How can Agility help a Finance Department?

28 Sep 2023

Agility and finance may not at first glance seem like natural bedfellows, yet the impact of an agile mindset and agile ways of working can improve not only a finance department itself but other parts of an organisation as well. 

The challenges in finance: 

Most of the time we finance professionals lurch from one deadline to the next, with rarely enough time to tidy things up, and never enough time to invest in being a true business partner to budget holders, senior management or the organisation at large. 

On a very few occasions in a long career, we may briefly consider what we could be doing to help our businesses take significant leaps forward. We get involved in projects that benefit from our training, knowledge and intellect and are told: ‘we could not have done it without you’. But all too soon we are back trying to reconcile actuals to a budget which was conceived up to 18 months ago! We are demanding time from our non-finance colleagues to help explain the data, and trying to get them back onto a track which has become meaningless given business and world events.  

We hold the (invented) budget to somehow be the beacon of truth, the goal we must try to reach. We believe we do this for the right reasons: governance, cost management, budget control, fiscal oversight, legal and regulatory compliance.  

However, in doing all this I believe we are driving our colleagues into making the wrong (sub-optimal) decisions and adopting unhelpful behaviours.  

By instead using our training in a more meaningful way, we can help a team (be that marketing, IT, HR, sales, product development, procurement, or other) to explain what they are trying to do and support their decisions with concrete evidence and metrics. We can help that team make better decisions, not by saying ‘no’ to the request for more budget, but by helping them find alternatives to solve their current challenges. 

By being comfortable with numbers and knowing how to gather, interpret, and, dare I say, manipulate data, we can have a meaningful role and provide significant impact not only in finance teams but in non-finance departments as well. 

How can agile address these challenges? 

Finance professionals could be doing so much more to support the financial health of the organisations we work for or with! 

Instead of controlling costs and risks in the traditional way, which stifles our organisations, we could be controlling costs and managing risks in an agile way, while at the same time helping teams unleash their potential. 

I have argued for a while now that far from doing a good professional job by only controlling costs and risks — counting the beans, we may actually be being negligent for not helping our teams achieve what they could achieve with our help.  

Simply meeting the budgeted numbers at the end of a tough year should not be cause for celebration when we could have doubled or tripled our revenues and profits by supporting our teams to be more agile. “That is all very well, but as you said at the beginning, we have no time”, I hear you thinking. 

Indeed! So firstly, we ought to consider some simple changes to our internal ways of working which could free up our time.  

Once we have created space, in our calendars and our heads, we can then turn our attention to better supporting our organisations. 

Even before we can properly test and buy into the fact that being agile will improve our controls, governance and risk management, we need to create time to experiment. 

Creating more time at month end: 

One of the first things we could do is become aware how much time we are spending on what. 

For example, how long does it take to get the numbers out of the system and into a clearly understandable form? 

Now how long does it take to get from that point until they are in a state to present to other departments? In my experience this part takes 2 to 4 times longer than the initial getting the numbers down. And how much more accurate, or how much more valuable is the information after spending the extra time on it? Remember the 80:20 rule: eighty per cent of the value comes from the first 20 per cent of the work. What is the minimum viable reporting we should do? 

One of the teams I worked with had 20 accountants crunching the numbers every month, quarter and year end. The initial numbers would be ready in less than a day, and we would spend another 2 to 4 days polishing the presentation. Right there we could have found 40 to 80 days a month we could use on something more productive. And this is without making any systems changes. What could your team do with an extra 80 FTE days per month? 

It is about being pragmatic. Does it matter that on one slide the number is $205.1m and on the other slide it is $205.2m? Will knowing what the $0.1m is made up of change the decision-making? 

Creating more time around budget reconciliations: 

Next we can look at our line item budget reconciliations. How much time do we spend interrogating the business about the over or underspend on the smallest line item in the list? So long as the overall budget for the team or department has not been exceeded, does it matter how the department head is allocating the spend?  

Maybe they find that part way through the year it is more valuable to upgrade their IT equipment than to travel. Maybe they can reduce the overall budget by working remotely. But instead of celebrating their ingenuity in doing these things, we tend to make it difficult for them to make these changes without long approval chains, so they end up not bothering. 

Of course we want all the actual numbers to line up with the budget. Success for us in finance is a variance column full of zeros. But is that always what is best for the company? 

Working in an agile way also means:

Faster Decision-Making:  

Agile practices promote more efficient decision-making by facilitating shorter feedback loops, rapid experimentation and iterative improvement. This can help finance departments respond more rapidly to changing financial conditions, make timely decisions based on real-time data and adapt financial strategies as needed. In other words, it’s not necessary to wait until reports and presentations are ‘finished’ or ‘perfect’ before reviewing them. It’s better to review the work in progress to guide the direction or call a stop to the work when enough value has been achieved. 

