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.
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
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 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.
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.
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.
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.
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.
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.
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