Functional capabilities to look for when purchasing Corporate Performance Management (CPM) software

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Published on: July 11, 2022
Written by: Tridant

Corporate Performance Management (CPM) software manages the strategies that large companies use to monitor the performance of their business activities. CPM solutions create and implement methodologies and processes, allowing businesses to monitor KPIs relative to corporate business objectives.

CPM software possess a range of functional capabilities including:

No Coding or Scripting

Significant progress has been made over the last decade towards making business-owned applications less technical using innovative methods and advances in technology, both new and legacy.

In most modern platforms, you preferably want to avoid coding for all things related to formula-based modeling or anything related to the user interface such as reporting or data entry.

For integration however, the appropriate level of data manipulation capability might actually be very helpful. Products without flexible data integration options simply create the demand for this work to be pushed to third-party software or often IT-based resources and/or processes.

Real-time Processing

Real-time processing of data and calculations is critical for a CPM system to provide value and to help promote user adoption. Different CPM vendors may have their own proprietary technology and terminology when describing how a system calculates in real-time.

What you want to ask your vendor, is whether or not the application has ‘in-memory’ processing. Applications that leverage ‘in memory’ computing engine are able to process changes and display results in real-time. If a technology vendor describes their computing engine as Online Analytical Processing (OLAP), this is not real time processing.

OLAP systems require running batch processes to recalculate records, and while there are use cases for OLAP, a CPM solution is not one of them. Most CPM vendors have already moved away from OLAP or avoided OLAP completely.

For FP&A Managers who are used to manual processes of sending out Excel templates and then consolidating them know that pushing out a change such as a new account to all planning templates for all lines of business can result in hours of manual updates to each file.

Time Period & Version Management

In some applications, time and versions will be available as dimensions similar to any other type of segment such as accounts, products or locations.

In other applications, time and versions will be inherent in the model and defined as part of the model administration.

Time capabilities that need to be considered include:

  • Do some models require different time granularity and what is the lowest granularity required – how does the hierarchy aggregate?
  • Are there some areas of the business that report with different fiscal year or reporting schedules – how easy can this be done?
  • How many years of data is required – will it greatly impact the storage consumption?

Version capabilities that need to be considered include:

  • Do end users need the ability to create their own versions – does this impact license levels?
  • How many versions do you regularly create - do the number of versions have a significant impact on the storage consumption or pricing?
  • Does data need to be shared between versions – how easily can this be done?
  • How are version variances calculated and reported?
  • Do permissions and access need to be applied to different types of versions?
Hierarchy Modelling & Attributes

Most businesses apply multiple perspectives or multiple hierarchies when reporting or planning across a segment.

For example, when planning by product, this could include SKU’s, Product Groups, Product Attributes, or Product Descriptions, and those segments could have one-to-one, one-to-many, many-to-one, or many-to-many relationships to each other.

The relationships between segments and how those segments aggregate will more than likely have an impact on the model design and reporting configurations.

It is important to have these lists and mapping of relationships defined prior to the design phase of the implementation – bringing in reporting/planning segments after implementation begins could result in rework and lost time.

A ‘ragged hierarchy’ structure occurs when there are differing levels of hierarchy at different points in a list. For example, a Product Group item may have 3 children levels of groups where as another item may only have 2 children levels of groups.

Some applications can handle this type of hierarchy better than others.

MS Office Integration, Reporting & Visualisation

Reporting and visualisations for FP&A is about communicating results and plans to relevant recipients.

Some information is intended to be shared and digested through polished and published reports, while other information should be interacted with via visual and graphical representation for better insights.

Having the ability to communicate the right information, in the right format, for the right people, at the right time is what needs to be assessed.

There are generally three types of interfaces for reporting:

Tabular

These are typically HTML reports that display numerical data in rows and columns, leveraging filters and user access. They can either be predefined or built on an ad-hoc basis as necessary.

Dashboards

These tend to be more visual and interactive in nature, encouraging drill down and pivoting. Preconfigured dashboards that display key metrics in real time are a favourite for executives that benefit from having decision-supporting information at their fingertips.

Microsoft Office

The plugins to Microsoft office (MS) are leveraged for highly formatted reports and presentations (think board and annual reports). Some are read only tools while others include capability for write back. Keep in mind, many plugins are not available for a Mac OS.

Most modern platforms do not require any coding for reporting – they are drag & drop and point & click interfaces. There should also be options for both self-service and pre-configured reporting.

If a tool is lacking one of the above-mentioned types of interfaces, there may be a built-in integration with another reporting software vendor to extend the native capabilities.

Reports are largely outputs of the CPM systems. It is critical to include reporting requirements with specific examples if possible during the design process as the requirements could impact the model and data management architecture.

Task-based Process Management

Understanding the future state of the new CPM solution and tasks that will be required to support updated processes may require a degree of change management and group discussion.

This is often only fully completed towards the end of an implementation once user interfaces are more certain.

Most leading CPM platforms will have some form of process and task management, whether it be out of the box or a tool that requires configuration.

