Businesses face tough environments these days. Technology has disrupted every sector, and staying ahead of the curve is harder than before. While technology has made operations harder for companies, it has also given smart companies an edge.
Corporate performance management (CPM) involves a series of financial tasks geared towards improving a company’s efficiency. It involves everything from projecting budgets to rooting out financial waste in a company’s workflows. Previously, CPM was a collection of manual tasks.
However, technology in the shape of CPM software has turbocharged CPM tasks. Here’s how modern companies are using CPM to streamline their operations.
Reduce Cash Flow Risks
Cash flow is the lifeblood of a business. End-of-month financial processes aim to project a business’s cash position by collecting data from various departments and projecting financial positions. There are challenges in these processes, with manual workflows posing the biggest one.
For instance, different departments in a large company store financial data in separate formats. Before collecting these data in a single spreadsheet, teams have to run data integrity checks to ensure all rows are suitable for further analysis. The problem is compounded when a company has an international footprint.
Currency differences and different reporting guidelines make this task impossible to execute on time. Software simplifies all of these tasks by automating data collection. As a result, CPM teams can project working capital and cash flow accurately.
Working capital is an essential metric that CFOs track to gauge the health of their business. Low working capital levels indicate a need to raise funds, whether through equity or debt. Needless to say, both options leave a lasting financial impact on a company, and accurate working capital projections lie at the heart of this decision.
Accurate Budgets and Expense Projections
Expensing is a challenging process in most enterprises. Large companies have to contend with different regulations, based on the geography their employees are located in. Everything from VAT reclamation to employee reimbursement affects a company’s bottom line.
A consequence of improved technology has been increasingly complex regulations. The European Union’s VAT laws are a good case in point. These laws are so complex that companies have no choice but to use electronic solutions to help them navigate byzantine reclamation laws. CPM software contains expense and VAT components that simplify this task.
The result is more money reclaimed for the company’s bottom line and accurate budget projections. Thanks to automated audit trails CPM teams can accurately predict a department’s budget and allocate cash accordingly. In turn, these projections inform cash flow projections and working capital levels.
While software aids these projections, robust recording and reporting processes underpin accurate budget predictions. Companies that marry technology with robust processes are the ones that reap the largest benefits.
The modern enterprise has to deal with a complex technical problem called data siloing. Thanks to the rapid pace with which technology has improved, companies have created a patchwork of tech infrastructure that is impossible to unravel.
As more advanced solutions have been patched on top of legacy apps, CPM teams have discovered that they rarely receive insight into every single data source a company has.
Thus, data silos exist where certain departments store data in different systems or formats from the rest of the company. Integrating these data in the past required a CPM team to manually format and integrate data into their core analysis worksheets. Needless to say, this was a time-consuming affair that only created more problems than it solved.
CPM software has made this task much easier these days by integrating with every database format and source. This is why companies can pull data from varied sources automatically, without having to rely on special technical expertise. Thanks to all the heavy lifting occurring in the background, CPM teams can view real-time data and create better ad-hoc reports that inform their projections.
Accurate Business Modelling
While projecting cash flow is an important task, the real work that a CPM team executes is modeling various scenarios and measuring business impact, whether it’s for an enterprise or a startup. In the past manual processes consumed the majority of a team’s time, but software has changed this picture.
Thanks to automated data collection and consolidation, teams spend more time than ever before modeling future scenarios.
For instance, how could impending currency rate fluctuations impact the cash flow of an important international subsidiary? How would increasing wages at that location impact working capital at the parent company? These are just a few examples of the complex questions that CPM teams demand from their software.
While the answers to these questions aren’t always 100% accurate, they nonetheless provide insight into second-order ramifications to a business. For instance, an adverse currency rate move could jeopardize a new product launch in an unrelated department due to cash flow holes.
Better Insight Through Better Planning
CPM is a critical task in a modern enterprise, and technology is powering it more than ever before. Software allows CPM teams to drill deep into data and figure out where the holes are. By increasing efficiency and boosting income, companies can rest assured that they’re staying ahead of their competition and building efficient processes all the time.