What Is Agile Finance? An Expert Guide

Today’s business environment is fast paced, hypercompetitive and constantly changing. It’s no place for the rearview-mirror finance and accounting processes of old. Instead, companies are starting to adopt agile finance, a modern approach to financial management that changes the way finance teams work and create value. Agile finance shifts mindset and focus away from data creation and gatekeeping toward higher-value decision-making and partnership with business leaders.

While this may seem like an obvious objective, many finance and accounting staff could cite a plethora of daily challenges that impede agile finance from taking root, including regulatory and compliance reporting, lack of staffing and difficulty collecting and extracting data from legacy systems. The key to converting traditional finance functions into agile ones is embracing modern technology, such as artificial intelligence (AI) and the cloud, as well as adopting the principles of agile – originally a software development methodology. Considering the potential benefits of agile finance, including improved operational efficiency and employee satisfaction, it’s no surprise that CFOs and business leaders at companies of all sizes are looking to adopt the agile model.

What Is Agile Finance?

Generally speaking, the agile approach combines aspects of advanced technology, culture, ways of working and organizational setup to empower those who are closest to vital information so they can quickly provide real-time data to decision-makers. By applying these agile fundamentals to financial management, a business can create a finance function that embraces digital intelligence above transactional processing and reorients its resources and culture to continually increase the value it delivers. In agile finance, common critical activities, such as record-to-report (R2R) and compliance, are supported by automation to allow staff to focus on strategic priorities. For example, AI and machine learning (ML) can help reduce staff time spent on low-value, repetitive tasks, such as data entry in the accounts payable process, and unlock time for more analysis or process improvement. Agile finance teams can allocate more time to analyzing the proliferation of financial, operational and market data to help create competitive advantages for the business.

The culture of agile finance is characterized by proactive thinking, speed, continual innovation and performance review. The goal of agile finance is to develop a team that is positioned to be a better business partner at all levels, adding value to current operations and future strategy. Common traits of agile finance include operational excellence, digital intelligence and business influence.

Key Takeaways

• Agile finance refers to the adaptation of finance functions to become more flexible and nimble to better support business partners.
• Agile finance is enabled by advanced technology, including robotic process automation (RPA), AI, ML and cloud computing, allowing staff members to prioritize higher-value deliverables that influence business decisions and support centralized centers of excellence.
• The CFO is the leader of agile finance, tasked with reorganizing teams, selecting the right digital tools, revamping staff skills and culture and establishing performance metrics.
• Studies have shown a correlation between agile finance and increased revenue and profitability.

Agile Finance Explained

Finance teams that apply agile principles look and act differently. Agile organizations are flatter than traditional hierarchical ones, typically eliminating midlevel management from decision-making. Specifically, an agile finance team is organized into small, cross-functional groups that work together to solve business problems and support operations. Some agile models refer to these primary working groups as squads, especially when they are embedded within a business unit. Agile squads are self-organized and autonomous and connected to larger tribes, chapters and guilds to tap into interdisciplinary, cross-functional knowledge and skills. A tribe is a group of squads that collaborate to solve specific business problems. Chapters and guilds focus on professional development and supporting squads. In a finance organization, a squad might consist of staff members from finance, IT, human resources and accounting, working together to deliver on common tasks, such as budgeting, forecasting and the financial close process.

Beyond team organization, the application of agile principles is critical to the success of agile finance. At the most basic level, an agile finance function focuses on strategic priorities. For example, agile finance broadens the typical financial planning and analysis (FP&A) role to include advanced analytics for more comprehensive and accurate forecasts, tapping into financial, operational and market data. In turn, these improved forecasts can be used to better measure performance across the company and deliver timely insights that inform strategic decisions. Other agile principles include customer-centricity, cooperative business partnership, continuous innovation to improve all processes and deliverables and excellent communication and trust among squads and leadership.

Agile Finance Key Practices

Agile finance teams use agile principles to change their approach to serving the business. By reducing the time spent on recording transactions and extracting data, finance teams can spend more time helping to support business decision-makers. The approach leads to a collaborative relationship with business leaders, based on shared goals. It’s important to note that agile finance doesn’t have to be all or nothing. The key to success is identifying which areas will benefit most from agility and then scale and accelerate deployment as needed. Regardless of how it’s implemented, agile finance involves the following key practices.

