Improved reporting and visibility are the main reasons businesses decide to select and implement an ERP software or a financials package — it’s an anthem we hear time and again as our team helps firms select and implement ERP software. But simply implementing an ERP doesn’t always bring the benefits companies are looking for and that is where an Enterprise Performance Management Tool (EPM) or Corporate Management Performance tool comes into play.
In this edition of The ERP Advisor, we discuss how to leverage a reporting and analytics tool to fully realize the potential of your ERP system.
Imagine a pyramid. At the very bottom of the pyramid are your basic transactions. Typically, when implementing a new ERP system, the business must clean up their transactions first to create a solid foundation for everything else. This cleanup activity usually includes normalizing datasets, curating charts of accounts, making items more defined and practical, removing old vendors, combining duplicate customer accounts and organizing your basic transactions.
The second level of the pyramid is the logic and automation your company requires. For example, this might include tracking the dates you're telling customers their orders are going to be ready (Available to Promise or AVP) or notifications to tell project managers when they are about to go over budget.
With organized transactions, logic, and automation in place, you have formed the bottom of the pyramid and can start to see key metrics and business drivers develop. That’s the perfect time to start discussing the top of the pyramid: reporting. As we mentioned, many business managers assume that their ERP system will provide the necessary reporting tools they need right out of the box, but in reality, many ERPs simply aren’t built to handle advanced reporting natively. At its core, an ERP is a transactional processing system, and not necessarily designed to perform complex tasks, like budgeting and planning. At this point, CFO’s and controllers usually begin realizing they need more than an ERP to get the information they need.
Many of the businesses we work with are using Excel to manage their company/department budgets, which requires a lot of manual effort. If things aren’t properly managed, there can often be multiple versions of the budget floating around among different managers and departments, and it’s difficult to make even a simple modification across all the copies. So it is no wonder that after implementing an ERP software system and getting the base financials in place, businesses begin thinking about how they might optimize their budgeting and planning process:
Planning and forecasting processes represent another common pain point that businesses want to address when they implement an ERP. How do you easily forecast on a monthly basis instead of annual? Is it possible to have a rolling forecast? Can we effectively account for seasonality in our sales or spending? We see a lot of cases in our practice where businesses want to build forecasting models around specific revenue drivers like the number of orders or the number of projects.
Optimizing planning processes gives businesses the opportunity to understand the impact of increasing or reducing specific variables, build specific scenarios, and better understand what the future may hold. Excel doesn’t offer those capabilities, however, which is why businesses are forced to look elsewhere for those tools.
It is also important when discussing the limitations of Excel to remember that your Excel spreadsheet only needs to crash once for you to lose months of work.
Financial Planning and Analysis tools, or corporate performance management and enterprise performance management tools provide the missing piece of the puzzle which goes beyond the typical ERP implementation and is difficult or impossible to replicate in Excel.
Our team recently worked with a biotech company in Boulder who was experiencing rapid revenue growth. They implemented an Enterprise Performance Management tool, Host Analytics.
What problems was EPM solving?
Our primary goal in implementing an EPM tool was limiting over-reliance on Excel. In a fast growing organization with diverse departments, Excel was not an efficient or appropriate solution for planning and reporting. Company executives had to send the spreadsheet to their department heads and then follow up repeatedly if the spreadsheet wasn’t updated in a timely manner. They would then have to migrate important data from one copy of the spreadsheet to the master copy. If one of the department heads had inserted additional rows or columns, it could distort the data in the master file so people had to be very careful to make certain the integrity of the file was maintained throughout the consolidation process. A lot of manual and unnecessary work was put into managing the budget that way and the client desperately needed to eliminate some of the human effort involved. Furthermore, there was a lot of sensitive personal data on some of the files being passed around this way and so there were significant security concerns as well.
How was the EPM application selected?
In helping this client select an Enterprise Performance Management tool, we had to look across the entire landscape of tools available and come up with a short list of potential vendors for the client. We paid close attention to the look and feel, or the user interface of each platform, as well as the functionality to ensure it met the needs of the organization. Then, we brought in vendors to perform onsite demos to department heads and other key users of the application.
What challenges did you run into during implementation?
One of the primary requirements in this project was that the client wanted the EPM to be cloud-based. As a smaller company without extensive in-house IT resources, it made a lot of sense to choose a cloud-based product that would be supported and maintained by a third party. Using a cloud solution also decreases implementation time, as your software is available as soon as the software company onboards you as a client. With an easy and intuitive user interface, the solution we chose didn’t require a lot of “technical support” from either the vendor or internal IT resources which made setup relatively simple.
The next step was working with the client to create a training package for all the users, educating the client’s team not only on how to use the new tool but also on how it would enable them to do their jobs better and more efficiently. We set up one-on-one’s with all company users to take them through the necessary steps of budgeting, forecasting, as well as analytics and reporting for their own department. The entire process, from signing the contract to going through an entire reporting cycle was only 8 weeks. The client was up and running and receiving a return on investment very quickly.
What should you consider if you are thinking about an EPM tool?
It is essential to make sure you know what your needs truly are as an organization and that you are selecting a tool that addresses those needs both now and in the future. The most difficult part of the process isn’t really understanding what you need now, but rather anticipating what your needs may be a few years down the road. User empowerment and engagement is also critical because if your team doesn’t get engaged, your EPM project will never be a success.
The biggest thing to consider though is that your EPM tool can only be as good as the base ERP system that you are using. Because your Enterprise Performance Management tool will sit on top of the ERP, your core financials and transactions at the base of the pyramid are providing the entire foundation that your reporting and forecasting is being built on.
How can we help?
ERP Advisors Group can help your organization select and implement an Enterprise Performance Management tool to streamline reporting, analytics, budgeting, and forecasting. We quickly get up to speed on what your firm does and we help document the requirements of individual departments and lines of business within your organization. We will help you map those requirements to the feature sets of specific tools and, guide you through the selection process, the implementation of your new tool, and training your users.
Many organizations wrongly assume that once they have an ERP solution in place that they will also have all of the reporting and forecasting functionality they need, and that is not always the case. An Enterprise Performance Management tool solves these problems and helps companies realize the full potential of their ERP.
Contact us today if you are interested in discussing how an EPM might be deployed in your business.