Enterprise Performance Management (EPM) is a critical aspect of any business. Without it, you'd lack the insight into key areas for improvement.
EPM is a set of processes that enable a proactive approach for managing challenges across your organization, making it a key tool for the CFO. It drives collaboration across finance and other departments, creating visibility into core areas and unifying an organization's goals.
Let's look more into EPM and how it fits into the evolving role of the Chief Financial Officer (CFO).
The Evolution of Enterprise Performance Management — From Paper to Automation
EPM has been used in organizations for decades. It started as a manual process, that was managed largely through phone calls, meetings, and manual paper processes. It then graduated to the use of spreadsheets, replacing manual worksheets and enabling the finance team to better manage budgets and reports.
These days, EPM has been streamlined even further, beyond spreadsheets and into automated processes. More recently, EPM solutions have largely graduated from on-premises to cloud-based solutions.
The result? EPM solutions today are accessible from anywhere in the world and help simplify collaboration and increase visibility into various aspects of the business. A cloud-based EPM system is also a more cost-effective solution, one that does not demand consistent in-house IT support.
This means your valuable resources have more time to dedicate to other areas of the organization.
Some of the core benefits of EPM include:
- Automated financial planning and reporting processes
- Less chance of human error
- Less intensive processes
- Collaboration and visibility throughout the organization
How EPM Fits into the Evolving Role of the CFO
Cloud-based EPM solutions help those in finance simplify the reporting and budgeting process. The role of the CFO, in particular, has evolved into more of an overall business leader, not beholden to only finance but one that helps drive performance management.
As a result of recent market conditions, the CFO has taken on a central role in stabilizing the organization and putting it in place to thrive with the improvement of market conditions.
The financial stress that many organizations have undergone has caused many businesses to close their doors. The CFO represents a leader in not just finance, but in being a central figure for keeping the business alive.
The goal of EPM is to improve business performance, making it even more relevant to the CFO role.
Uncertainty Planning EPM Tools for CFOs
Are you prepared for the "what ifs" within your organization? EPM uncertainty tools help position companies to be prepared for various scenarios. Some of these core EPM tools include:
Scenario Planning
The CFO becomes a key figure in times of uncertainty. Scenario planning helps businesses plan for multiple scenarios or situations. Having more than one is critical because it allows you to be prepared in case one scenario fails.
You should have a list of multiple scenarios that are more likely to occur—each scenario should have at least five Key Performance Indicators (KPIs). These KPIs will help you build your forecast.
With this information, your business can come up with a plan of action to deal with each scenario in the event that it happens.
Cost Management
Being proactive is critical for profitable businesses. Too often, it isn't until the business is in danger that some companies try to determine areas for change. This reactive approach can lead to business failures.
You need insight into which areas are costing your business money with little to no return on investment. These can be things like products and facilities.
Having this insight will show you which areas are not profitable so you can put a stop to those before they drain your resources.
Narrative Reporting
Narrative reporting helps you make sense of the data. It's a helpful tool for explaining variances in budget and forecast and to communicate scenario planning.
It opens the lines of communication and helps provide insight into what your numbers mean and why they don't align with the economic forecast, so you can determine a plan of action.
Benefits of Implementing EPM During Current Market Conditions
It's essential that your business is able to proactively plan for recovery in the event of a crisis. The more prepared businesses are, the faster they'll be able to bounce back. Insight into the data is necessary to business success and EPM helps businesses better gather and share these insights.
Some of the benefits businesses will gain from EPM implementation include:
Consolidation and Visualization
It's not enough to capture the data, visualization helps to make better sense of it. EPM solutions help combine the capture of data with visualization and consolidation to result in more efficient budgeting, planning, and forecasting.
This is particularly helpful during times of economic uncertainty by enabling you to understand your customer base and how it has evolved with the market.
Agility
The role of CFO is one that relies on an agile approach and the ability to adapt to changing market trends and address operational challenges.
CFOs are tasked with making sense of a lot of data in a short amount of time, developing a financial plan, and budgeting for all resources.
EPM provides CFOs with the tools needed to manage these responsibilities efficiently.
EPM Is a Key Tool For Today's CFO
Collaboration and visibility are key aspects of an effective business. CFOs that implement Enterprise Performance Management tools will reap the benefits of valuable insights that will help them proactively prepare for challenges and ensure business recovery in the event of a crisis.
Interested in implementing a cloud-based EPM solution within your business? Download one of our free resources and learn more today.