• Scale accounting and finance operations. Digital, cloud-based automation helps expand the capacity of accounting and finance operations, creating efficiencies and enabling scalability, especially in shared-services models. Additionally, centralizing centers of excellence fosters standardization, which provides more transparency and better controls. Typical centers of excellence include accounts payable, account reconciliation, financial reporting and FP&A data scientists.
• Know intangible drivers of value. Agile finance teams go beyond traditional key performance indicators (KPIs) and leverage big data and advanced analytics to unlock, monitor and predict intangible business drivers. In turn, this knowledge provides more meaningful information for business decisions and greater confidence in results. Examples of intangible drivers of value are brand reputation, customer service and customer satisfaction, although the drivers may vary by company and industry.
• Inform stakeholders of new developments. Partnering with business leaders is a key goal for agile finance, so it’s important to communicate with stakeholders. Agile finance teams should be involved in defining finance deliverables, helping to explain them and soliciting feedback on their usefulness. By doing so, product improvement and development are more apt to be aligned with stakeholders’ needs.
• Identify opportunities to manage risk. Since agile finance teams put enhanced analysis in front of decision-makers quickly, leaders can identify and address business risks in a timely fashion, without increasing the organization’s risk profile.
• Expand skill sets. Agile finance teams need employees with expanded skill sets beyond traditional technical accounting and finance training. Agile finance requires competency in data analysis and statistics, combined with market expertise and keen collaboration skills.

Benefits of Agile Finance

Benefits often naturally arise when multidisciplinary finance teams develop strong relationships with the business and operational teams. In addition, the agile principles of operational excellence, digital intelligence and continuous innovation help keep the finance deliverables finely tuned, leading to additional advantages. Consider the following benefits of agile finance.

• Faster decision-making: Cross-functional squads continuously work together and are empowered to make quick decisions. This allows the finance team’s priorities to be reordered as needed so that reliable, accurate information can get into the right hands faster.
• Less complexity: Streamlining responsibility and accountability helps simplify financial processes. Small squads reduce the number of cooks in the kitchen, so to speak. Further, increased use of automation and technology reduces complexity by lowering the amount of manual intervention.
• Equalized data: Agile finance embraces digital tools and leans on IT partners and integrated financial software, such as enterprise resource planning (ERP) applications. This results in a single source of truth for data, allowing teams to focus on the analysis and interpretation of financial data rather than its creation and gatekeeping.
• Increased revenue: Using advanced analytics, agile finance teams can uncover relationships and patterns that may lead to new business opportunities. In fact, a study by Oracle and the American Institute of Certified Public Accountants found that businesses supported by digitally savvy agile finance teams(opens in new tab) are considerably more likely to report positive revenue growth than those that aren’t (46% vs. 29%).
• Better offerings: Agile finance aims to increase the finance team’s influence in business decisions. Companies that can make informed decisions more quickly are better positioned to capture new market opportunities or new demand from existing customers.
• Shorter turnaround: Businesses armed with comprehensive information from an agile finance team often realize commercial benefits, such as reducing the time it takes to get new products to market or to adapt existing products based on customer satisfaction.
• Improved transparency: The cross-functional nature of agile finance teams means that more people from different areas of the business have visibility into the numbers and metrics. This level of transparency helps keep everyone on the same page and provides clarity on what data is the most, and the least, useful to the business.
• Higher employee engagement: Agile finance demands additional skills — especially softer skills like communication and collaboration — and rewards employees with increased autonomy and influence. For finance teams, this is the holy grail of employee engagement. Unburdened by tedium, finance employees who have significant influence on business operations using creativity and problem-solving skills are more enthusiastic and personally fulfilled. In fact, a recent study by McKinsey & Co.(opens in new tab) found that employee engagement increased 30% in agile organizations. Imagine the positive impact that could have on a business.

How to Achieve Financial Agility in a Business

For a finance organization to achieve agility, it must be willing to adapt its culture and processes. The need for proactive thinking, speed and continual innovation and review may require a business to change how its teams are organized, managed and compensated. Additionally, the business may need to re-evaluate and retrain the long-tenured talent who typically work on finance teams as skills like data analysis, data management, commercial acumen and collaborative communication become more important. To achieve this, a business may need to invest in professional development and tactical support for their teams.

