Over the past few years, the economy has been in turmoil, between the health crisis of the past, the enduring energy crisis and the various geopolitical crises of today (and tomorrow). Companies are facing new challenges that call into question historical certainties.
It is against this backdrop of uncertainty that companies must adapt, transform and anticipate their activities more rapidly and effectively to ensure high performance:
they need to be more agile. To achieve this, performance management, a process handled by the finance department, needs to be strengthened and developed.
Performance management, the key to successful business competitiveness
Performance management enables a company to measure, control and improve operational performance in line with its strategy and business challenges. The main functionalities are as follows:
- Definition of KPI's and objectives
- Budget planning
- Control and analysis of deviations
- Performance control and analysis
- Reporting and information distribution
- Risk identification and remediation plan
Many projects are concerned with performance management, and finance departments have a particular responsibility for the priority issues facing a company:
- Monthly income statement
- Payroll management and workforce planning
- Cash management
- Managing overheads
- Performance management and sales planning
New topics are also emerging in line with innovations and new legislation. These include corporate social responsibility (CSR), including quality of working life and the environment.
The rise of digitalization is multiplying the number of business applications and making the work of the finance function more complex. It implies new data to collect, manage and analyze, both in terms of building performance indicators, and in terms of reporting and forecasting.
This translates into a multitude of extractions, temporary files, consolidations, controls, budgets and reports, which are generally produced in Excel. This manual activity tends to increase over time. It gives rise to major problems:
- Loss of time and therefore efficiency (repetitive actions, input errors or formulas)
- Security, confidentiality and collaboration issues
- Technical limitations (performance, file size)
- Growing complexity (maintenance, multi-dependent dashboards, etc.)
A number of questions are raised by stakeholders: "Is there a technological answer?"; "How can the company speed things up while leaving sufficient autonomy to the finance function?"; "How can CSR issues fit into this type of project?"; "Will I save time to save the company time?
A solution is emerging: EPM tools
One category of digital tools stands out to meet these challenges: EPM (Enterprise performance management) software. They are very often equated with budget preparation, but as we shall see, their scope is much broader: they deal with the entire range of performance management issues - from P&L to S&OP.
What sets this type of tool apart: an integrated solution designed to help companies better manage overall performance. They allow you to model your company's business processes, establish links between them and, most importantly, simulate and plan your activities. Actual data, forecast/simulation data and budgetary data are all stored in a single, accessible database (based on pre-established authorizations), offering a wide range of rendering and analysis options.
What's more, this type of tool is indispensable to the finance function if it wants to simplify its work and gain in responsiveness.
What are the benefits of EPM tools?
Firstly, applications from other company functions are connected (no need to export files), and modules are developed to transcribe business processes (common, centralized data and management rules). They are interconnected to reflect the company's overall performance, and are accessible to authorized personnel through shared, centralized reporting.
There's no longer any need for Excel files. The finance function can now proactively measure, simulate and forecast, in line with corporate strategy.
Let's take the example of a company which, using an EPM tool, has implemented finance (PnL/accounting), sales forecasts, payroll, part of the supply chain (production means and costs) and CSRD. On the basis of a forecasting/forecasting process, it is then possible to :
- Compare progress against budget,
- Visualize the impact of sales forecasts on sales,
- Deduct the resources needed to generate the estimated sales,
- Estimate means of production,
- Deduct costs (including payroll),
- Automatically integrate impact on sustainable responsibility
- A vision in the form of an intermediate management balance
And all this in an industrialized & collaborative way, avoiding manual reprocessing. The finance function becomes more agile, so it can concentrate on optimizing overall performance and, above all, provide top management with precise answers.
Some examples of performance management
1. Monthly management closing
The closing of the financial statements is essential, and a key part of the company's expectations, as it enables us to check whether the results for the last month correspond to the budget set aside. With Excel as the only tool, it's not uncommon for this monthly exercise to drag on, monopolizing the management control teams for several days (sometimes more than 15). As a result, managers are kept waiting, and corrective action is postponed, as are the expected benefits. Unthinkable in this day and age!
On the other hand, the construction of results requires a multitude of Excel files to allocate and break down costs and products at the right level. Beyond the time allocated and the risk of error, Excel is also a limiting factor when it comes to allocation, which can be more refined and effective with a genuine EPM tool.
An EPM solution will automate this closing process, making it faster and more reliable: in the end, management control teams have more analysis time at their disposal, and provide real added value in reading the results for management.
2. Budget forecasts
- The tool enables contributors to enter their data, compare it with previous years and take responsibility for it,
- Data aggregation/consolidation is carried out natively in the EPM tool, avoiding the numerous errors associated with manual copying,
- Natively, "what-if" scenarios can be set up to vary parameters (exchange rates, inflation, etc.) and determine their impact.
Digitizing this process saves a great deal of time when it comes to budgeting!
3. Cash management
An EPM solution will enable you to manage short, medium and long-term cash flow requirements, and thus guide strategic decisions. What's more, the EPM tool makes it possible to collect and centralize data from different sources, and rapidly feed forecasting data into a reliable forecast. With Excel alone, this type of operation is tedious to build, and loses reliability and precision.
Performance management with EPM tools in a nutshell
The choice between an EPM tool and Excel depends on several key factors, including the company's specific needs (e.g. cash management), the complexity of its financial processes and its resources in terms of skills and budget.
In an increasingly volatile market environment (VUCA), it is becoming essential to be able to adjust performance management models. Companies must not only assess their ability to activate technological levers, but also integrate sustainability issues.
In short, for companies that want not just to survive, but to thrive in an uncertain economic climate, an EPM system is a strategic asset. It provides a robust infrastructure for integrated performance management, facilitating strategic alignment and a focus on growth.
Excel remains a powerful and flexible tool, particularly appreciated for its ease of use and its ability to carry out ad hoc analyses quickly. It's a cost-effective choice, often already familiar to finance teams, which makes it easy to adopt and use. However, Excel shows its limitations when it comes to handling large volumes of data, ensuring the security and integrity of information, or facilitating collaboration between several users.
In the future, companies will need to adapt to new technologies. EPM solutions, in particular, offer advanced tools such as predictive analysis, operational planning (Supply Chain, HR, CSR, IT, Sales and Operations - S&OP, Marketing), financial planning and performance reporting/analysis, enabling a more comprehensive and proactive vision.
The final choice will depend on the company's ability to transform its practices and embrace new technologies to navigate effectively in an ever-changing environment.
Micropole can help you choose the solution best suited to your needs, and integrate it into your business.
Thibaud Dufour : Data Consulting Director at Micropole Ouest
Romain Chagneau : Team Leader EPM at Micropole Centre-Est
Anastasia Coste-Chareyre : Finance Transformation & Performance Manager at Micropole Centre-Est
