In today’s business world, digital technology is pervasive, but planning still lives in siloes, which drastically limits a corporation’s ability to pivot when there’s business disruption. Corporate finance is not in sync with business area finance teams; and too often no one in finance - regardless of their role - is in sync with operations that involve human capital planning or supply chain management.
We can move past disconnected planning practices only when we understand the barriers to growth. Disconnected planning between corporate finance and business finance often involves these top three barriers:
Barrier #1: We don’t Speak the Same Language
Historically, business decision-making has been riddled with uncertainty. Managers have limited information and can’t predict the future, yet they must constantly make decisions about what a company should do tomorrow, next year, and into the next decade. To support decision-making under uncertainty, the languages of accounting (historical information), finance (forward-looking information), and economics (external forces) all help managers make better decisions.
But if corporate finance and business finance create their own individual spreadsheets with no common language or data governance, it’s next to impossible to pivot when something like, say, a global pandemic comes along.
- Ask yourself: Do you have master data defined, and a governance process in place so that you can quickly and easily pivot from a line of business view to a corporate view?
For corporate finance and business finance to better collaborate, you must define a common language and taxonomy that everyone agrees upon. For example, corporate finance may define client industries differently than business finance – when you send someone a spreadsheet, what does “Industry X” mean? A common language and data governance helps you align the top-down view with the bottom-up view and allows you to generate value through data-driven business insights.
Barrier #2: Unstandardized Finance Models
When operational or financial modeling is fragmented at an organization, a lot of time is wasted, and important decisions are riddled with ambiguity. Sure, it makes sense for corporate finance to build their own specific models for top of the house scenarios such as scenario modeling, long range planning, divestitures & acquisition modeling. And business finance teams have their own set of modeling for revenue modeling, industry-specific models, product-specific models, or horizontal models for financial management, HR, sales and manufacturing.
However, when possible, it’s important to share leading best practices for modeling across the organization. If you have a great idea – wherever it lives – find a way to share it across the organization for potential adoption.
For example, labor may be your biggest expense. Should corporate and six different business units forecast labor differently? NO! Connected planning allows these teams work in sync to model financial and operational outcomes and share the details at both aggregate and detailed levels for complete visibility into how one area impacts another. To be cliché – “everyone’s on the same page for once.”
But seriously, corporate finance can maintain a bird’s eye view across the enterprise, while business finance teams can drill into product lines or geographies. Operations teams can also use the same solution to plan for labor, materials, inventory levels and more.
Barrier #3: Immature Reporting Practices
It makes sense for the business finance teams to have their own reports which support decision-making at a localized level, but organizations need to be able to pivot to the enterprise view at a moment’s notice.
- Ask yourself: How will this affect the organization as a whole? In other words, if an enterprise report is run—business finance, corporate finance, and senior management teams all need to reach the same answer and insight.
To draw a meaningful conclusion from reporting, you must use one tool and enter data which conforms to the standard data set into one data repository.
Mature reporting practices require that corporate and business finance have a willingness to conform to a standard, and consistently work at it.
A connected planning tool will allow you to overcome all of the aforementioned barriers:
- Define a common taxonomy or language, automate it, and govern it
- Provide for both localized and standardized/centralized modeling
- Provide for both centralized and enterprise reporting, while also allowing for self-service or ad-hoc reporting where appropriate
Oracle Enterprise Performance Management (EPM) fulfills all these needs. By providing a unified view of financial, operational, and line of business planning, Oracle EPM improves planning accuracy and improves agility, while supporting smarter, more informed decision-making.
Oracle EPM in Action
Alithya worked with a financial services/banking customer to streamline processes on Oracle EPM in the cloud. The bank had three different business lines: planning and analysis, customer banking and business banking. These three lines of business were modeling in separate spreadsheets and tools. Whenever they attempted to roll up a number, they couldn’t answer the critical question: why? Why is revenue growing/falling? Why do we think this is our most profitable product line?
With Oracle EPM, the bank can now generate a fully allocated P&L at the segment and line of business level. The organization has improved control at all levels of its business including complete transparency of results for improved decision making and:
- Fully allocated P&L at the segment and line of business level
- Eliminated dozens of spreadsheets
- Transformed financial planning and analysis process from bottom up to top down
- Completed an acquisition post-implementation and quickly onboarded using common modeling, eliminating unnecessary systems
A connected approach has helped Oracle customers improve margins, on average, by 35% and decrease planning cycle times by 30%. Let us know if we can get you there.
For comments, questions, or suggestions for future topics, please reach out to us at [email protected]. Visit our blog regularly for new posts about Cloud updates and other Oracle Cloud Services such as Planning and Budgeting, Financial Consolidation, Account Reconciliation, and Enterprise Data Management. Follow Alithya on social media for the latest information about EPM, ERP, and Analytics solutions to meet your business needs.