Adjusting processes is also key to achieving financial agility, including the adoption of digital technology, such as RPA, ML and AI. These technologies reduce manual intervention in high-volume and repetitive tasks, and free up staff to focus on higher-value tasks for the business. Bank reconciliations, cash application and invoice processing are typical use cases for RPA. ML organizes volumes of data into patterns to help spot anomalies like fraud and errors, drastically reducing the need for human intervention and enhancing internal controls. And FP&A teams commonly use AI-assisted analysis to forecast sales, inventory levels and cash flows.

How to Build an Agile Finance Strategy

When building an agile finance strategy, businesses must keep the general principles of agile in mind, including a focus on delivering value, collaborating with business units and keeping processes simple and transparent. Businesses also must recognize the demands on finance and accounting teams to keep up with dynamic organizations while maintaining strong controls, meeting regulatory requirements and keeping back-office costs down. Consider the following eight steps when building an agile finance strategy for your business.

1. Create a statement of strategy that explains the end goal, including the key objectives that an agile finance function should achieve.
2. Perform a gap analysis to determine where the finance function is today and where it needs to be.
3. Agree on barometers to gauge progress, including urgency drivers that your business must respond to and initiatives it must achieve. Urgency drivers tend to be external forces causing companywide change, such as supply chain issues. Initiatives are commonly internal tactical goals, such as increasing revenue growth or customer satisfaction by a specified amount.
4. Evaluate and implement the right technology that at a minimum eliminates reliance on spreadsheets, but more likely incorporates RPA, ML and AI to facilitate speed and scalability. Automation is critical to building agile finance because it frees up time for more value-oriented activities.
5. Accelerate the financial close so that results are available sooner for analysis and stakeholder reporting. Consider continuous closing, facilitated by the right accounting software.
6. Move to minimum viable product (MVP) forecasts — simple forecasts that cover basic requirements but can be iteratively improved, such as high-level, rolling 12-month forecasts rather than detailed static forecasts that are revised quarterly. Augmented by AI, forecasts may even be doable in real-time.
7. Make a people plan. This involves assessing personnel skills, creating professional-development plans and making staffing changes. At a higher level, this step may involve reorganizing functions into specialized centers of excellence, such as proficiency in analytics, forecasting, expense management or liquidity management. This approach allows for more nimble redeployment of expertise across an organization.
8. Identify and communicate significant overarching assumptions that are expected to be in effect, such as levels of business growth and industry disruption.

CFOs and Agile Finance

CFOs frequently find themselves in the spotlight, tasked with providing strategic insight and plans to fuel future growth. Their charter has evolved from creating and enforcing budgets to helping create business value and avoid problems before they hit the financial statements. As a result, they’re leading their teams to be more nimble, strategic, collaborative and empowered, and they’re adopting agile finance to sustainably deliver the analysis and intelligence that shifting macroeconomic climates — including inflation, recession and supply chain disruption — require.

CFOs are challenged to adjust processes, incorporate the right tools and evaluate their team’s skills to provide value to their C-suite colleagues and the business as a whole. However, they can’t drop the ball on traditional finance tasks, and many are concurrently tasked with reducing costs for their department. As a result, CFOs are turning to the agile approach to meet these conflicting demands, including adopting digital technologies to reduce staff labor on low-value, high-volume tasks and establishing centers of excellence to handle accounts payable, accounts receivable, corporate FP&A and tax accounting. These changes can also help alleviate staffing challenges, such as scarcity of talent, entrenched remote workforces and development of new skills.

In a nutshell, agile finance helps CFOs solve many of their role-specific challenges. Additionally, those who successfully accelerate their teams’ adoption of agile will be in a better position to help drive their company’s growth.

Agile Finance Trends

The tumultuous global environment has pushed the finance function to step up its game. The need for more scenario analysis and nimble, accurate decision support has risen over the recent cycles of pandemic, inflation and supply chain disruption, and it’s expected to continue. Against this backdrop of macroeconomic and societal upheaval, adoption of agile finance is expected to accelerate. It offers a potential solution for several challenges in legacy finance environments, chief among them data collection and aggregation. Here are some other agile finance trends.

• More businesses are expected to apply agile as a way to manage staffing challenges caused by a persistent global talent shortage.
• Instances of remote and hybrid workforces are expected to continue, necessitating a move away from on-premises financial systems and toward cloud-based systems and centralized centers of excellence.
• Finance functions will become more agile through a series of short-term sprints to achieve quick wins, rather than long-term transformation projects.
• Companies with agile finance functions will be better positioned to thrive during a potential recession because they’ll have the right information to surgically cut costs while also investing for growth.