What is CPM and how does it differ from FPM?

Once an organization reaches a certain size, there are endless processes to manage—leading to endless opportunities to reach new heights. But at that size, getting visibility on all these moving pieces, let alone acting on them, can be challenging.

That’s where corporate performance management (CPM) and financial performance management (FPM) become crucial. But there are key differences and benefits to CPM and FPM.

Let’s explore these in depth.

Che cos'è il Corporate Performance Management (CPM)?

First popularized by Gartner in 2001, corporate performance management (CPM) refers to the management of important business processes throughout an organization—whether for crucial projects or day-to-day operations. As digital transformation became more of a focus for business leaders, Gartner has put less emphasis on this term in favor of Financial Planning & Analysis, or FP&A, and Financial Close.

That said, CPM is still essential to understanding how your organization operates, especially when compared to financial performance management (FPM).

Definition and basic concept

Corporate performance management is a holistic approach to business management meant to bridge the gaps between strategy, planning, and execution. It includes financial and accounting processes like budgeting, forecasting, financial consolidation, and reporting, but it isn’t limited to financial processes. CPM also covers operations, supply chain management, and risk management. CPM may also be referred to as business or enterprise performance management.

Corporate performance management and finance

Effective CPM is closely tied to the finance team’s processes. Part of this approach is to collect, consolidate, and analyze financial data to guide decision-making since a complete view of an organization’s financial performance is necessary for CPM. This helps organizations meet their financial and operational goals while staying aligned with their long-term strategy.

Core functions of CPM

Budgeting and analysis

Budgeting is crucial to make the most out of your organization’s resources. CPM is essential to deploying these resources effectively, creating better budgets, and aligning expenditures with organizational goals.

Analyzing financial data goes beyond budgeting, revealing insights, explaining variance, and providing a foundation for data-driven decision-making in all operations.

FORECASTING

Forecasting is used in CPM to plan for potential future financial outcomes based on historical data and current market trends. Forecasts let organizations anticipate changes and quickly adapt their strategy.

Financial consolidation

Financial consolidation is the process of collecting financial data from multiple departments or business entities into a single set of financial statements. These consolidated statements provide a singular view of the organization’s financial health while eliminating internal transactions.

Reporting e Analisi

Reporting and analytics turn raw data into action, making them essential to CPM. FPM software, advanced analytics tools, and real-time dashboards enable stakeholders to deploy their expertise where it’s needed most.

The importance of CPM   

Driving strategic decision-making

Leaders can make decisions when they don’t have all the facts, but that rarely leads to a better outcome than when they have everything they need. CPM gets essential data to where it’s needed most, meaning decisions are based on facts.

Aligning operations with business goals

CPM bridges the gap between strategy and operation activities, providing a framework for teams involved in operations to better further strategic goals. The continuous monitoring of processes allows teams to stay in line with business goals, spotting issues as they come up and correcting them as needed.

How to improve CPM

Assessing your existing CPM processes

Organizations should always start by proactively assessing their current processes to identify and resolve inefficiencies. Evaluate the effectiveness of existing tools and processes, looking for gaps and recurring problems. Establishing and regularly evaluating key performance indicators (KPIs) can reveal these issues dynamically rather than only in extensive review sessions.  

Benchmarking against industry standards

Internal data is good, but benchmarking against industry standards helps organizations understand how their practices stand up against market peers in competitiveness and best practices. There is a wealth of data out there produced by organizations that have already encountered the same issues you’re trying to solve.

Improving the strategic planning process

Integrating more data sources, improving data quality, and leveraging advanced analytics will improve and streamline the way you plan your strategy. A more streamlined process helps to ensure your plans are adaptable and agile, crafted using up-to-date and reliable data.

Optimizing budgeting and forecasting

Inaccurate budgets can force your teams to work with less than they need or use excess resources inefficiently. Meanwhile, inappropriate forecasts might lead the entire organization in a direction that doesn’t grow the bottom line—and wastes everyone’s time.

With CPM, you get the data you need and a path to creating budgets that give teams exactly what they need and forecasts that make your next step clear.

Che cos'è il Financial Performance Management (FPM)?

Definizione

Financial performance management (FPM) is a subset of corporate performance management that focuses specifically on growing profit margins, reducing expenses, and ensuring an organization spends every dollar as efficiently as possible. FPM software enables finance leaders to monitor their business’s financial health, analyze its profitability, and optimize financial processes.

FPM is also sometimes used to describe enterprise performance management software, as well as financial planning & analysis software.

The focus of FPM

FPM is concerned only with financial metrics and outcomes. Unlike CPM which includes operations and other business activities, FPM focuses on optimizing financial performance, improving profitability, and maintaining compliance with financial regulations.

Key components of FPM

Without the wide scope of CPM, FPM focuses on adapting financial activities to improve company performance as a whole.

Pianificazione finanziaria

Detailed financial plans guide organizational spending and investment. While creating these plans, businesses anticipate future financial needs, manage risks, and prioritize investments and expenditures. As roadmaps for all things financial, they include budgeting, forecasting, and financial objectives, while maximizing growth and accounting for sustainability.

Misurazione Performance

Performance measurement involves tracking and evaluating key metrics to see how effectively the company is meeting its financial objectives. This process identifies areas for improvement, ensures alignment on goals, and generally drives success.

