EPM tools are software that helps businesses connect strategy to planning and performance reporting. They keep every budget and forecast tied to company goals.
Many businesses still build budgets in scattered spreadsheets that drift away from company goals. Here is everything you need to know about EPM tools, from how they work to where ERP fits in.
Key Takeaways
EPM tools help businesses connect strategy, planning, budgeting, forecasting, reporting and financial consolidation.
The EPM cycle includes budgeting and forecasting, value creation modelling, results consolidation and performance analysis.
EPM tools support industries such as insurance, retail and manufacturing by improving profitability analysis, planning and decision-making.
ERP manages daily operational transactions, while EPM focuses on strategic planning, forecasting, budgeting and management reporting.
What is the Meaning of EPM?
"EPM tools connect strategy with execution by bringing planning, budgeting, forecasting, reporting, and performance analysis into one coordinated process."
Enterprise Performance Management (EPM) is a technique and software system that intends to assist businesses (i.e., governmental bodies, academic institutions, and nonprofits) in connecting their strategy to their plans and execution. Software for enterprise performance management (EPM) aids in the analysis, comprehension, and reporting of your company’s operations.
Enterprise Performance Management (EPM) is also known as; Corporate Performance Management (CPM), Business Performance Management (BPM), and Financial Planning & Analysis (FP&A). E-commerce platforms, front- and back-office software, data warehouses, and external data sources are just a few of the sources that EPM tools can combine and analyze data from. Numerous performance approaches, such as the balanced scorecard, can be supported by advanced EPM tools.
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Is EPM a Methodology or a Tool?
EPM is both a business methodology and a technology tool. As a methodology, Enterprise Performance Management provides a structured approach for planning, budgeting, forecasting, measuring performance, and aligning business goals across departments. As a tool, EPM software supports these activities through centralised data, automated reporting, financial consolidation, scenario modelling, and performance analysis.
Using EPM software helps organisations reduce manual spreadsheet work, improve data accuracy, and give managers better visibility into actual performance compared with budgets and strategic targets. The software supports the EPM process, but successful performance management also depends on clear goals, reliable data, and collaboration between finance and operational teams.
The Cycle of EPM
Enterprise resource planning (ERP) systems are frequently associated with EPM tools. Why? Because it adds managerial insights on top of operational data to ERP. By connecting financial and operational indicators to insights and eventually guiding strategies, plans, and execution, EPM tools are now seen as essential for managing all sorts of enterprises.
Through the use of analytics to identify significant trends and forecast outcomes, managers may use EPM tools to improve performance across the business by tracking financial and operational results against goals and projections. It describes methods and solutions that enterprise management requires and including the following management processes:
- Budgeting, planning, forecasting
Create forecast models and ad hoc simulations across several dimensions using EPM data analytics. Make data-driven decisions to improve performance, profitability, and strategic plan alignment. Also, develop flexible budgets by collaborating across company lines to crowdsource proposals. Use automated workflows to create a tidy and effective process.
- Modeling the value creation of a company
Every successful corporate entity strives to provide value for its clients. Because doing so makes it easier to sell goods and services. In the same vein, increasing dividends and stock prices for shareholders ensures the availability of investment funds to finance ongoing operations. This is one of the key elements or processes of EPM
- Consolidation of the results
A firm displays a combined financial performance for all of its businesses when, in addition to its own principal operations, it has stakes in additional businesses (subsidiaries, associates, and joint ventures). The public knows this as the consolidation of results.
- Performance analysis
Compare profitability and performance to the strategic plan. Find new opportunities, address underperformance areas, and use the intelligence to guide the upcoming cycle of strategic planning.
The EPM process includes the monitoring and managing of key performance indicators (KPIs). They let managers in various departments and divisions of a business understand key market and business trends on a regular basis.
If you’re considering adopting EPM software, see our article on the Oracle EPM review. There you can explore its key features, learn how it supports planning and forecasting, and see what real users highlight as its biggest strengths and limitations before you decide.
History of EPM
EPM procedures were initially controlled by hand, on paper, in meetings, and through presentations and discussions. The collection of budgets and financial data for reporting reasons was first supported by accounting packages in the 1970s. How? As commercial software applications started to gain traction in many enterprises. In the 1980s, accounting and finance teams were able to automate the production of budgets, reports, and worksheets.
The advent of email in the 1990s, which facilitated the sharing of spreadsheets and supported departmental collaboration in the gathering and dissemination of budgeting and reporting data, furthered this improvement. Executive information systems (EIS), which were created to offer graphical reports and KPIs to senior executives via their personal computers, also came into existence in the 1980s.
Later, this idea developed into software-based. What does it mean? Visual scorecards and dashboards that can offer KPIs and metrics to leaders as well as managers throughout the firm. Since the 1980s, the platforms for EPM tools have changed from mainframe systems to client/server Windows systems. And then to internet-capable, web-based applications. Software as a service (SaaS), often known as cloud-based software, is becoming more and more popular nowadays. Especially since it enables Finance to take charge, install the solution fast, and obtain automatic, affordable upgrades.
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Future of EPM
What are the next version of EPM? It definitely includes brand-new features that take advantage of cutting-edge technology like artificial intelligence and machine learning. These technologies bridge the gap between analysis and action, making them effective decision-making aids. By finding hidden patterns and insights in historical data, they assist finance managers and executives in making better decisions. Wide-ranging effects on decision-making include tactical effects (which vendor to pay first), operational effects (budget reallocations), and strategic effects (mergers and acquisitions).
