Top 7 Trends in Enterprise Performance Management

Enterprise performance management (EPM) incorporates positive planning, budgeting, and forecasting with prompt, dependable, and precise consolidations and reporting to form an extensive view of business performance. By bringing together business procedures and technology, EPM allows data-driven choice making by putting relevant, structured information in the right hands at the right time. Implementing reliable EPM solutions requires a partner that can understand your business, procedures, and business performance management goals in the context of a complex and ever-changing technology landscape.

Different management trends appear and then fade away as a short-lived fad. An example is “management by goals (MBOs).” Supervisors excitedly jump onto these new bandwagons only to be dissatisfied when they haven’t lasted. In some cases, however, what starts as a smart idea in fact sticks and ends up being a trend.

1. Growth from product to channel and customer earnings analysis.
Activity-based costing (ABC) traces expenditures into cost with resource and activity motorists and provides much cost visibility that is generally hidden. Sadly, lots of organizations continue to use a single indirect and shared cost “swimming pool” that assigns resource expenses into costs based upon a single cost aspect, which breaches cost accounting’s causality concept. The outcome is products and service-lines are at the same time over- and under-costing since allotments always have a no amount error. It’s baffling how accounting professionals can allow this lacking practice when ABC is a much better alternative.

Today customers see the offerings of suppliers in most industries as commodities. For example, a lot of banks provide comparable checking and deposit services. Subsequently, the importance of services increases, which leads to a shift from product-driven differentiation toward service-driven distinction to differentiated customer microsegments in order to acquire a competitive advantage.

The objective for the marketing and sales functions must not be entirely about increasing market share and growing sales however about growing lucrative sales. That requires tracing expenditures below the product gross profit margin line, consisting of channel distribution, selling, marketing, and customer care expenses to serve.

Trend number 1 is that management accounting need to assist the sales and marketing functions. A company needs to understand better types of consumers to retain, grow, recover, and acquire– and those who aren’t.

2. Management accounting’s broadening role with enterprise performance management (EPM).
Enterprise performance management (EPM) can be defined as the integration of multiple methods (such as strategy maps, balanced scorecard, performance steps, driver-based budgeting, lean management, and customer relationship management) to attain the executive group’s strategy, enhance control, and boost financial profits– all through making better choices. The output of a management accounting system is always the input to use in acquiring understandings and handling activities and operations.

Trend number 2 has to do with integration. The various elements of EPM are like gears in a machine– they are adjoined.

3. The shift to predictive accounting.
A gap is expanding in between what management accountants report and what supervisors and employee teams desire. The gap is being dued to a shift in supervisors’ needs– from having to know what things cost (such as a product cost) and what took place to a higher requirement for comprehensive information about what their future expenses will certainly be and why. The past reflects choices already made. Choices that will be made are the ones that affect the future.

The value-add, utility and effectiveness of accounting information boosts, arguably at an exponential rate, as one shifts from financial accounting (i.e., for regulative compliance) to cost reporting to decision support with cost planning.

When the cost reporting shifts to choice support with cost planning, analysis shifts to economic analysis. For instance, one has to understand the effect that alters will have on future costs, so the focus shifts to the required changes in resources and their abilities. This includes classifying the habits of resource expenses as sunk, taken care of, step-fixed, semi-variable, variable, and discretionary with modifications in service providings, volumes, mix, processes, and so on.

Trend number 3 reveals a major change from management accounting for reporting costs and profits to managerial economics for decision support and analysis that effect the future.

4. Business analytics imbedded in EPM approaches.
Business analytics and Big Data are hot topics. They are here to remain because intricacy, uncertainty, and volatility are on the increase. Today the requirement for analytics may be the only sustainable long term competitive advantage. This is because the conventional generic methods, like being the lowest cost supplier or product or customer differentiation, are susceptible to agile competitors who can quickly match a provider’s price or invade your customer base.

Business analytics can produce questions, promote more complex and intriguing questions, and have the power to answer the concerns.

Trend number 4 recognizes that progressive accounting functions now recognize that proficiency and capabilities with analytics supplies an one-upmanship.

5. Co-existing and enhanced management accounting approaches.
There are arguments in the management accounting community about what is the most proper costing approach. There can be rival camps such as lean accounting and activity-based costing (ABC) advocates. The solution is allow having 2 or more co-existing management accounting techniques. There can be different costs for various functions utilized by various types of supervisors and employee teams.

Trend number 5 shows that the more progressive CFOs and their management accounting personnel are thinking about the numerous requirements of various types of managers in their organization.

6. Handling IT and shared services as a business.
It is humanity that when something is free one does not care how much one consumes whatever the item or service may be. There is a trend towards using management accounting for internal chargebacks (like an invoice) from internal company to service users. Line-item IT charge back billings create a service provider a market for rates. This information also serves for establishing what are efficiently “move rates” based on cost intake rates for service level contracts (SLAs).

Trend number 6 is for management accounting to support internal IT and shared services to be managed as a business.

7. The need for better skills and competency with behavioral cost management.
A progressing trend is that lobbyist management accounting professionals, those who are promoting progressive methods as described in the trends already mentioned, are coming across barriers to get buy-in and acceptance of their ideas. They are realizing they need to enhance their behavioral change management abilities and abilities.

Today’s main obstacle is no longer technical, such as “filthy data” and inconsonant data sources. The obstacle is social, behavioral and cultural. There are many examples of this type obstacle, consisting of individuals’s natural resistance to change; not wishing to be measured or held accountable; fear of understanding the fact (or of someone else knowing it); reluctance to share data or information; and “we don’t do that here.”.

 

Source: Industry Week

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