New terms that we need to learn appear every day. In fact, the Oxford English Dictionary adds approximately 1,000 words each year. Some are readily familiar and others less known, being specific to an industry or demographic. For anyone working in finance, here’s a valuable new term to learn: Collaborative Enterprise Planning (CEP). You may not know much about it now but it’s sure to become more familiar across both finance and business groups in the coming months.
CEP is the alignment and linking of strategic, financial, and operational plans to achieve better business outcomes. It’s evolved over the years as finance’s role in facilitating the coordination of plans across the company has grown and as the search for one version of truth that supports operations has become more difficult. With market response times that are razor thin, both executive leadership and business unit leads are leaning on finance and relying on their recommendations to ensure that operational tactics are aligned with financial targets throughout the organization. CEP empowers finance by giving them the insight they need to give smart, accurate, strategic counsel to executives and business unit leaders.
When an organization practices CEP, operating and financial plans work in harmony and ideally reside in one system. Cross-functional teams can collaborate easily and leverage automated reports that generate scenarios that provide previously hidden business insight. In a unique turn, CEP introduces top-down and bottom-up forecasting and planning capabilities that are considerably less rigid than the fixed forecasts based on end-of-quarter or close-of-books financial reports.
Work Smarter, Not Harder with CEP
To understand the impact that CEB can have on a business, consider this scenario for a national pet food brand. In the upcoming year, the brand wants to increase its market share for puppy food by 25 to 40 percent. Reaching that goal requires an increase in hiring and marketing to reach the new sales quotas. Sales coverage will need to increase too, but no one is sure the exact amount. Sales expects to hire more reps, but it’s unclear how many. Marketing is tasked with pushing new leads into the sales pipeline. They think the numbers will be large, but they would like to be more precise. In all this unknown, CEP lets finance, sales, and marketing work together to run different scenarios. The insight from the scenarios provides the information they need to define a plan to hit the new market share goals.
With CEP, they can simulate any number of actions and see how the new hires will impact the overall P&L. They can compare how one increase in the marketing budget will increase leads, and they can look at which demographics and regions hold the most potential for the new salespeople and marketing campaigns. Whatever they are curious about, CEP has the potential to create models and scenarios that will answer their questions and help the teams forecast and plan for the company’s upcoming business goals.
5 Facts to Know about CEP
Now that you know what CEP is and the advantages it brings to a business, here are five more facts that will put you at the front of the CEP pack.
1. CEP is not Integrated Business Planning (IBP). The supply chain and manufacturers are familiar with IBP and at first blush may see similarities with CEP. It’s important to separate the two terms and understand their differences. CEP is directly related to finance, and it is a finance-led approach to aligning strategic, financial, and business plans to achieve better outcomes. With collaboration as a key ingredient, CEP is a valuable resource for anyone who works in finance and knows they could be offering more help and support to others throughout the organization. Instead of a one-dimensional financial report, CEP offers extensive insight to help groups make good decisions that align with the organization’s finances.
Another important element in CEP is analytics. With CEP, finance and sales, business development, and HR can pose if-then questions, models, and scenarios to the data. CEP has embedded analytics that help teams understand the impact of certain decisions and make data-driven forecasts.
2. Finance groups using CEP can offer the support and insight that executives and line of business need to improve business outcomes. Organizations struggle to find a single version of truth. Internal data is siloed and unavailable or it is available in such poor quality that no one believes it. With CEP, finance has a single version of truth on a common platform that executives and business leaders can rely on to make data-driven decisions. The groups can talk in a relatable manner using the same numbers and key performance indicators about what’s happening on a group or unit level or from a broader business-wide view.
3. CEP can reduce—possibly eliminate—reliance on spreadsheets. Spreadsheets have served finance departments well for decades, and their value should never be underestimated. Having said that, though, better tools are available. Consider how location-based maps have replaced paper maps and how much better GPS-based maps serve drivers. They link directions, driving time, and nearby destinations. Similarly, CEP provides a depth of information that will never be available from a spreadsheet.
The dashboards of charts, graphs, heat maps and more visual information provides a clear financial picture. Users have insight available at a glance that shows the links between operational activities and financial results with a few clicks and swipes. Social media and chat features are also part of CEP, further enriching the interactivity and engagement for groups to collaborate together.
4. Accurate budgets and plans can be created on-the-fly rather than at end-of-quarter or close-of-books. Strict timelines, such as close of books or end of quarter, have driven financial analysis for decades. CEP upends these scheduled reports that are often out of date before they are distributed. Instead, finance can respond to our more global cultures that must react regardless of the day or time. When a market changes from a new tariff, finance can run any number of scenarios and offer guidance around questions like “What is the new cost for aluminum?” “How will four new engineering hires at the Dublin office impact P&L?” “Which product line requires the most resources and yields the lowest profits?”
Finance teams can rely on CEP to provide guidance at the moment when it is most needed.
5. CEP is finance led—but not finance only. As in all new endeavors, CEP’s success depends on good leadership from finance or an analytics competency center. Not only does someone from finance need to be the advocate for CEP, it needs executive sponsorship. CEP is appealing in that it crosses organizational groups, and it has the power to break down divides that prevent successful collaboration.
Units and groups create a tribe-like mentality that doesn’t nurture, cross-group interactions. In fact, someone in product development may never talk to anyone outside her team. The operations manager may be similarly isolated. Realistically, these silos are not healthy for the organization. CEP encourages groups work in unison so the business is aligned toward meeting shared objectives. With so much at stake, CEP needs executive sponsorship to gain much needed awareness and support throughout the organization.
Overcoming Language Barriers
As CEP moves into the business lexicon, finance teams will become much more familiar with how and when to use this new resource. CEP is a much-needed alternative to cumbersome spreadsheets that slow down progress. Who hasn’t been to a meeting where someone responded to a question with “I’ll need to run a few reports and get back to you with an answer”? Who hasn’t left an inspiring brainstorming session with a list of what-if scenarios? With CEP, finance has the resources to answer those questions and create multiple if-then models for inquiring minds.
With CEP in the mix, everyone can share a common platform and collaborate together to improve business outcomes. As the weeks go forward, CEP is destined to become a very popular term, known by executive leadership, business, and finance for showing the clear links between an organization’s operations and business activities.
Pras Chatterjee is a Senior Director of Product Marketing for Planning & Analysis at SAP focusing on SAP Analytics Cloud and SAP BPC.