PART 1: OVERVIEW OF ENTERPRISE PERFORMANCE MANAGEMENT 1
1 INTRODUCTION 3
A Dilemma for Accountants 3
Accountants’ Problem of Denial 4
2 ENTERPRISE PERFORMANCE MANAGEMENT: MYTH OR REALITY? 5
Executive Pain—A Major Force Creating Interest in Performance Management 6
What Is EPM? 7
Is EPM a New Methodology? 7
Clarifying What EPM Is Not 8
What Has Caused Interest in EPM? 9
The EPM Framework for Value Creation 10
The EPM as a Continuous Flow 12
A Car Analogy for EPM 13
Where Does Managerial Accounting Fit In? 14
EPM Unleashes the ROI From Information 15
Management’s Quest for a Complete Solution 17
PART 2: MANAGERIAL ACCOUNTING 21
3 DO ACCOUNTANTS LEAD OR MISLEAD? 23
The Perils of Poor Navigation Equipment 23
The Perils of Poor Managerial Accounting 24
The Accountant as a Bad Navigator 24
4 A TAXONOMY OF ACCOUNTING AND COSTING METHODS 27
Confusion About Accounting Methods 27
A Historical Evolution of Managerial Accounting 29
An Accounting Framework and Taxonomy 29
Asking What? So What? Then What? 31
Predictive Versus Descriptive Accounting 32
Co-existing Cost Accounting Methods 33
5 MANAGERIAL ACCOUNTING DESIGN COMPLYING WITH THE CAUSALITY PRINCIPLE 35
Removing the Blindfold With ABC/M 35
Overhead Expenses Are Displacing Direct Expenses 36
Impact of Diversity in Products, Service Lines, Channels and Customers 37
Growing Discontent With Traditional Calculation of Costs 38
Activities Are Expressed With Action Verbs 39
Drivers Trigger the Workload Costs 41
Strategic Versus Operational ABC/M 42
6 STRATEGIC COST MANAGEMENT FOR PRODUCT PROFITABILITY ANALYSIS 45
ABC/M Is a Multi-Level Cost Re-assignment Network 45
Drivers: Resource, Cost, Activity and Cost Object Drivers 48
Business and Organisational Sustaining Costs 48
The Two Views of Costs: The Assignment View Versus the Process View 49
Vertical Axis 50
Horizontal Axis 50
How Does Activity-Based Costing Compute Better Accuracies? 51
Activity-Based Management Rapid Prototyping: Getting Quick and Accurate Results 53
Product Profitability Analysis 54
Two Alternative Equations for Costing Activities and Cost Objects 55
PART 3: STRATEGY MANAGEMENT 57
7 THE PROMISE AND PERILS OF THE BALANCED SCORECARD 59
What Is a Balanced Scorecard? 59
Balanced Scorecards Are Companions to Strategy Maps 60
Measurements Are More of a Social System Than a Technical One 62
Scorecard or Report Card? The Impact of Senior Management’s Attitude 63
GPS Navigators for an Organisation 63
How Are Balanced Scorecards and Dashboards Different? 64
Scorecards and Dashboards Serve Different Purposes 65
Scorecards Link the Executives’ Strategy to Operations and the Budget 68
Dashboards Move the Scorecard’s Dials 68
Strategy Is More Than Performing Better 68
Getting Past the Speed Bumps 69
8 DESIGNING A STRATEGY MAP AND BALANCED SCORECARD 71
Eight Steps to Create a Strategy Map 71
Scorecards and Strategy Maps: The Enabler for EPM 76
PART 4: PLANNING, BUDGETING AND FORECASTING 79
9 PREDICTIVE ACCOUNTING AND BUDGETING WITH MARGINAL EXPENSE ANALYSIS 81
What Is the Purpose of Management Accounting? 81
What Types of Decisions Are Made With Managerial Accounting Information? 82
Rationalisation 82
Planning and Budgeting 83
Capital Expense Justification 83
Make Versus Buy, and General Outsourcing Decisions 83
Process and Productivity Improvement 84
