Understanding Enterprise Performance Management (EPM) for Your Business Needs

Enterprise Performance Management (EPM) is a powerful framework designed to streamline essential business functions, from planning, budgeting, and forecasting to performance reporting and financial consolidation, often known as “closing the books.” EPM tools help businesses align their strategies with execution, creating a cohesive approach to achieving organizational goals.

EPM technology leverages insights from data generated by various systems, processes, and operations within the company. By identifying key business drivers and analyzing this data, companies can better evaluate new opportunities, enhance profitability, and adapt to unforeseen changes with increased agility.

Hash Core ERP offers a comprehensive solution that integrates EPM and ERP, providing substantial benefits to business owners, including increased operational efficiency, smoother workflow processes, and more.

Mga pangunahing benepisyo ay kinabibilangan ng pinasimpleng awtomasyon ng mga proseso ng negosyo, naayon na pag-access ng datos, at maaasahang pagdedesisyon batay sa datos, na nagbibigay ng katiyakan at kaugnayan para sa iyong negosyo.

What is EPM?

Enterprise Performance Management (EPM) is a methodology supported by software designed to help various organizations—businesses, government agencies, educational institutions, and nonprofits—align their strategy with planning and execution.

EPM software assists in analyzing, understanding, and reporting on a company’s operations, offering insights that drive informed decisions. EPM, sometimes referred to as Corporate Performance Management (CPM) integrates data from multiple sources including e-commerce platforms, front-office and back-office software, data warehouses, and external datasets.

Advanced EPM tools can support a variety of performance management frameworks such as the balanced scorecard, enhancing a company’s ability to monitor and achieve strategic objectives.

History of Enterprise Performance Management (EPM)

EPM was initially managed manually through the use of paper, meetings, presentations, and discussions. In the 1970s, accounting software began to assist in the collection of budgets and financial data for reporting purposes as commercial applications started to gain popularity in various organizations. By the 1980s, accounting and finance teams could automate the generation of budgets, reports, and worksheets.

This advancement was further enhanced by the introduction of email in the 1990s, which facilitated the sharing of spreadsheets and supported departmental collaboration in gathering and disseminating budgeting and reporting data.

Additionally, executive information systems (EIS) were developed in the 1980s to provide graphical reports and key performance indicators (KPIs) to senior executives through their personal computers.

This concept later evolved into software-based solutions, meaning visual scorecards and dashboards that can present KPIs and metrics to leaders and managers throughout the organization.

Since the 1980s, the platforms for EPM tools have shifted from mainframe systems to client/server Windows systems and now to internet-connected web applications.

Nowadays, Software as a Service (SaaS), also known as cloud-based software, is becoming increasingly popular, particularly as it allows finance teams to take control, implement solutions quickly, and receive automatic, cost-effective upgrades.

Understanding the EPM Cycle

Enterprise Resource Planning (ERP) systems are commonly integrated with Enterprise Performance Management (EPM). This integration is crucial because EPM provides essential managerial insights that enhance the operational data contained within ERP systems.

By aligning financial and operational metrics with these insights, EPM tools are recognized as vital for guiding strategies, plans, and execution across various types of organizations.

By employing analytics to identify significant trends and predict future outcomes, managers can utilize EPM tools to enhance overall organizational performance by monitoring financial and operational results against established goals and forecasts.

This encompasses the methodologies and solutions required for effective enterprise management, including the following key management processes:

1. The processes of budgeting, planning, and forecasting

Budgeting, planning, and forecasting are essential to the enterprise performance management (EPM) cycle. Budgeting involves allocating financial resources effectively to support various company activities, ensuring that funds are utilized in alignment with strategic objectives.

Conversely, planning focuses on setting clear goals and developing actionable strategies. Forecasting plays a critical role in predicting future performance based on historical data and current trends, which enables companies to anticipate changes and adjust their plans accordingly.

Together, these processes facilitate informed decision-making and drive overall business performance.

2. Developing a framework for value creation in a company

Developing a framework for value creation in a company is a crucial aspect of the Enterprise Performance Management (EPM) cycle. This framework serves as a structured approach to identify, measure, and enhance the factors that contribute to the company’s overall value.

By establishing clear metrics and performance indicators, organizations can assess their progress in achieving strategic goals and making informed decisions. Furthermore, this framework allows companies to align their resources effectively and prioritize initiatives that drive growth and profitability.

Ultimately, a well-designed value-creation framework not only supports sustainable success but also fosters a culture of continuous improvement within the organization.

