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What is enterprise performance management (EPM)?

Enterprise performance management, or EPM, software specializes in budgeting, forecasting, and financial management. It provides data analytics, reporting, and forecast modeling so organizations can analyze, understand, and plan strategically for the business.

 

With EPM software, companies can align business strategy with business execution. The technology uses feedback drawn from data generated from systems, processes, and activities across the organization. The resulting analytics help to identify business drivers and other insights. Companies can assess new opportunities, augment profitability in existing business, and respond with greater agility in the face of unexpected change and disruption.


Enterprise performance management software helps inform future decisions, drive efficiencies, and improve the financial and operational performance of the company.

What are the key elements of EPM?

As with most traditional software, enterprise performance management systems were initially installed on premise. Today, more and more EPM software systems run in the cloud. A cloud platform provides a range of benefits, including larger data storage capacities, stronger security, and easier integration with complementary applications such as financial consolidation, financial close, planning, tax reporting, profitability and cost, account reconciliation, and other applications.

 

Here’s how the EPM process typically works:

  1. Access data across all business units. Leverage the agility of the cloud to access financial and operational data from business units across the organization, including IT, marketing, HR, operations, and sales. Data can be sourced from e-commerce systems, front- and back-office applications, data warehouses, and external data sources. Make more confident decisions and respond to disruptions faster with complete, accurate data.
  2. Create a strategic plan. Use EPM data analytics to build forecast models and ad hoc simulations across multiple dimensions. Make data-driven decisions that maximize profitability, performance, and drive alignment with your strategic plan.
  3. Budget. Work collaboratively across lines of business to crowdsource plans and build flexible budgets. Leverage automated workflows for a clean and efficient process.
  4. Track and report. Use real-time data to assess performance across the enterprise and determine if adjustments are required. Prepare reports that align with corporate and regulatory guidance.
  5. Assess and analyze. Review performance and profitability against the strategic plan. Identify new areas of opportunity, resolve areas of underperformance, and use the intelligence to inform the next cycle of strategic planning.

Benefits of an EPM system

Here are some of the top benefits of an EPM:

  • Profitability: Examine existing margins and accurately predict future profitability across a range of business cases and scenarios. EPM technology can help increase margins, maximize returns, and identify new opportunities to increase profitability and performance.
  • Integrated business strategy: Consolidate data from all lines of business for a cohesive view of current and future performance. EPM delivers insights based on real-time data, so companies can explore different opportunities and make the most profitable and efficient decisions.
  • Modern, automated financial processes: Eliminate time-consuming spreadsheets, human error, and siloed planning workstreams. EPM connects processes and data from across the organization for a comprehensive view of the business.
  • Regulatory oversight: Ensure compliance with ever-changing regulatory and tax law requirements for the financial close, corporate financial reporting, and tax reporting. EPM supports a range of reporting standards with accurate and current information, eliminating the need for multiple reporting systems and accelerating cycle times.
  • Faster reconciliation of accounts: Eliminate delays to the financial close. EPM provides automated workflows that eliminate risk and securely expedite global account reconciliation.

EPM examples in business sectors

EPM solutions support endless business cases across industry segments. Here are some examples:

  • Insurance: These organizations must constantly adjust business models in response to a range of changes including environmental, regulatory, and market shifts, making it harder to meet profitability targets. EPM provides insurance companies with efficient cost management and detailed profitability analyses that support the more complex and detailed calculations required to determine profitability potential.

Discover how EPM can help insurance companies.

  • Retail: With many consumers shifting to a digital shopping model, this sector has undergone significant change, including access to a new and growing repository of rich consumer data. EPM allows retailers to calculate and simulate profitability down to the transaction level, identifying new revenue streams and consumer groups to help grow the business.

See how EPM can help retail companies make strategic decisions using Big Data to calculate and simulate profitability daily.

  • Manufacturing: Disruptions to the global supply chain have taken their toll on the manufacturing sector. EPM provides manufacturers with accurate cost and profitability analytics to make “build or buy” decisions. With insights based on real-time data, manufacturers can protect margins and ensure profitability.

Small changes to costs or ingredients, for example, during the manufacturing production process can impact profitability. See how simulations can help finance and planning teams make better decisions.

Evolution of enterprise performance management

Positive profitability and performance are foundational to the success of any business. Traditionally, this work was managed by finance, using manual processes and spreadsheets to track progress and alignment with corporate goals.

 

Each line of business operated in a silo and finance teams were challenged to consolidate departmental objectives, budgets, and data into a single, cohesive strategy for the business. This was time-consuming work that often failed due to human error or the inability to comply with ever-changing regulatory and tax laws.

 

Stale and inaccurate data introduced additional challenges, making it impossible to respond quickly to changes in the business – with underperforming results not coming to light until much later in the cycle.

 

Enterprise performance management systems came into use in the 1990s. Hosted on premise, these systems automated reporting and financial consolidation processes. Many manual workflows were eliminated, resulting in significant efficiencies and consistency in reporting and regulatory compliance.

 

In the intervening years, EPM systems migrated to the cloud, making the technology more accessible to organizations and departments that did not have the capability or the budget to support the infrastructure on premise. Cloud-based EPM provided additional efficiencies, most importantly, access to real-time operational and financial data so that profitability and performance could be tracked in the moment.  

 

Despite these improvements, EPM didn’t quite deliver on the vision of taking performance management and planning beyond the office of the CFO and moving from a historical view to a forward-looking one. Now, with solutions that deliver enterprise-wide planning and analysis – or extended planning and analysis, xP&A – companies can realize a holistic, integrated approach that brings all plans together in a seamless manner. Each business unit or department maintains the flexibility to manage its own plans but is part of an integrated view of financial and operational plans, creating a more collaborative approach to planning and performance management, as well as higher accuracy and agility.

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Enterprise performance management FAQs

Enterprise performance management, or EPM, technology specializes in forecasting and financial management. It provides analytics, reporting, and forecast modeling so organizations can analyze, understand, and plan strategically for the business. Modern finance solutions combine EPM capabilities into a comprehensive financial planning and analytics (FP&A) solution that allow you to analyze, plan, budget, forecast, and predict in one tool.

ERP is a company’s system of record that contains and links all transactions that happen in the moment whether it is sales, expenses, costs, and other balance sheet related items (for example, purchases of assets). EPM solutions give a real-time view of the ERP data in a consumable manner to compare against budgets and plans, but also to help predict future outcomes.

Although traditionally EPM systems were deployed on premise, today most applications are deployed to the cloud. A software-as-a-service (SaaS) approach helps smaller and mid-sized businesses accommodate a more moderate operation, and can scale easily with growth.

EPM relies on financial and operational data from many sources, such as ERP, front-office and back-office applications, data warehouses, and external data sources. The technology integrates easily with existing systems such as those used for financial consolidation, financial close, planning, tax reporting, profitability and cost, account reconciliation, and other systems.

EPM software monitors transactions, user access, and master data – important oversight in managing compliance with industry regulations and requirements. These capabilities mitigate risk relative to fraud, payments, data breaches, inefficient business activities, and other risk areas.

 

EPM automates workflows to ensure processes are repeatable and compliant with regulatory requirements. New regulations can be easily integrated into existing workflows for up-to-date oversight.

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