Typical features that are helpful include:

  • Ability to see completion percentages by segment (e.g. line of business)
  • Ability to point users to where tasks are completed within the UI
  • Ability to assign tasks to groups or individuals
  • Ability to view outstanding tasks and responsible parties
  • Ability to send notifications and reminders
  • Ability to approve or reject a submission

Think about the number of processes that your team will execute (e.g. the annual budget process or the monthly reporting process) and create a process flow map during the implementation.

It is important for end user adoption that new processes are clear and easy to follow.

Financial Intelligence

Machine learning is the primary form of artificial intelligence that is being applied in recent years to CPM solutions to expand capabilities. Although it is an exciting new frontier, there is still much work to be done on how forecasted outcomes are derived through algorithms.

At the end of the day, finance professionals must be able to show the reason and logic behind plans. Where financial intelligence provides the most value is in it’s ability to spot relationships and patterns between planning segments and across time beyond human proficiency.

An intelligent forecast can serve as an excellent ‘starting point’ when creating a plan, especially where there are new components involved (e.g. new product lines or new territories).

Many CPM vendors have either already begun incorporating intelligent capabilities into their products or it's in the near term roadmap. Some vendors are acquiring existing technology partners with the intention of embedding the tool into the native platform while others are seeking a more home grown solution.

It is not typical for financial intelligence to be included in the initial phase of CPM adoption, but instead is often explored during a second or third phase of implementation. The jump from manual Excel processes to intelligent forecasts is simply too far a gap to concur in a single roll out - stepping stones are required.

The capabilities between vendors vary; however most are yet to go beyond basic linear algorithms.

When a business is ready to test the intelligent solution it is advised to:

  • Select a few specific use cases to test first
  • Be prepared to pivot if the science leads you in a different direction
  • Evaluate whether the native capabilities in the software will be sufficient or if an external tool would be more appropriate
  • Continuously compare the intelligent forecasts accuracy
Financial Consolidation vs Aggregation

Consolidation and aggregation are often used interchangeably when we speak about CPM; however they are two distinct concepts.

Financial consolidation is the process of consolidating books across a business’s subsidiaries to form a single set of wholistic financial statements that accounts for ownership distinctions, intercompany eliminations, and aligns with regulating entity standards.

Aggregation is a simple concept of summarisation across a hierarchy.

All CPM vendors will automatically aggregate data within hierarchies, but not all vendors specialise in financial consolidation.

When evaluating for financial consolidation capabilities, key questions to ask will include:

  • How are the intercompany rules, accounts and business partners managed?
  • Does the elimination happen at the account level or transaction level?
  • Can a company change ownership percentages that change the consolidation method? How does this impact historical reporting?
  • What happens if the transactions between entities do not eliminate perfectly (i.e. to $0.00)?
  • Will the financial consolidation model significantly impact the size and performance of the solution?
Cloud-based Integration

All CPM platforms allow the ability to import data into the system and export data out of the system manually via Excel or CSV files.

Many platforms also have the ability to connect directly to commonly used systems such as ERP, CRM, or data warehouse tools.

The most common types of cloud connectors will be:

  • JDBC/ODBC connectors
  • API
  • Out of the box (e.g. enter credentials and move on)

It is recommended to consider the suite of tools your business utilises and whether or not a CPM platform of interest contains out of the box connectors for those systems.

If a CPM solution does not contain a native connector, there are many Extract Load Transform (ETL) and iPaas tools that can do the job.

Although it's common for businesses to be concerned about data accessibility, it's actually rare to have a situation where data movement is not possible with modern cloud platforms. The real question is which method will be used.

Persona-based User Experiences

A major driver in the probability of a successful user adoption is the user experience. Users with different positions within the organisation will likely also have differing roles, responsibility, and accessibility within the CPM platform.

An Executive Director may want to log in and immediately see a dashboard containing all the necessary KPI’s for his or her area of business. An FP&A Manager who completes the monthly reforecast tasks, diligently checking all the models and reports, would then have an exceedingly different path of experience to the Executive Director.

Some users may log in each day to complete tasks while others only require access once a year for annual processes.

A persona-based experience can help guide users on the appropriate path whenever interacting with the system.

Data-level & Role Based Security

Security settings in CPM solutions will often be role based. There will generally be ability to assign different permissions and responsibilities in addition to access for different functional, geographical, or project areas.

If there will be some information in the solution that will not be privy to all users, it is important to include this information as part of the scope and assess how a vendor’s security structure works for you.

Even when employing a single sign on (SSO) capability, most CPM solutions will still require the security and access to be controlled within the solution. An administrator would need to be nominated to manage access across users.

Certain access settings may also have an impact on the type of user license required, so make sure to verify this with vendors during your assessment period.

Some questions for your vendors could include:

  • Is there a limit on the number of roles for the solution?
  • Are the security settings applied across all interfaces of the solution?
  • What are the types of user licenses based on accessibility?
  • Can you limit access to a specific segment, dimension, or line of business?
  • Can you limit access to a single cell of data?
  • Is it possible to grant access to a function but not all areas of the model? (For example, having access to sales plans but not the salaries of the sales team members)

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