Activity-Based Cost Management as a Foundation for Predictive Accounting 84
Major Clue: Capacity Only Exists as a Resource 85
Predictive Accounting Involves Marginal Expense Calculations 86
Decomposing the Information Flows Figure 88
Framework to Compare and Contrast Expense Estimating Methods 90
Predictive Costing Is Modelling 91
Debates About Costing Methods 91
10 WHAT’S BROKEN ABOUT BUDGETING? 95
The Evolutionary History of Budgets 96
A Sea Change in Accounting and Finance 98
The Financial Management Integrated Information Delivery Portal 99
11 PUT YOUR MONEY WHERE YOUR STRATEGY IS 101
A Budgeting Problem 101
Value Is Created From Projects and Initiatives, Not Strategic Objectives 103
Driver-Based Resource Capacity and Spending Planning 104
Including Risk Mitigation With a Risk Assessment Grid 105
Four Types of Budget Spending: Operational, Capital, Strategic and Risk 107
From a Static Annual Budget to Rolling Financial Forecasts 108
Managing Strategy Is Learnable 108
PART 5: INTEGRATING ENTERPRISE RISK MANAGEMENT AND ENTERPRISE PERFORMANCE MANAGEMENT 111
12 THE INTEGRATION OF ENTERPRISE RISK AND ENTERPRISE PERFORMANCE MANAGEMENT 113
How Do ERM and EPM Fit Together? 113
Is Risk an Opportunity or Hazard? 114
Problems Quantifying Risk and Its Consequences 114
Types of Risk Categories 115
Risk-Based EPM Framework 117
Risk Managers: Friend or Foe of Profit Growth? 118
Invulnerable Today but Aimless Tomorrow 119
PART 6: BUSINESS ANALYTICS FOR ACCOUNTING AND FINANCE 121
13 WHAT WILL BE THE NEXT NEW MANAGEMENT BREAKTHROUGH? 123
The History of Management Breakthroughs 123
Will Business Analytics Be the Next Breakthrough? 124
14 HOW DO BUSINESS INTELLIGENCE, BUSINESS ANALYTICS AND ENTERPRISE PERFORMANCE MANAGEMENT FIT TOGETHER? 127
The Relationship Between Business Intelligence, Business Analytics and Enterprise Performance Management 128
Overcoming Barriers 129
15 CFO TRENDS WITH ANALYTICS 131
Analytics as the Only Sustainable Competitive Advantage 131
Resistance to Change and Presumptions of Existing Capabilities 132
Evidence of Deficient Use of Business Analytics in Finance and Accounting 133
Sobering Indication of the Advances Still Needed by the CFO Function 134
Moving From Aspirations to Practice With Analytics 135
Customer Profitability Analysis to Take Actions 135
Rationalising and Validating Key Performance Indicators in a Strategy Map and Balanced Scorecard 136
Moving From Possibilities to Probabilities With Analytics 137
Fill in the Blanks: Which X Is Most Likely to Y? 139
Increased Employee Retention 139
Increased Customer Profitability 139
Increased Product Shelf Opportunity 139
The CFO Function Needs to Push the Envelope 140
PART 7: HOW TO BEGIN IMPLEMENTING ENTERPRISE PERFORMANCE MANAGEMENT 143
16 WHERE DO YOU BEGIN IMPLEMENTING ANALYTICS-BASED PERFORMANCE MANAGEMENT? 145
Accept That Analytics-Based EPM Is About Integration and Speed 145
Assuming an Enlightened Leadership Team, Then What? 146
Embrace Uncertainty With Predictive Analytics 147
17 A CALL TO ACTION—BUILDING A BUSINESS CASE 149
The Obsession With ROI Justifications 149
Management and the IT Function Can Be Obstacles 150
Is EPM Art, Craft or Science? 151
Balancing a Smart, as Well as a Healthy, Organization 151
The Power of Business Analytics 152
The Future of Analytics-Based EPM 152
