It takes a lot of software to manage the operations of an enterprise, and two of the most useful and utilized are Enterprise Performance Management (EPM) and Enterprise Resource Planning (ERP).
While on the surface it may sound like these software systems overlap in terms of features and functionality, these are entirely separate types of systems. What role do they play? How can they work together?
Enterprise Resource Planning (ERP) Manages Operational Processes
ERP is focused on transactions, coordinating the company's resources, and providing operational data to the organization.
Enterprise Resource Planning, or ERP, is a system that is designed to process transactions and keep track of the resources within an organization. For instance, ERP tracks materials from the procurement phase through production to the paid-in-full deliverable product. ERP helps the organization determine the best ways to use given resources within the company on a day to day basis. ERP includes a general ledger which summarizes all of the details from other modules like purchasing, accounts payable, and accounts receivable. And it can perform management reporting and consolidations, as well as actual vs. budget reporting. So it does overlap EPM in some areas of financial planning and decision making.
Enterprise Performance Management (EPM) Streamlines Management Processes
EPM supports the management processes that the enterprise can use to improve profits, and performance.
Enterprise Performance Management, or EPM, is a suite of applications designed to support management processes - planning, modeling, forecasting, complex financial consolidation, and reporting of data from single or multiple ERP systems as well as analytics. It is generally driven by the finance department or CFO of the enterprise. EPM is a system used to monitor, analyze, and manage the performance of the organization, particularly in terms of evaluating and allocating resources. It is used to help management optimize performance and get the most from its investments. EPM is designed to help the enterprise set goals, develop and execute plans, and make changes needed through periodic reviews of results.
EPM assists the CFO and finance department in creating initial targets or budgets, and to coordinate planning across the organization. It allows for rapid, periodic collection of financial and operational results for fast and effective decision-making - weekly, monthly, quarterly, and annually. The right EPM solution is flexible and supports modeling and advanced analytics, which can help the CFO and other executives perform "what if" analysis that improves decision-making. A good EPM solution will also make the financial auditing process much simpler and faster. So while there is some overlap with ERP, EPM can be more strategic in nature and can work across multiple ERP systems.
ERP and EPM Together
Most organizations start off by implementing an Accounting or ERP system to handle day-to-day transactions, and will often use Excel spreadsheets to manage EPM processes such as budgeting, forecasting, and financial reporting. However, as the organization grows and expands, they quickly outgrow spreadsheets and will need to implement EPM applications as a replacement.
Optimally, the enterprise will invest in both an EPM and an ERP to ensure they have solid transactional as well as management processes and systems. See related blog article on this topic.
To learn more about utilizing EPM and ERP software together, visit us in Booth #609 at Intacct Advantage 2015 or download the free whitepaper, "Best Practices: ERP and Enterprise Performance Management" today. This is a free gift to you from Host Analytics.