A Simple Guide to Enterprise Performance Management (EPM)

Enterprise performance management (EPM), not to be confused with employee performance management, is increasingly popular thanks to technological advancements. The solution provides powerful functionalities with real-time data consolidation, predictive analytics, cloud-based applications, and better yet, ease of use.

In many cases, today’s enterprises are sitting on different versions of the truth that are not connected to each other. As a CFO, how do you cope with the influx of information from various systems? How can you link business decision-making to risk assessment?

Read more: 7 worst financial fiascos caused by Excel errors

Contents

• What does Enterprise Performance Management (EPM) do?
• Is EPM the same as Financial Management?
• Is EPM the same as Business Intelligence (BI)?
• Is EPM the same as Enterprise Resource Planning (ERP)?
• EPM compatibility with ERP
• Examples of how EPM is used in different industries

What does Enterprise Performance Management (EPM) do?

Enterprise Performance Management (EPM) is a suite of applications designed to help organisations plan, budget, forecast, and report business performance.

Unlike legacy systems, an EPM system consolidates data from various sources, such as your ERP system, front/back-office applications, external data sources, and the entire organisation regularly. The solution then analyses these data and turns them into actionable insights.

Read more: Automating financial forecasting for hotels with cloud-based systems

EPM was designed to help organisation link their strategies to their plan and execution. A typical EPM system includes the following management process:

• Budgeting, planning, and forecasting
• Periodically consolidating results and closing the books
• Analysing and reporting to internal and external stakeholders

EPM provides decision-makers with real-time, up-to-the-minute relevant information, predictive analytics capabilities, and intuitive, visualised interfaces to ensure the organisation achieves its goals and objectives and reflects them in its budgets and plans.

The EPM process also includes monitoring and managing key performance indicators (KPIs), which notifies managers about unexpected changes and thus allows them to respond quickly.

Nevertheless, EPM needs frequent revision to align with the organisation’s general visions.

Data presented in a visually engaging format through an EPM dashboard

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Is EPM the same as Financial Management?

Given the list of EPM functionalities mentioned above, some may be confused about the differences between EPM and a standard financial management system.

The functionalities of these two processes might intertwine, but the key differentiation is EPM’s capability to provide a forward-looking vision to the C-suite, allowing forecasting and budgeting up to 5 years in advance or more.  

Equipped with predictive analysis, you can pinpoint trends and produce quick and accurate decisions using data accumulated from different departments. EPM allows you to perceive a single version of the truth, real-time data, and easy-to-read information at your fingertips.

Read more: How has Dana-Farber shortened their budget cycle by 40 per cent?

More and more EPM vendors leverage technological advancements to improve their offerings. EPM products nowadays are even more user-friendly, with graphic visualisations on dashboards, extending data access outside the finance department.

In short, EPM is a tool that supports financial management. While EPM helps automate and streamline financial planning processes, financial management encompasses the broader strategy and activities related to managing an organisation's financial resources.

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Is EPM the same as Business Intelligence (BI)?

Both are related but distinct concepts within the financial management realm.

EPM focuses on planning, budgeting, forecasting, and reporting. It helps organisations set financial goals, allocate resources, and track performance against those goals. EPM is a process-oriented approach with tools to streamline these activities. Financial data used for planning and forecasting in EPM can come from BI analyses of historical performance.

BI focuses on analysing historical data to gain insights and inform business decisions. BI tools help gather, analyse, and visualise data from various sources to identify trends, patterns, and potential opportunities.

Read more: Business Intelligence and Analytics - from A to Z

Having said that, BI plays an important role in EPM because it offers analysis and reporting functions that aid the decision-making process. Gaining access to a pool of data and drawing out only the most relevant one is not easy. As we have discussed before, data in today's business world is enormous and chaotic, and the ability to handle such sheer volume quickly and effectively can give your organisation a better head start.

Read more: Rise of the CDO (Chief Data Officer) and the growing importance of data

Solutions today, like Infor EPM, have built-in BI to address complex issues, from multi-dimensional analysis through data mining to sophisticated predictive analysis via an Excel-feel, web-based interface.

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Is EPM the same as Enterprise Resource Planning (ERP)?

EPM helps organisations plan for the future, track performance against goals, and make informed financial decisions.

ERP focuses on day-to-day business operations. It integrates various functionalities like inventory management, customer relationship management (CRM), human resources (HR), and manufacturing. ERP streamlines core processes and provides a centralised platform for managing various departments.

Read more: A Nucleus Guide to Embrace Modern ERP Systems

Financial data from ERP systems can be used for budgeting, forecasting, and reporting in EPM. Some ERPs might have basic EPM features. However, dedicated EPM solutions offer more advanced functionalities for financial planning and analysis.

