Many companies have made the move to running their businesses along the enterprise performance management (EPM) principles, in part or in whole. Amazingly, though, companies which have gone the EPM route remain in the minority in South Africa, writes Adrian van der Merwe, MD of 8th Man Consulting.

That this should be so is something of a mystery given the benefits that EPM confirms: in other words, companies which have not gone the EPM route are at a competitive disadvantage relative to those which have. Perhaps it is because executives feel that EPM is only for very large companies, or for those which have complex financial requirements, such as stringent and frequent reporting commitments.
If this is the case, and I believe it is, then it is appropriate to revisit the assumptions as to just why companies should look at EPM, and make it part of their operational discipline.
The trigger for most companies as they consider EPM is financial consolidation, and it's not hard to see why. If you are in a company like SABMiller, Sasol, Mondi or Sappi, you have to report across multiple time zones, in many currencies, with multiple deadlines to meet in each country. The pain these companies experience in financial consolidation makes it the obvious starting point. But in fact the real pain most companies experience is in budgeting, planning and forecasting, and that is where EPM should start.
It is common cause that the budgeting process in most companies is dysfunctional. Budgets take forever to prepare, there is not necessarily full buy-in from or participation by all parties, and the budget is not iterative. Importantly, the budgeting process does not reflect weekly and monthly changes on the ground and as a consequence it does not correlate with the forecasting process.
And accurate, dependable forecasting is critical for any company which has to report either to the market or to shareholders and other stakeholders.
With forecasting, there is a lesser requirement for detail than in budgeting, but the process has many similar challenges. And in a market as volatile as that in which we live today, companies would like to forecast more frequently, but this is not easily done. In addition, the accuracy of forecasting has always been problematic, as the market does not easily accept or tolerate error today.
EPM smoothes and resolves budgeting and forecasting through the application of its methods, processes and technologies. Planning, budgeting and forecasting are all done against the context of the same version of the truth. As noted before, this single version of the truth is a multidimensional database which has drawn its content from operational databases, which in turn are fed by the company's core applications, such as the ERP system. It is a secure loop of high integrity.
So companies enjoy a simpler, less cumbersome budgeting process that takes less time, involves more users and speeds up the cycle. Forecasting now starts to leverage this budgeting process, using a common interface, workflow and account and entity tables.
The process becomes iterative; as the budget is changed, so the forecast changes. Because changes made in one part of the budget affect others, change is easily accommodated. It becomes easier to perform what-if analysis, and as the entire process is workflow-driven, with full auditability and traceability, all necessary parties can be accommodated.
It gets better, though: the same database that informed the budgeting, planning and forecasting processes also informs and supports the financial consolidation process, along with the reporting process.
With predictive analytics now becoming part of the overall EPM suite, it becomes easier to dig deep into the underlying data and suppositions behind the budgeting and forecasting process.
The picture now becomes clearer as to why EPM should be approached as a whole rather than many parts. As an integrated discipline, it leads to many wins well beyond the scope of each of the constituent components.
EPM has adhered terrifically as a discipline in the last five years, and it is safe to say that any company which ignores it for much longer will pay a hefty price in years to come.