Why using your ERP’s CPM for financial close is hurting your business

Are you using legacy Enterprise Resource Planning (ERP) software for Corporate Performance Management (CPM) functions? If you are, your business innovation, reporting, financial consolidation and close, business intelligence and senior leader decision making is undoubtedly hurting as a result.

ERP systems, developed as far back as the 1990s, have essentially had the same purpose for their clients, and often the CPM function of these systems are add-ons and never truly live up to what an independent CPM can do. Read further to understand why there is a significant difference between integrated CPM functions in your current ERP software and how a modern CPM platform can radically offer efficiencies that these built-in functions have never provided.  Here’s why you should NOT buy a CPM function from your ERP vendor.

ERP’s Vision of CPM is Wrong

From the beginning of ERP software development, the focus on their core function has always precluded them from competently offering complete CPM solutions.

At their very core, ERP systems by design are meant to be transactional. They provide the general ledger (GL) for companies, and this core function is transactional. In contrast, CPM is a management reporting tool, and therefore their design purpose and work processes are opposed. The culture at most ERP legacy platforms is to offer a ‘suite’ of products, with ERP being the core product. Every other module is a feature or benefit that ‘sweetens the deal’ and makes the expenditure attractive. This core sales culture pervades even the software development teams, making integrated CPM modules less robust, less able to integrate data from disparate sources and less likely to offer a competitive edge.

Unfortunately, CPM in these systems does not operate the way it should because they are designed from an ERP focus and therefore do a disservice to both ERP and CPM functions.

Having Purpose Provides Proficiency

In the early 2000s, Gartner recognized CPM as a separate category as the first generation of CPM software became available and showed a genuine difference to the simple functions that were included as part of legacy ERP systems.

However, ERP legacy systems, such as Oracle and SAP, were not going to go quietly into the night. Major ERP vendors started spending billions of dollars buying up CPM companies and integrating them into their ERP platforms to compete against this new category.

The problem with this strategy is that standalone CPMs are purpose-built for a good reason, and trying to integrate the DNA from a wide variety of platforms can result in some inefficient hybrids. They required complex coding solutions, separate tools and licences to integrate the newly acquired CPM software into the ERP environment. This attempted synchronization of data between the very different products resulted in mediocre solutions that never really lived up to their hype.

The second generation of CPM platforms was built for the cloud and make most first-generation CPM software look simple and make ERP legacy CPM platforms obsolete.

One Ring to Bind Them

Furthermore, most ERP platforms use the extra add-ons as a leverage tool to bind customers into their walled gardens. The problem, explained above, are these additional tools, such as CPM modules, do not deliver as they should. This is especially true with any data that is outside the original ERP system, making it extremely difficult for heterogeneous multinational, multicurrency, multi-ownership style companies to automate financial reporting and get access to their data in a timely manner.

If you were offered a CPM as a ‘free’ or low-cost option with your ERP vendor to make it more attractive to senior executives, you have just accepted a trojan horse. The good news is that most companies are starting to realize this issue, with 70% in a recent survey stating they prefer best-in-class independent CPM solutions.

Independent, Efficient, Automated

Best-in-class SmartCPM solutions, such as OneStream, offer clients a financial and management reporting tool that is light years ahead of ERP built-in CPM solutions. Here are just a few examples of a cloud-based, independent CPM’s real value described in client conversations that I have had.

Ad-Hoc Reporting

The number one benefit is the ad-hoc analysis capability of OneStream, offering a self-reporting function that is not beholden to ERP reporting rules. This ad-hoc capability gives your financial professionals the analysis tools they need to make crucial decisions through efficient, often-automated reports. You can develop reports ‘on the fly,’ giving you unparalleled access to financial intelligence.

Instant Data Recall

This intelligence is also up-to-date. With many combined ERP/CPM systems, a data dump is only done daily and often requires a significant time lag to completion. With a modern CPM, you can have both scheduled and on-demand data integration, ensuring your reports are based on the most recent data available. This data integration is also near-instant.

True Drill-back & Drill-through Functionality

Having an issue getting to your core data? With OneStream, you have complete transparency and visibility of all data with easy drill-back and drill-through functionality to your original data. Even more importantly, this capability is native in the platform, without having to go back through your multiple data platforms across various corporate entities to verify your data.

Forecasting is a Dream

Looking to reorganize a department, subsidiary or team within the company, but dreading the amount of work it’ll take in your ERP system to build out the plan? With OneStream, you can easily forecast changes with your most current data by simply setting up your reorganization parameters without impacting your existing structures. Understanding the restructuring impacts in real-time offers an unparalleled ability to realize cost-saving initiatives as soon as possible.

Financial Consolidations Efficiency

If you are using an ERP for CPM functions and have multiple currencies, operations in numerous countries, various specialized ownership structures, your financial close and consolidation must take weeks? This is one of the most significant benefits of a SmartCPM. Most clients of OneStream realize instant efficiency in close operations from weeks or months to hours or days. Even the most complex financial consolidations, once set up expertly, can be done faster and more efficiently, giving you a competitive edge. An added benefit includes more accurate reporting as all the calculations are done within the CPM, avoiding errors.  

Reduce Intercompany Audit Flags

Intercompany reconciliations and eliminations in large enterprises can be one of the most complex and frustrating aspects of financial close and consolidations for accounting professionals, especially those currently using a legacy ERP CPM, Excel or even email to consolidate this data.

OneStream consolidates data based on organizational hierarchies and automatically eliminates intercompany transactions and balances at the first common parent in all hierarchies with well-designed, pre-built and easily customizable dimensions.

If you are stuck in a legacy CPM module as part of your ERP ecosystem, we can still help extricate you from your inefficient nightmare. We have helped dozens of companies realize their full financial and management reporting potential even in the most complex environments or out-dated software ecosystems.

If you would like more information on OneStream or Ascend Partners, a Onestream Platinum Partner, contact us today.

Sources:

https://blog.onestreamsoftware.com/four-reasons-to-avoid-cpm-solutions-from-your-erp-vendor 

https://blog.onestreamsoftware.com/intercompany-reconciliations-done-right-part-1-2

Ascend Partners Technical Team, “ERP vs CPM for Financial Close Brief,” Internal Brief,  March 2021.