3. Consolidation of the results

The consolidation of results is a vital step in the Enterprise Performance Management (EPM) cycle. This process involves combining and synthesizing data from various departments and business units to provide a comprehensive view of the company’s performance.

By consolidating results, companies can identify trends, discrepancies, and areas for improvement across their operations. This holistic perspective not only enhances transparency but also aids in making informed strategic decisions.

Additionally, effective consolidation enables companies to create accurate reports that reflect their overall performance, facilitating better communication with stakeholders and fostering accountability within the company.

4. Performance analysis

Performance analysis is a crucial component of the Enterprise Performance Management (EPM) cycle. This process involves examining and evaluating various metrics and indicators to assess how well a company is meeting its strategic objectives.

By analyzing performance data, organizations can identify strengths and weaknesses within their operations, enabling them to make informed decisions for improvement. This analysis not only helps in recognizing trends over time but also provides insights into potential risks and opportunities.

Ultimately, effective performance analysis empowers companies to align their resources and strategies more effectively, driving overall business success.

The Future of EPM in Business Strategy

What can we expect from the upcoming version of EPM? It will introduce new features that utilize advanced technologies like artificial intelligence and machine learning. These technologies help bridge the gap between analysis and action, making them valuable tools for decision-making.

By revealing hidden patterns and insights in historical data, they assist finance managers and executives make better choices. The effects on decision-making are significant, impacting tactical decisions (such as which vendor to pay first), operational decisions (like reallocating budgets), and strategic decisions (including mergers and acquisitions).

EPM Tools for Business

Packaged EPM tools enhance organizational efficiency by minimizing dependence on spreadsheets and refining planning and reporting processes through the use of centralized databases, structured workflows, and process controls.

By harmonizing strategic, financial, and operational goals, broadening the involvement of budgeting participants, and equipping managers with timely information, these tools promote accountability throughout the organization. The following are examples of how EPM plays a significant role in business success:

• Insurance: Achieving profitability targets is more challenging for these companies as they must continuously adapt their business models to various factors, including environmental, regulatory, and market disruptions. EPM provides insurance firms with robust cost management and comprehensive profitability assessments. It facilitates the complex and detailed calculations needed to determine future profitability.
• Retail: The industry has experienced significant changes due to numerous consumers adopting a digital shopping model, which provides access to a vast and growing repository of valuable consumer data. EPM allows retailers to calculate and analyze profitability at the transaction level, as well as identify new revenue streams and customer segments to facilitate business growth.
• Manufacturing: Global supply chain disruptions have negatively impacted the manufacturing sector. EPM provides manufacturers with accurate insights into costs and profitability, enabling them to make informed decisions about “build or buy.” By utilizing real-time data, manufacturing companies can protect their profit margins and ensure profitability.

Difference between EPM and ERP

Enterprise Performance Management (EPM) and Enterprise Resource Planning (ERP) are two crucial systems that serve distinct yet complementary functions within an organization. EPM is primarily focused on strategic planning, budgeting, forecasting, and performance analysis.

It provides valuable insights and analytics that support effective decision-making, allowing businesses to align their operations with their long-term goals. By leveraging historical data and predictive analytics, EPM tools enable organizations to assess their performance and identify areas for improvement.

On the other hand, ERP focuses on the integration and management of core business processes such as finance, supply chain, manufacturing, and human resources. It streamlines and automates daily operations, ensuring that various departments work cohesively towards common objectives.

In summary, while EPM emphasises enhancing organizational performance through strategic insights, ERP is concerned with optimizing day-to-day operations. Understanding the differences and unique strengths of these two systems can empower businesses to select the right tools that cater to their specific needs, ultimately driving growth and efficiency.

Conclusion

EPM is an essential component for any business, as highlighted in the points discussed above. It effectively tracks and manages key performance indicators (KPIs), enabling managers across various departments to consistently grasp important market and business trends.

Additionally, EPM integrates seamlessly with ERP systems as they complement one another; EPM focuses on automating management functions, while ERP is dedicated to automating transactional processes.

This is where Hash Core ERP becomes the ideal solution for your EPM needs. Hash Core ERP is the best ERP software that offers a diverse range of solutions, including accounting, CRM, HRM, procurement, inventory management, warehousing, and manufacturing all available on a single platform.

To experience the advantages of using Hash Core ERP for your business, be sure to try the free demo. Discover the benefits for yourself and get your free demo today!