CPM - Corporate Performance Management

History of the term

The term "CPM" was formulated by analysts of Gartner company in 2001 as the management concept business performance. Analysts described what already actually, though not fully, was created in practice. The main focus in this determination is put on integration of analytical applications into the single corporate system allowing to exercise control and the analysis of all activity of the company at all necessary levels.

The term BPM (Business Performance Management – business performance management) which is a synonym of CPM appeared in a lexicon of other analytical company slightly earlier - IDC. The international organization of The Data Warehousing Institute dates emergence of BPM as class software for 1999-2000. In 2004 the BPM Standards Group non-profit organization formulated the most complete definition of BPM and issued the first version of standards of performance management.

By determination of BPM Standards Group, BPM is "A set of the integrated, closed analytical and management processes supported by appropriate technologies which help to perform both financial, and operational activity. BPM allows the management to define strategic tasks, and then to manage activity of the company according to these strategic tasks".

Thus, the solution for performance management, by classical determination, integrates financial management model the organization (the description of processes of management of finance) and technology tools for their support (information system).

What problems are solved by CPM

By determination of Gartner, the CPM application service two areas: aimed at improvement of efficiency by management of financial processes of company (OOF) and belonging to performance management (PM) within all organization. Implementations of CPM can be also classified as tactical OOF CPM or strategic CPM. OOF CPM generally is responsible for improvement of financial processes while strategic CPM aims at conversion and development of all organization.

The competitive business environment requires that the organizations looked for new methods of cost reduction at simultaneous increase in their capability to manage efficiency. Corporate finances in the best way are suitable for the solution of both tasks. Traditionally finance applications first of all were intended for control of accuracy, completeness and efficiency. Existence of CPM solutions with advanced functionality, such as calculations in RAM (IMC), work from mobile devices, social networks and possibilities of the flexible analysis, provides to finance an additional incentive for focusing on the solution of strategic tasks.

In addition to the term "CPM" vendors use other determinations, such as performance management of the enterprise (EPM), dynamic performance management (DPM) or just performance management (PM). These determinations are equal. But it is important to recognize that any current offer cannot provide support of PM from beginning to end. Organizationally PM includes different subject-oriented PM processes, one of which is CPM. The role of CPM firmly affirmed as ensuring broader approach to PM, however CPM of the offer continue to develop. Efforts of CPM are usually concentrated in the field of forecasting and financial planning (budgeting) (BP&F) and also financial consolidation and the reporting. Nevertheless, they support also coordination of complex planning processes. The CPM systems can also extend to separate functional areas for support of specific processes and provide "glue" for communication of operational areas with financial and corporate performance indicators.

5 main blocks of the CPM functions

CPM systems have tool kits for automation:

• Formations of consolidated financial statements for the reporting period
• Financial and management reporting
• Financial planning and forecasting
• Strategic planning
• Constructions of models of profit and optimization (Profitability Modeling and Optimization, PM&O)

Formation of consolidated financial statements for the reporting period

The block of functions for financial consolidation is fundamental to CPM as gives the audited, all-corporate view of data on income and expenses. These consolidated data form further a basis for the analysis and development of further strategy. Tools of this block allow to correlate with each other, to consolidate, sum up and aggregate financial data on the basis of different standards of calculations and requirements of state bodies. Such tools involve difficult transactional models and are used for audit. In wider option the functionality of this block can include control of internal activity, control of maintaining magazines, management of tax reserves (new area for CPM) and others.

Financial and management reporting

Processes of disclosure of financial data and the reporting are, as a rule, regulated, CPM systems successfully help to cope with accomplishment of these regulations. Data can be prepared in the form of the structured reports for which removal and display additional resources and presentation opportunities are used. Systems support the different widely used standards of the reporting. Also there are popular eXtensible Business Reporting Language standards (XBRL). CPM applications also allow to prepare the reporting in the detailing necessary for decision making in the company to the management.

Financial planning and forecasting

Planning differs from budgeting in two key aspects. The first, in financial planning more long-term time frames can be considered, it is normal from three to five years. The second: focus is displaced from the budget of the organization on the drivers of business having an impact on financial wellbeing. Planning of finance is more relevant not for financial, and for operations managers. For example, long-term financial models can be used by top managers for assessment of effects of merges and absorption.

Planning can be performed also in more detailed cuts: salary expenditure and plans for hiring, planning of revenue, planning of the capital or planning of costs. Besides, additional tools can help business with creation of more difficult financial models using such factors as the prices, volumes and discounts.

Within the CPM systems process of budgeting is usually expected the year period. The financial purposes and tasks during budget making are classified, the budget and process of budgeting are completely controlled by the chief financial officer and the relevant service.

Budget process is guided by the prices determined in the strategy of the enterprise. On the other hand he is guided by quickly arriving information from the accounting systems thanks to what the possibility of operational adjustment of the budget appears.

Possibilities of CPM support the difficult forecasting and modeling including extrapolation of new versions of plans and budgets on the basis of comparison of the actual results, the analysis of historical data and application of the analysis like "that if …".

Strategic planning

In CPM systems strategic planning usually includes creation of financial model on the basis of balance of expenses and income and possible financial flows. Existence of this block is key difference between the CPM systems and other analytical applications which also allow to plan and make forecasts.

The control block strategy includes both directly strategic planning, and management of the purposes, the systems of indicators and the card of strategy which are closely connected with KPI and also control panels which are used for aggregation and display of different metrics, their analysis, including in an interactive mode.

Creation of models of profit and optimization (PM&O)

The PM&O block of the CPM systems includes different solutions using which the enterprise can calculate profitability as different objects of the activity (products, clients), and the companies in general.

In particular, it is possible to select functional and cost the analysis, the direct costing method and different ways of cost accounting and profitability.

Using these solutions of the organization can create optimal market offers, optimize also batching and pricing and strategy in sales channels.

Functional comparison of CPM systems

In July, 2016 TAdviser provided results of the research devoted to comparison of functionality of the key CPM systems presented at the Russian market. Drawing up comparative tables which allow to estimate strong and weaknesses of software products in sale of these or those tools[1](more detailed) became a result of a research

Perspective CPM technologies

Often the Russian companies use only limited functionality of CPM systems though the range of their application can be much wider, and the result from implementation of additional opportunities can bring notable pluses. With the purpose to learn what functions and technologies of CPM systems are for some reason still insufficiently demanded by the Russian customers, at the same time, have high potential of application in the future, TAdviser in 2016 conducted survey among participants of the Russian market of CPM[2](in more detail).

See Also

Business Intelligence

OLAP

ERP