FP&A - The Role of Corporate Performance Management

Why the focus should now shift to agile financial planning and analytics? Gartner, Inc. (www.gartner.com) recently published a report titled: “Back to Basics: The Refocusing of Corporate Performance Management”. Analysts John E. Van Decker, Nigel Rayner and Christopher Lervolino were credited as the report's authors.

The Shift in Corporate Performance Management Principles

The report's authors raise the point that the original principles of corporate performance management (CPM) have become less relevant in recent years due to senior managements shift of focus to digital corporate transformations.

Gartner, the world’s leading research and advisory company, should know that well. Gartner came up with the original concept of CPM back in 2001 and influenced not only how managements approach and use CPM, but primarily how independent software vendors defined, developed, marketed and implemented CPM suites in virtually all of the world’s premier enterprises and in many mid-market and even smaller organizations.

Gartner’s Main Recommendations

The report's analysis backs up Gartner’s main recommendations:

1. Pursue a more targeted approach to selecting financial planning and analysis (FP&A) and financial close (FC) solutions. Leverage cloud FP&A solutions to enable flexibility and agility.
2. Plan for closer integration between core financial management suites and FP&A. The new generation of cloud-based financial solutions, some of which leverage in-memory computing, is breaking down the barriers between FP&A applications and transaction-processing applications.
3. Focus on the needs of finance in application evaluations, but look for opportunities to link with other operational planning functions.

Investment in CPM Software Applications

Over the last 16 years, a tremendous amount of effort and resources has been invested in the development of CPM software applications that range from the very fundamental to the most elaborate suites that cater to mid-market companies and large enterprises in all industries. Some vendors targeted smaller organizations, many of which were in the SMB (small and medium-size business) category. Comparable effort and money was spent on marketing these solutions to targeted customers. Revenues derived from licensing fees and continual maintenance in the last 16 years are staggering.

Evaluating the Justification of Expenses

Were these expenses justified? Are CPM customer benefits from these traditional solutions in line with costs and efforts invested in them? Can senior managers make informed decisions based on the data in these comprehensive but mainly strategic CPM systems?

Observations Leading to Gartner’s Recommendations

Gartner’s main recommendations, listed above, are based on these observations:

1. The emergence of digital business has sidelined corporate performance management (CPM) methodologies and processes, leading to a renewed focus on financial performance and processes.
2. Integrated financial planning, which brings together financial planning and operational planning, has caused financial planning and analysis to become the primary use case for strategic CPM solutions.

Impact on Traditional CPM Software Vendors

Vendors of traditional CPM software suites are sure to take notice. And a noticeable decline in traditional CPM software sales will further drive vendors to make changes and adjustments to their product offerings to align them with Gartner’s recommendations.

Which leads me to believe that vendors of practical, everyday use, FP&A software applications are now more than ever poised to prosper and grow their user base, especially in the SMB customer category where sales cycles are shorter.

Providing Meaningful Financial Information

In 2015, I wrote an article for this blog titled: “Don’t Deprive Your Company Management of Meaningful Financial Information”. In the article, I was referring to lack of proper planning, budgeting and analysis or use of traditional systems and processes that fail to produce meaningful data for management to see, understand and make informed decisions ahead of events that may significantly impact the financial health of their organization.

The Value of FP&A Software Solutions

With an FP&A software solution such as Centage (www.centage.com/), finance team members can optimally provide the useful and meaningful data that senior managements really need—data that may not be readily available through use of traditional CPM solutions.

‍