Enterprise Performance Management Systems Accounting

Instructor: Yusuf Abdullah

Yusuf has taught Science and Mathematics at school level and Finance and Economics at University level. He has recently earned his Ph.D in Financial Econometrics.

This lesson deals with enterprise performance management systems. You'll learn how enterprise performance management systems are integrated and used for management accounting and other financial decision-making purposes.

Enterprise Performance Management (EPM)

Roger is the founder of a tech startup that has grown more than 100 times in the past three years. With such exponential growth, management has become extremely difficult and the company's own enterprise management tools are not efficient enough. He has hired a consultant, Sarah, to provide him with advice.

Sarah defines enterprise performance management (EPM) as the set of strategic measures that lead to efficient production and sales of the goods and services for a firm. The EPM is not limited to production and sales, but also includes decisions related to human resources, financial planning and analysis, and marketing among others. Roger would like to increase the efficiency of the firm and would like to know the areas that he should work on. Sarah takes account of the older reports and would like to focus on four major areas.

Business Strategy Decisions and Formulation

Roger does not quite understand how EPM would help with business strategy decisions. Sarah states that business strategy is better formulated if a set of indicators are known. The indicators help set up a strategy development for the firm. For example, if the company has to formulate a strategy for expansion, it has to check the sales reports of different regions. The sales data can serve as an indicator of this. Sales data can help assess where the expansion would yield the highest increase in revenue. Other indicators may include market share, demographics, income level, etc. The factors or indicators come in very handy for management accounting and planning purposes and allow informed decision making for the financial managers.

Business Planning and Forecasting

The next aspect that Roger wants to target is business and budget planning. Sarah informs him that EPM allows better planning and forecasting by aligning the strategy formulated with forecasted factors, such as demand, sales, costs, etc. For management accounting, this becomes more important because the decisions affect the finances of the firm. The forecasts are made on the basis of management decisions, which include financial decisions as well as planning for human resources, costs of products, profitability level given forecasted demand or sales, etc.

Financial Management

Roger informs Sarah that he needs a good EPM to help in better financial management. Sarah states that an EPM simplifies financial management by setting up proper accounting standards and financial reports. The reports are available to the managers in real-time and help in making decisions that require immediate attention. The management accounting reports can be accessed right away and decisions made likewise. An EPM also helps to make financial reports and management reports at the end of the period or as required by the law. The reports are available for download at the click of a button.

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