Think of ERP as the central nervous system of a business. It connects various departments and functions, ensuring smooth operation and data flow. EPM is like the business' financial brain, analysing information from different parts of the body (ERP data) to make informed financial decisions and plan for future growth.

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EPM compatibility with ERP

It would make sense for businesses to invest in an all-in-one system that can do basic accounting. EPM can be a great addition to your current ERP system as it pulls transactional data from an ERP system and utilises them in performance management.

Image credit: Syntellise

EPM can bring many business benefits but it cannot do anything without the data from external sources to support its key processes. The usual spreadsheet might be the normal way to keep track of your organisation’s financial situation. However, a web-based front end empowers you to take control of the data and when BI is added, you earn yourself a competitive advantage.

Read more: Why CFOs should be looking to the Cloud?

EPM system provides a centralised platform that boosts efficiency, eliminates errors due to editing spreadsheets, helps drive accountability across the entire organisation by aligning strategic goals to financial objectives, and provides actionable insights for operations.

Cloud-based EPM has all the functionalities of the traditional system but is deployed in the cloud thereby significantly reducing the cost of ownership, increasing speed and agility, and most important of all, enhancing cross-departmental collaboration.

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Examples of how EPM is used in different industries

Hospitality

• Demand forecasting: Forecast future demand based on historical data, seasonality, competitor pricing, and local events. This helps hotels anticipate occupancy levels and optimise staffing and resource allocation.

• Scenario Modelling: Simulate the impact of different pricing strategies, occupancy rates, and promotional offers on hotel revenue. This helps set optimal room rates and maximize revenue during peak seasons or adjust them during low seasons.
• Profitability by segment: Analyse profitability across different hotel segments like room types, guest categories, or restaurant menus. This helps identify high-performing segments and adjust pricing or service offerings to maximize overall profitability.
• Budgeting and reporting: Create budgets for different revenue streams such as room rates, food & beverage, and spa services. Regularly track performance against budget goals and identify areas where adjustments might be needed.
• Vendor Management: Negotiate better pricing with vendors by leveraging data on historical purchases and identifying potential savings opportunities.

Read more: Seasonality in Hotels: Revenue Management Strategies You Should Adopt

Financial Services

• Regulatory compliance: Ensure financial reporting adheres to complex regulations like Sarbanes-Oxley (SOX) or Basel III.
• Stress testing: Simulate various economic scenarios to assess the bank's capital adequacy and risk exposure.
• Profitability analysis: Analyse profitability across different customer segments, product lines, and geographic regions. This helps financial services companies tailor their offerings and pricing strategies to maximise profitability.

Manufacturing

• Scenario modelling: Simulate the impact of production line changes, material price fluctuations, or new product launches on profitability.
• Inventory management: Optimise inventory levels to minimise carrying costs while ensuring enough stock to meet demand. This can be integrated with data from ERP systems for real-time insights.
• Budgeting and forecasting: Forecast production costs, sales volume, and cash flow based on historical data and market trends.

Retail

• Sales forecasting: Predict future sales based on historical sales data, seasonality, and marketing campaigns. This helps optimise inventory planning and staffing levels.
• Profitability analysis: Analyse profitability across different product categories, store locations, or customer segments. This helps identify areas for improvement and optimise pricing strategies.
• Budgeting and reporting: Create budgets for marketing campaigns, store operations, and employee training. Generate reports that track performance against budget goals.

Healthcare

• Cost analysis: Identify and control healthcare costs by analysing spending patterns across departments and procedures.
• Budgeting and resource allocation: Develop budgets for different departments like surgery, radiology, and nursing. Allocate resources efficiently based on patient needs and budget constraints.
• Performance reporting: Track key performance indicators (KPIs) like patient satisfaction, readmission rates, and length of stay. This data can be used to identify areas for improvement in patient care.

Non-Profit Organisations

• Grant management: Track grant funding, expenses, and program outcomes to ensure efficient use of resources and demonstrate impact to donors.
• Budgeting and fundraising: Create budgets for different programs and fundraising initiatives. Track donations and analyse their effectiveness in achieving organisational goals.
• Performance reporting: Measure the impact of programs on beneficiaries and stakeholders. Generate reports to demonstrate the value of the organisation's work and secure future funding.

These are just a few examples, and the specific applications of EPM will vary depending on the unique needs of your business and industry. However, EPM's core functionalities of planning, budgeting, forecasting, and reporting can be valuable tools for improving financial performance and achieving strategic objectives across various business sectors.

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To learn more about EPM and its capabilities in full, visit the TRG website or request a free demo today!