Many businesses are finding success by moving away from a time- and labor-intensive budgeting and forecasting process to one steered by corporate performance management (CPM) with a focus on business intelligence (BI).

Organizations can now create responsive forecasts and implement plans that drive prosperity by changing the focus from a year-over-year comparison, or a look backwards, to an approach that addresses what a business needs now to meet its next growth or success objective.

Traditional Budgeting Process

More than 50% of budgets become significantly inaccurate within four to six months and need to be recast, according to the Beyond Budgeting Round Table. This means it might be time to reconsider the process.

Many companies spend three to four months building a budget that’s intended to:

• Account for historical trends
• Adjust for any improvements or technology advances
• Reflect the anticipated outlay of resources in the coming year

Although traditional annual budgets are often accurate upon completion, they aren’t responsive to the ongoing market and business changes that can affect a business. Because these changes don’t wait for the next budget cycle, budgeting processes that don’t account for them often stray off track.

This is why organizations need something more responsive to actively manage their budgets—which is where CPM comes in.

Corporate Performance Management

CPM is the process of actively planning for and communicating near- and long-term business results using forecasting models, dashboards, and analytics. This process:

• Helps reduce the amount of time and money spent on annual budgeting
• Engages the broader management team
• Provides a platform to efficiently respond to changing business environments

CPM establishes an information-driven framework that facilitates better and faster decision-making. It involves managers more frequently and helps generate a more efficient budget process—creating better visibility around business drivers and the evolving business environment. This can translate to increased revenue and lower costs.

Organizations often focus on planning and forecasting with a heavy emphasis on protecting their annual budget. CPM takes a different approach and focuses on creating a continuous conversation about forecasts and planning that allows business results to be measured on a consistent basis, rather than a yearly one.

Implementing CPM

CPM is a data-driven process that combines data from multiple sources and allows analytics to reveal valuable information. This is often accomplished through automation that reduces effort and improves the responsiveness of this highly communicative approach. Moving to CPM is generally accomplished in three discrete phases:

Streamline Processes

Using technology to automate manual processes can help streamline budgeting, financial reporting, and financial consolidations, which provides a baseline for improving CPM effectiveness. During this phase, processes are generally moved out of spreadsheets into more effective and communicative tools.

Enhance Analytics

Creating rolling forecasts help businesses engage the business cycle and elevate performance. It’s easier to plan a path forward with knowledge of where a business is now and how it’s trending, knowing that it will need to be an ongoing management conversation. Rolling forecasts ultimately require management to stay actively engaged and responsive to the business environment—responding at the speed of business.

Strategic Engagement

By adopting a 360-degree view that includes dashboards and KPIs, managers and stakeholders can quickly and easily analyze data across multiple performance measures:

• Time—Past, current, and future conditions
• Operations—Finance and operations, for example
• Conditions—Economy, employees, weather, and market or industry trends

This view allows for immediate shifts in operational or financial plans by answering the questions of how a company is performing and what else it can be doing.

Driving Value

Organizations can benefit from moving to CPM’s content-rich, real-time reporting, which enables managers and stakeholders to have continuous discussions about business strategy by providing them with focused, high-visibility metrics.

While all organizations perform some level of CPM—whether it’s expense planning, revenue planning and forecasting, or personnel planning—asking how CPM efforts can be more effective and improve results is a conversation worth having.

By shifting priorities to accessing data in real time and focusing on improving financial performance, organizations can move away from spending finance team resources on financial operations to areas that improve performance and bring value. Ideally, this change would result in organizations spending 20% on financial operations and 50% on performance analysis, which includes improving areas that impact the organization, increase revenue, and reduce overhead.

Making the Transition

An automated solution that provides real-time budget information gleaned from multiple sources can help financial leadership stay relevant, but letting go of traditional budget processes can be difficult—even though breaking free of dependency on spreadsheets helps reduce errors and mitigate risk by encouraging operational agility through early risk detection.

Still, jumping straight to full automation may not be the right choice for every organization. Weighing the time needed for budgeting and forecasting against an organization’s dependency on spreadsheets and their unsuitability for managing real-time decision-making can help make the decision easier.

CPM is an investment that impacts the dynamics of a business and the effectiveness of its people by changing the conversation and engaging the larger team in business strategy. This value-driven approach implements best practices for budgeting and forecasting and transforms data into useful information for stakeholders. It has far-reaching consequences that improve business agility and the ability to capitalize on business results.

We’re Here to Help

For more information on implementing CPM within your organization, contact your Moss Adams professional.