In this series of Industry Insights on corporate performance management (CPM), I have been focusing on the various stages of the management cycle that will enable business leaders to manage every aspect of their companies from a central point.
Perhaps the most confusing aspect of the management cycle is its resonance with corporate managers. Enterprise leaders in search of a better way to control their organisations all tend to react in the same manner initially: "But that`s what we`ve been doing all along. What does CPM really offer that`s new?"
To some degree they are correct and recognise that they have been applying good business practices, but without seeing the results they expect. When looking at certain parts of a CPM programme, it can appear to be more business as usual than a new way of doing things. The differentiator in CPM is the consolidation and integration of the parts into one contiguous whole.
Implementing a single part of the programme right may deliver great performance in one department or division, but it will not change the overall manageability and functioning of the enterprise to any great degree.
The same applies to data. Making decisions on bits of data from multiple locations will surely help certain aspects of the company improve functionality, but the overall impact will be hindered by the data management does not have.
All the planning and modelling mentioned in the previous Industry Insights in this series depend on corporate data, specifically financial data. No CEO can accurately plan for the future if he lacks a precise overview of the current status of the corporation, along with historical data patterns.
Safe to say, it`s not only management planning and budgeting that depend on accurate financial data delivered on time, but also the credibility of management, who must deliver and report on performance. If these leaders are to make their plans meaningful, distribute them to business units and monitor their progress - adapting them as needed - they will find themselves dependent on a single global view of corporate data.
Consolidated financials are the cornerstone of a successful CPM project.
David McWilliam, MD, Cognos South Africa.
This single version of the truth - a phrase often used in the CPM world - involves consolidating multiple diverse ledgers with thousands of operating units and accounts, into one common chart-of-accounts structure. This consolidated data will deliver an accurate overview of the current standing of the business`s finances to assist in decision-making for the short- and long-term.
Any CPM tool or company will need to demonstrate a track record in consolidating multiple financial records from various applications and data sources accurately and quickly. Decision-makers then do not have to be trained in multiple operational and ledger systems to be able to find the information they want. A single financial data entity gets you the information you need faster, and also permits a more thorough analysis of the data.
Consolidated financial data should include any number of allocations of any data by any proportion, measure or statistic. The users will then be able to perform one-off or repeatable eliminations, automatically determining required elimination amounts as transactions are identified between entities.
Additionally - and in a globalised business environment this should be a given - the consolidation tool should effectively manage all currency requirements in real-time. This means an unlimited number of input currencies must be converted to the required currency, along with the appropriate exchange gain/loss calculations in accordance with corporate policy and currency fluctuations. In addition, it will also automatically handle currency issues where allocations and eliminations take place across different currencies.
Consolidated financials are the cornerstone of a successful CPM project. Even in mid-sized concerns, consolidation can be a mammoth task, but it must be undertaken if management is to have a global view of the organisation with the ability to drill down into specific areas. After all, even though making decisions according to the numbers is nothing new, making those decisions based on a model you know accurately represents the organisation and its workings, and using data that represents an accurate snapshot of the organisation simply adds a layer of confidence to the decision process never before possible. And that is CPM in a nutshell.
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