EPM Tools for Business
By eliminating or augmenting spreadsheets and enhancing planning and reporting processes through centralized databases, workflow, and process control, packaged EPM tools aid firms in becoming more efficient. Bringing together strategic, financial, and operational goals, expanding the budgeting participants, and providing managers with more up-to-date information, promotes accountability across the business. Here are some examples of EPM’s role in business:
Insurance: It is more difficult to achieve profitability goals for these firms because they must constantly modify their business models in response to a variety of factors. Such as environmental, governmental, and market upheavals. EPM offers insurance firms effective cost management and thorough profitability evaluations. It enables the more intricate and in-depth calculations necessary to ascertain future profitability.
Retail: This industry has seen a tremendous transformation as a result of many consumers switching to a digital buying model, having access to a new and expanding store of valuable consumer data. EPM enables merchants to compute and model profitability at the transactional level. Also, uncovering new revenue streams and customer segments to support business expansion.
Manufacturing: The industrial industry has suffered as a result of supply chain disruptions on a worldwide scale. EPM gives manufacturers precise cost and profitability insights so they may choose whether to “build or buy.” Manufacturing companies are able to safeguard margins and guarantee profitability by using insights based on real-time data.
EPM and ERP
| Aspect | EPM | ERP |
|---|---|---|
| Primary purpose | Strategic planning and performance management | Daily business operations and transactions |
| Main functions | Budgeting, forecasting, consolidation, reporting, and scenario modelling | Accounting, purchasing, inventory, sales, and human resources |
| Time focus | Future planning and long-term performance | Current and historical operational data |
| Main users | Executives, finance teams, and business managers | Operational teams, accountants, and department staff |
| Key outcome | Better strategic decisions and business performance | Efficient and integrated daily operations |
The comparison of ERP vs EPM clarifies which system supports day-to-day execution versus budgeting, forecasting, and management reporting. A relational database management system (RDBMS) is used to build and install the majority of ERP systems. The general ledger module of an ERP system often contains a summary of the data. ERP solutions also provide some fundamental financial and management reporting in addition to managing operational reporting on transactional data. This contains the balance sheet, income statement, and statement of cash flows, among other fundamental financial documents. Management reports, such as actual vs. budget deviation reports by cost center and department, are another advantage of ERP.
An EPM system’s planning module is made to manage the gathering and compilation of budget and forecast data, with workflow and process support that takes into account the iterative nature of the process. Although line managers might occasionally violate business rules and calculations that have been established by Finance, budget data entry templates can be built and tailored to the requirements of different departments. Additionally, the outcomes of managers entering their budget data and pressing enter are immediately enter into a central database for compilation. Businesses can speed up the budgeting process while enhancing data accuracy thanks to these capabilities. Knowing the history of the two software systems allows us to conclude that they weren’t really created to function as an alliance because their goals were distinct.
EPM tries to make management procedures more efficient while ERP focuses on operational operations. An EPM platform’s strength is in its ability to gather and combine data from various sources to enable crucial EPM operations. Including modeling, forecasting, financial reporting, and budgeting. While EPM systems concentrate on automating management operations, ERP systems concentrate on automating transactional procedures. One of the key distinctions between these two software programs is that ERP takes about a year to fully implement. Whereas EPM systems can be set up in a matter of months.
How to Choose the Right EPM Tools
Choosing the right EPM tools starts with identifying your business needs for planning, budgeting, forecasting, reporting, and performance analysis. The solution should help finance and operational teams work with consistent and reliable data.
Look for EPM tools that integrate with your ERP, CRM, and other business systems. Important capabilities include budgeting, forecasting, financial consolidation, scenario modelling, KPI tracking, dashboards, workflow management, and management reporting.
Businesses should also consider ease of use, scalability, implementation requirements, data security, cloud access, and total cost of ownership. A suitable EPM tool should reduce manual spreadsheet work and support faster, more accurate decision-making.
Conclusion
EPM is a crucial aspect for a business to have because of all the explanations we have seen above. It monitors and manages the key performance indicators (KPIs) that let managers in various departments and divisions of a business understand key market and business trends on a regular basis. EPM also works very well with ERP because they complete each other. EPM systems concentrate on automating management operations and ERP systems concentrate on automating transactional procedures.
This is why Hash Core ERP is the key solution for this EPM matter for your business. Hash Core ERP is the most comprehensive cloud-based ERP system with a wide selection of solutions such as accounting, CRM, HRM, procurement, inventory, warehouse to manufacturing systems all in one platform. Try the free demo and you will find the benefits of using Hash Core ERP for your business. Get a free demo now!
FAQ
EPM tools help organisations connect strategy, planning, budgeting, forecasting, performance analysis, reporting, and financial consolidation in one system.
EPM stands for Enterprise Performance Management. It is also known as Corporate Performance Management, Business Performance Management, or Financial Planning and Analysis.
The main EPM processes include budgeting and forecasting, value creation modelling, financial consolidation, performance analysis, and KPI monitoring.
EPM tools centralise financial and operational data, reduce spreadsheet-based work, support scenario modelling, and help managers compare actual performance with budgets and strategic goals.
ERP systems mainly manage daily transactions and operational processes, while EPM systems focus on planning, forecasting, budgeting, consolidation, management reporting, and strategic performance analysis.
Insurance, retail, manufacturing, and other industries use EPM tools to evaluate profitability, manage costs, model scenarios, and support data-driven decisions.
Yes. EPM tools can use data from ERP systems and add planning, forecasting, modelling, consolidation, and management insights on top of operational information.
The future of EPM includes artificial intelligence and machine learning that can identify patterns in historical data, improve forecasts, and support tactical, operational, and strategic decisions.
