Non-financial metrics may be used for planning such as unit and component counts

Description

Non-financial metrics such as unit and component counts are data points such as “unit volume” or “renewal rate” that can significantly impact planning calculations. The ability to incorporate these metrics into the CPM software carries the potential to provide an organization with more significant insights into its performance, facilitating more informed business decisions.

Example Use Case

Scenario: A global manufacturing and retail corporation utilizes CPM software for strategic planning. Traditionally, the company has worked backwards into their planusing financial metrics like gross margin for planning. However, they realize the potential of the unutilized non-financial data they consistently generate, such as daily production unit counts and component counts.

Solution: The company decides to incorporate non-financial metrics into their strategic planning process. With their CPM software, they begin utilizing Unit Count and Component Count as key non-financial parameters. These metrics help them observe patterns and trends which in turn aid in better forecasting and resource allocation.

Considerations

Almost all financial planning and consolidation systems provide the ability to use non-financial metrics in the plan. However, not all of them do a good job of keeping those metrics current in the system. In other words, some products do not calculate the metrics with data it has access to. They simply ask the user to enter in a calculated metric every month which means those metrics are calculated offline, defeating the purpose of a CPM tool to a certain degree.

Non-financial metrics are broad and are based on industry. They can be anything from unit demand of a specific item in a manufacturing or wholesale environment, or renewal rate in the SaaS industry.

Questions to Ask a Vendor

• Using Non-Financial Metrics: Is your product able to calculate and keep current the non-financial metrics we'll need to build our plan?
• Central Storage: Where in the system can we see all the non-financial metrics that are available to use in a plan?
• Defaults: Are there any pre-built non-financial metrics that are included for our industry?