View From the Corporate World
In recent years, the business world has seen the rise of Corporate Performance Management (CPM) products. It may sound dull but CPM software is becoming one of the most tools used by a finance department to plan and forecast an organization’s financial health and profitability.
CPM software is used by finance departments to track and measure a company’s Financial, Planning & Analysis (FP&A) policy.
It’s a relatively new layer of software available for the finance function of an organization and can work alongside existing technology such HR, General Ledger, CRM, ERP, etc.
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| Dull name, exciting software |
Being tagged with such a boring and hard-to-remember name makes it hard to get a feel for the corporate performance management market size or user numbers.
A quick search reveals very little. The market survey summaries on the net seem to be generated by AI bots using that smug list-style using generic, context-free language.
In recent years, many published reports about all sorts of markets and business sectors have become increasingly unreliable. They have become the scourge of reputable business publishers who use sound journalistic methods and well-researched data to analyse a technology or business sector and forecast where it is heading.
The woes of "McResearch" in trying to guage a market size
By contrast, there has been an explosion of market research (“McResearch”) firms in recent years that seem to wade into any sector and take a haphazard snapshot of it. Quite often they use unsupervised employees, often young graduates that gather the information and risk the danger of using unverified and unchecked data.
Anyway, the market size for CPM software is anywhere between $7 and $8 billion, depending on the source with projections to the $20 billion mark by 2030, which is not insignificant.
According to the report entitled “Global Corporate Performance Management (CPM) Software Industry Research Report 2023” the following companies are suppliers: Prophix Software, Planful, Tagetik Software, OneStream Software, Unit4 Prevero, Jedox, Oracle, Anaplan, Solver, Vena Solutions, Insightsoftware, Infor, SAP, Kepion Solution, Workday Adaptive Planning, Magiq Software, Board International, Pentana Performance and IBM.
It’s a busy space with many products offering overlapping functions not necessarily concentrating on CPM tasks.
Enter the Financial, Planning & Analysis prof.
As mentioned above, the emergence of CPM tools has corresponded with the rise of FP&A as a defined function. This has particularly been seen in the number of courses and teaching modules at university and higher education in wider accountancy, finance and business courses and degrees.
In turn, the number of companies hiring specific FP&A analysts has risen and the number of finance professionals with FP&A in their (LinkedIn) description has grown in the last few years too.
But what does an FP&A analyst do?
Using an organization’s financial data they plan, forecast, budget and support the company’s major business decisions looking ahead to plotting future prosperity and financial health. These processes include forecasting, scenario modeling and performance reporting. FP&A takes accounting to a higher level and creates a way of predicting future revenues, expenses, profits, and cash flows.
If knowledge is power, then potentially that’s quite a lot of corporate power concentrated into the hands of a small group within a finance division.
Back to CPM software and the FP&A function where crafting budgets is one of the most important tasks. A good CPM software tool will include visualization features that can turn a budget’s raw financial figures into interesting and presentable graphs and charts. Many have built-in forecasting capabilities enabling finance teams to estimate how much revenue and profit their organizations will generate in upcoming quarters based on historical data.
This capability for forecasting is part of the broader features provided for financial planning and can be crucial for giving a company an edge in financial profitability or efficiency.
Also, scenario modeling tools makes it possible to estimate the impact of potential business changes on the bottom line. Finance teams can share the assessments with executives to inform strategy decisions.
Importantly, CPM software can eliminate whole swathes of manual work related to routine recurring activities in FP&A such as manual spreadsheet reporting and checking. As a result, FP&A teams can focus more on providing strategic insights and collaborating with business units.
CPM in action
Take the example of a client of UK-based finance and management consultancy firm, Red Egg Consulting. One of its clients, a large, nationwide professional services agent, was distributing over 47 Excel spreadsheet budget templates which needed to be returned and consolidated centrally. “The budget managers were making ad hoc changes to those templates”, explains Roger Lovis, founder of the consultancy, “it meant it created time-wasting inefficiency in central and corporate assumptions after each template revision”.
The consultancy recommended a CPM software program to track and optimize the same budget template structure. “Because these templates were nested within the client’s system it allowed for automatic consolidation changes, such as additional rows without disrupting the client’s underlying IT framework”, continues Lovis.
The CPM software workflow allowed the template completion to be managed efficiently. The client’s budget managers could now make single entry changes to central assumptions.
CPM software’s online analytical processing (OLAP) data capability allows financial analysts to interface and pull in data (financial and non-financial) even at a transaction level. This then gives the users and analysts the capability to slice and dice data to provide meaningful management information, even with drill down resources for supporting business information.
The software also includes vizualisation features tied to business intelligence tools such as Microsoft PowerBI that can turn raw financial figures into graphs, and can automatically update reports like monthly senior management packs.
Many CPM software programs have built-in forecasting capabilities enabling finance teams to estimate how much revenue and profit their organizations will generate in upcoming quarters based on historical data.
It’s not hard to see, then, why more and more companies in the corporate world are beginning to rely on the Financial, Planning and Analysis function to improve their financial health and by using Corporate Performance Management tools to do so.
More at my Linkedin
https://www.linkedin.com/in/simon-thompson-4388764/
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