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Guest View: How integrated performance management can unlock business potential

Francis Han | March 15, 2014
(Exclusive) Oracle ASEAN's Francis Han outlines how organisations can improve their enterprise performance in today's economic environment.

Francis Han - Oracle modified copy

Photo - Francis Han, General Manager, EPM-BI-Exalytics, Oracle Corporation, ASEAN.


Despite the slow economic growth, today's business cycles are becoming more rapid, which in turn forced enterprises to find new ways to stay relevant and adapt to the ever-changing business environments. The proliferation of both structured and unstructured data driven by disruptive technologies such as Cloud, Mobile and social computing further compounded the current situation faced by enterprises.

As a result, many organisations are looking to improve their enterprise performance in order to thrive in the competitive market. According to Gartner's recent study in 2013, there have been increased tractions for Software-as-a-Service based Corporate Performance Management (also known as Enterprise Performance Management, EPM) applications within midmarket organisations and more recently for larger Tier 1 organisations.

Enterprises are seeking to achieve profitable growth, consistent business performance, and standardized processes for greater efficiency through improved performances. With an integrated enterprise performance management (EPM), enterprises can effectively eliminate or invest more into the under-performing products, provide more focus on under-served customer segments, and better utilize existing staff and capacity.

Briefly, there are four core strategic areas that business should be looking into whilst establishing their enterprise performance management to unlocking their business potentials:-
 
i) Aligned Objectives

The linkage between the long-term business strategies with the annual financial budgets is critical for enterprises to ensure alignment across the organisation and optimal use of resources. However, according to a survey from Palladium Group, there are only 40 percent of organisations manage to link their long-term business strategy with the annual financial budgets.

Strategy management and aligning objectives with metrics are the best practices that can be used to track internal progress.- Such include leveraging balanced scorecard, employing cascading scorecards through the management chain and aligning KPIs to strategic goals. Yet, an effective strategy management can be challenging if when using spreadsheets or manual processes to execute. 

ii) Accurate Forecasts

Globally, finance managers are drowning in spreadsheets and this was especially true in the area of budgeting, planning and forecasting. Relying on spreadsheets has been shown to lengthen planning cycles and introduce errors.

While there are planning and budgeting software available focusing on eliminating spreadsheets and automating budgeting, ideally to ensure higher accuracy in forecasting, enterprises should also shorten the annual budget cycle by spending less time on the budget and including fewer details in the budget.

Enterprises should opt for rolling forecasts to refresh budget assumptions on a regular basis such as every quarter or month, or to use driver-based plans and forecasts to reduce manual inputs.

iii) Confident Close

A recent article in the Wall Street Journal highlighted that earnings restatements in large organisations increased by 21% in 2012, and 60% between 2009 and 2012. The main drivers of these restatements included errors in tax accounting, cash flow statement classifications and revenue recognition issues.

Restatements are the biggest nightmare for a company as the market doesn't look favourably on companies that have to restate their earnings due to issues in the financial closing and reporting process. Enterprises should look into streamlining the closing process while improving accuracy and confidence in the results delivered.

iv) Creating an Accountable Enterprise

Having insight into financial and operational performance is critical to effective decision-making. Yet, many companies are indeed lacking visibility into profitability across their business. While most have visibility into profits at a corporate or division level, they don't fully understand the profitability by products, services, channels, customers, brands or projects. When managers don't have full visibility into the impact of their efforts, then it's difficult to make them accountable for their results.

To improve management accountability and the metrics used to gauge success in this area, enterprises can perform full allocations of overhead on a regular basis, drive costs down to more detail - products, services, customers to better understand profitability at the line of business level, and leverage mobile information delivery to empower managers with timely insights.

In summary, in order to survive in today's market, organisations need to consider, invest in, and leverage new technologies where it makes sense to drive innovation, reduce costs, and improve enterprise performance. An integrated EPM solution strategy helps organisations to link business goals to results by aligning operation performance and delivering the desired outcome needed to succeed in business through Aligned Objectives, Accurate Forecasts, Confident Close and a more Accountable Enterprise. Plus they can address the needs of Finance, IT, as well as line of business managers to ensure more consistent decision-making.

- Francis Han is General Manager, EPM-BI-Exalytics, Oracle Corporation, ASEAN.

 

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