This blog continues our series on how to find excellence in your BPC planning processes by looking at the area of Master Data and Data structure. This might seem like a dry subject, but getting it right is an essential part of an EPM system that delivers on your investment. Excellence in this area can make the difference.

As in the previous post, on excellence in EPM planning processes, that can be found here, we’ll show the way to excellence by classifying common planning practices on a scale from traditional practices (not optimised for EPM), through being aware of the right practices, and then implementing them, to then finally implementing them well, which is where we find our best practice, and excellence in execution, facilitated by EPM.

The Chart of Accounts

Considering that the Chart of Accounts is the main interface with your financial information, it is vital to get it right. Companies with different CoAs across business unit sand geographical entities will struggle to have any coherent view of what is going on in the organisation. To do this right you need to have a common CoA used by all business units across the company that will also contain non-financial data such as KPI’s, ratios and drivers. The CoA is key, but it is just one dimension in your multi-dimensional model. In a high performing system all the other master data, such as product, cost centre, customer, will also be shared across the organisation to have a fully integrated model.

 Drivers

Using drivers to calculate estimates for variable costs allows everyone to see how the final figure was reached, it makes the number much more valuable to see how it was calculated. A driver can be a sales price, a production quantity, an inflation rate, a ratio, a tax rate, or any other number that you use to drive your forecast and budget calculations. To have all the drivers and workings available in the system provides clarity to management and confidence in how the forecast numbers have been arrived at. It also allows the forecast to be recast quickly if the driver data changes.

Different people will be responsible for the quality of different drivers and everyone in the organisation needs to understand which parts they own. The next step is to get buy-in from all stakeholders that the right drivers are being used and that the data they hold is timely and accurate.

Driver based models

So far we have talked about the importance of common master data, and common assumptions and drivers in the planning process. When these are pulled together into integrated planning models then you really start to leverage the power of EPM. At the highest level, scenario planning should be a fast, iterative process, bringing in transparent, driver-based, forecast data from across the company, permitting a greatly enhanced view of the risks and opportunities facing the organisation.

Benchmarks

Benchmarking is a very powerful tool that should definitely be in your planning toolkit if it isn’t already. The best companies are looking at what the industry standard is, taking note of what their competitors are doing, and measuring themselves against that. Market share can often be a stronger long term predictor of a company’s long term position than any internal ratio.

External data

In order for the integrated planning model to work, the financial data extracted from the ERP needs to be supplemented with data from other sources.  Many organisations have business units that are not on the main ERP due to recent acquisition and the high investment required to migrate, and other data such as manpower and payroll may be held in other systems. This data should all be brought in to the planning models and used in the integrated planning process to ensure that it is best in class.

Planning level

Generally, in companies that are not very far down the path to planning excellence, only P&L planning will be attempted, and it will normally be done at too detailed a level. More evolved organisations will carry out Balance Sheet planning too, and maybe some Cashflow. They will have thought about the right level at which to plan, but they will probably still be planning at too detailed a level. The best companies, and this is where you want to be, are putting their planning effort into areas that have a high material impact on the P&L or Balance Sheet, or which they know can vary a great deal from month to month due to seasonality or other factors.

 Integrated data modelling across the business, using common master data and diver based planning, at the correct level of detail, with all necessary data and metadata brought in from external sources, and with results bench marked against industry standards and competitors; that is EPM planning excellence in master data and data structure as brought to you by SAP BPC and Column5 – driving better business through actionable intelligence.