requirements and improving transparency.
• Performance measurement: EPM systems enable organizations to track and analyze KPIs, providing insights into financial health and operational efficiency.
• Risk management: By integrating risk assessment into performance management, EPM allows organizations to mitigate potential financial and operational risks effectively.

Key functionalities of EPM systems

Enterprise Performance Management (EPM) systems encompass several essential functionalities that support organizational planning, performance monitoring, and strategic decision-making. Below are the key functions that define an EPM system:

By integrating these functionalities, EPM systems enhance business performance by ensuring that financial and operational activities are aligned with strategic objectives.

1. Financial consolidation

Financial consolidation refers to the process of aggregating financial data from different departments, business units, or subsidiaries into a unified financial statement. EPM systems automate this process, ensuring compliance with regulatory requirements and reducing manual errors.

2. Reporting and analytics

EPM systems provide real-time reporting and analytics capabilities to monitor business performance. These tools enable businesses to generate financial statements, operational reports, and dashboards that track key performance indicators (KPIs), improving visibility into financial health.

3. Strategic planning

Strategic planning tools within EPM systems allow businesses to define long-term goals, allocate resources efficiently, and develop strategies based on market trends and organizational objectives. These tools align corporate objectives with execution plans.

4. Scenario modeling

Scenario modeling helps organizations evaluate different business conditions and make data-driven decisions. EPM systems provide simulation capabilities that allow businesses to assess the impact of economic changes, market shifts, or internal policy adjustments.

5. Budgeting and forecasting

EPM solutions facilitate budgeting and forecasting processes by automating data collection, reducing inefficiencies, and improving accuracy. Rolling forecasts allow businesses to adjust financial projections in response to market fluctuations.