Gestione del rischio

Risk management is the identification and mitigation of financial risks that could affect the organization’s assets, increase its debts, or shrink its profit margin. This process helps protect the company from possible financial losses, legal issues, and operational disruptions, leading to better stability across the organization and its activities.

CPM and FPM

Scope of CPM

CPM has a much broader scope that includes both financial and operational performance management. It integrates processes across the entire organization to provide a clear, complete view of every aspect of its performance.

Scope of FPM

FPM is more narrowly focused on the financial aspects of an organization. It deals primarily with financial planning, analysis, and reporting. The goal is to ensure the financial health of the organization and drive growth.

Implementing CPM and FPM

Both methods have similar requirements for successful implementation. Both require powerful data management systems, clearly defined performance metrics, and a drive to iterate and improve. For successful adoption and long-term benefits, staff will need training, workflows will need to be reworked and buy-in from leadership will be essential.

Functionalities of CPM & FPM

Both CPM and FPM involve functionalities such as planning, budgeting, forecasting, consolidation, reporting, and analysis. However, CPM focuses on operational performance, while FPM focuses specifically on financial processes. CPM will require a wide scope of tools that are often context-dependent, as well as collecting reports from these tools for analysis. FPM tools will be almost entirely finance-oriented and will be easier to implement. Combined, they’re a powerful tool set for organizations.

CPM vs FPM

While CPM covers a wide range of performance management aspects, FPM is focused on financial performance. CPM aims to align financial and operational goals and processes, whereas FPM concentrates on financial health and efficiency.

CPM & FPM challenges

Implementing CPM and FPM present similar challenges. Data integration, system complexity, and user adoption are some of the most difficult hoops to jump through. Overcoming these challenges requires stakeholder engagement, careful planning, and choosing the right tools and technologies.

CPM & FPM applications

CPM and FPM applications are used across various industries to streamline and improve performance management. Software should support strategic planning, financial consolidation, performance analysis, and data integration. When dealing with large amounts of data, automation and integration are key.

Overlapping areas of CPM and FPM

CPM and FPM overlap in areas such as financial planning, budgeting, and reporting. Both aim to provide insights that drive better decision-making and improve organizational performance. CPM has a much broader scope that includes business activities like operations outside of finance.

Choosing between CPM and FPM

Organizations should assess their own specific needs and context to choose between CPM and FPM. Consider the scope of performance management required, the complexity of financial processes, and the need for integration with other business functions or entities. Most organizations will find CPM essential once they reach a certain size while combining CPM and FPM might only be necessary when your company structure reaches a certain level of complexity.

Benefits of FPM

FPM provides detailed financial analytics and reporting, offering deeper insights into financial health, profitability, and cash flow management, which are critical to making effective financial decisions.

While CPM offers a broader view by including various performance metrics across departments, FPM’s narrower focus is essential for organizations prioritizing financial stability and growth.

Better strategic decision making

FPM facilitates better strategic decision-making by providing accurate financial data, analysis, and reports. By focusing specifically on financial performance, FPM allows organizations to develop more effective long-term financial strategies that align with their business objectives.

Increased operational efficiency

FPM tools streamline financial operations through automation and integration of financial processes, improving data quality and accuracy by avoiding manual errors. This in turn improves the reliability of the reports that guide strategy, increases operational efficiency, and reduces costs.

Enhanced compliance and governance

FPM helps maintain compliance with regulatory standards, facilitates governance, and reduces the risk of non-compliance. This also applies to internal financial controls, with FPM tools being essential to standardize internal processes.

Improved collaboration and communication

FPM facilitates better collaboration and communication across financial teams, keeping everyone aligned with the organization’s financial goals.

Scalability and adaptability

FPM tools are designed to be scalable and adaptable while also allowing for agility when needed. Organizations can grow and change without compromising financial performance management.

FPM software

Clearly defining the needs of your organization, as well as a clear understanding of your business context, will help to guide your choices toward the FPM tool that is right for you.

Key features to look for in FPM tools

When selecting FPM tools, look for features such as robust financial planning capabilities, advanced analytics, integration with existing systems, and user-friendly interfaces.

Cloud-based vs. on-premise solutions

Consider the benefits of cloud-based solutions, such as scalability and reduced IT overhead, versus on-premise solutions, which may offer more control or better customization.

Integration with existing systems

Ensure that FPM tools can seamlessly integrate with your existing financial and operational systems to provide a comprehensive view of performance. Ensuring that your data sources are compatible natively is essential since the manual conversion of data defeats the benefits of automation.

Scegliere il software migliore per la tua azienda

Your specific performance management needs are unique. Consider the functionality and flexibility of the different tools that are available to you and choose software that best supports your business needs.

Assessing your current performance management needs

Evaluate your current performance management practices, identify the gaps and areas for improvement, and determine what tools would best fill those gaps and improve your processes and systems.

Creating a comprehensive performance management framework

Collaboration is key. Whether it's performance across the entire company or just for finance and accounting, working together with your teams is going to be the best way to quickly identify needs and implement a solution.

Want to see what a dedicated solution can do for your team? Prophix One, a Financial Performance Platform optimizes financial processes, manages everything from financial close to planning, and gets you the insights you need to lead your organization into the next stage of its growth. Request a demo to see what you can do with Prophix One.