A decade ago, enterprise performance management (EPM) platforms were seen as a luxury item that only big companies used. As a result, many small and medium businesses (SMBs) adopted affordable but less-capable tools, such as spreadsheets.
Today, EPM platforms are a critical component of finance systems that support profitable growth for any company, but slow adoption by medium businesses still remains. One of the trends closing that gap is a push from former Fortune 500 finance leaders who have moved on to work at these growing companies. Having used modern EPM systems, they understand the urgency and benefits of adopting EPM for overall finance health.
Simply put, EPM is essential for companies of all sizes because today’s strategic business decisions hinge on accurate data from operations and finance. If there isn’t a set of governed master data, planning and reporting is not as accurate and effective because not everyone is speaking the same language.
Labor—consistently a top input cost—is a good example. I have observed organizations where different departments have different measures for full-time equivalent (FTE), a commonly used unit applied for calculating workforce expenses.
Think about this type of variability related to other measurements across the business. “Price” and “profit” are two other concepts that I’ve seen defined in multiple ways across organizations.
This type of variability erodes the accuracy (and thus effectiveness) of business performance. It’s a level of imprecision that is no longer acceptable in a data-driven business world, especially for publicly-traded small and medium businesses and those aspiring to go public.
From a core capability perspective, public and private companies have the same needs when it comes to EPM, but public companies use the capabilities in ways private companies commonly don’t—for instance, calculating or predicting future shareholder value. Another use would be narrative reporting (for both external and internal reports), which is relevant regardless of company size.
But what about companies that are on track for an IPO and are looking to become the next big company?
There’s an urgency to adopt EPM here as well for several reasons. First, as a public company, it’s important to establish and demonstrate performance management capabilities early on to build shareholder and market confidence. Such companies need a production-ready EPM platform before they go public.
Second, when an organization moves to adopt EPM, it’s a trigger to review and upgrade foundational data capabilities because internal systems need to be able to provide data to the EPM system. This causes another trigger—realignment as a data-driven company.
I've worked with medium businesses that are on QuickBooks, for example, to manage their financials. Even though they're operating in the $100 million to $300 million revenue range, they're still using desktop tools to manage their organization. This isn’t just an example of outdated technology uses; it also portrays an outdated business model for all but the smallest of small companies. With modern EPM platforms, such as Oracle EPM Cloud, SMBs that are using desktop tools can move away from them and fast-forward their maturity in better decision-making.
The bottom line is that EPM Cloud has become an essential platform for successful growth. For growing companies that still haven’t modernized on EPM Cloud, they should consider that the sooner they make the move, the better positioned they will be for the future.