Enhanced Flexibility and Adaptability:

Agile practices promote a flexible and adaptable mindset, allowing finance departments to respond more effectively to changes in business requirements, regulatory changes, and market conditions. Agile methods such as Scrum or Kanban, enable finance teams to adjust their priorities, tasks and resources in response to changing circumstances, improving their ability to manage financial operations in dynamic and uncertain environments. 

Improved Collaboration and Communication: Agile practices emphasise teamwork, collaboration, and open communication. This can foster better collaboration, both within the finance department and with other departments, business units, and stakeholders. Agile practices, such as daily stand-up meetings, sprint reviews and retrospectives, promote regular communication and feedback, which can help finance teams identify and address issues, align expectations, and improve coordination and collaboration. 

Increased Transparency and Visibility:

Agile practices promote transparency and visibility of work progress, priorities, and outcomes. This can enable finance departments to have a clear view of the status of financial initiatives, identify bottlenecks, and prioritise work effectively. Agile practices, such as visual management boards, burndown charts, and Kanban boards, provide real-time visibility of work status, which can help finance teams make data-driven decisions and manage their workloads more effectively. 

Continuous Improvement:

Agile practices emphasise a culture of continuous improvement, encouraging finance departments to regularly review and reflect on their processes, practices, and outcomes and make iterative improvements. This can help finance teams identify and address inefficiencies, optimise financial processes and enhance overall performance over time. It is necessary to take care however, that small gains achieved by continuous improvement efforts do not get in the way of the potentially much larger gains possible by implementing a real change our ways of working. It will often require as much time and effort to get a 1 per cent improvement as it will to improve outcomes tenfold. 

Early and Frequent Deliverables:

Agile practices emphasise delivering value early and frequently. This can help finance departments achieve tangible outcomes sooner, such as financial reports, budget updates and cash flow projections, which can support timely decision-making and improve organisational performance. 

Risk Management:

Risk management is baked into agile ways of working. Agile teams identify, assess and manage risks proactively as part of their ongoing work. Understanding how to do this can help finance departments achieve the benefits of risk management with much less work, and in many cases improve the outcomes of their risk management efforts.  

Early Identification and Mitigation of Risks:

Agile practices emphasise early and frequent feedback loops, which can help finance teams identify risks early in the financial management process. Agile ways of working promote regular review meetings, such as sprint reviews or daily stand-ups, where risks can be discussed, identified, and addressed promptly. This allows finance teams to take proactive measures to mitigate risks and prevent potential financial losses. 

Iterative and Incremental Risk Management:

Agile practices allow for iterative and incremental approaches to managing financial risks. Rather than relying on a traditional waterfall approach, where all risks are identified and mitigated upfront, agile practices enable finance teams to continuously assess and manage risks throughout the financial management process. This iterative approach allows for better adaptability to changing risk profiles, evolving business conditions and dynamic market environments. 

Collaborative Risk Management:

Agile practices promote collaboration and communication among team members, which can enhance Financial Risk Management. Regular meetings, such as sprint reviews, backlog refinement, or daily stand-ups, facilitate discussions on risks, risk identification, risk assessment and risk mitigation strategies. This collaborative approach allows for diverse perspectives, insights, and expertise to be taken into consideration, leading to more effective and comprehensive risk management. 

How can Agile support Financial Planning and Budgeting? 

Adaptive Planning:

Agile practices promote adaptive planning, allowing finance teams to adjust financial plans and budgets based on evidence, changing business needs and market conditions. Agile principles, practices and methodologies allow for iterative and incremental planning, where finance teams can continuously review, adjust, and optimise financial plans and budgets as new information becomes available or business priorities change. 

Faster Budgeting Cycles:

Agile practices can help finance teams shorten budgeting cycles by enabling faster decision-making, iterative progress, and frequent feedback. Agile methodologies facilitate shorter budgeting cycles, allowing finance teams to respond more quickly to changing business requirements, to align budgets with strategic goals and make timely budgeting decisions. 

Data-Driven Decision-Making:

Agile practices emphasise the importance of data-driven decision-making and can help finance teams improve their data management practices for financial planning and budgeting. Agile teams typically use tools and techniques for data collection, validation, analysis, and visualisation, which can help finance teams better manage financial data, ensure data accuracy and make informed decisions based on data-driven insights. Though I have only scratched the surface here hopefully this provides food for thought. As someone who worked in Finance for most of my career, I wish I had known about some of these options back then! A few of us tried various approaches but without a coach, a framework or just some evidence of what is possible, we never made full use of the opportunity to change what we did and how we did it. 

 

The Agility in Finance, Procurement & Contracts category of the annual Agile Business Awards will shine a light on the extent of what is possible and provide the examples and inspirations I wish we had! 

Applications for the awards are open now. Find out how to apply here: Agile Business Awards and Conference | Agile Business Consortium 

For further reading, please see: Beyond Budgeting – the Handelsbanken story and why the traditional budget needs a rethink 


Please note: blogs reflect the opinions of their authors and do not necessarily reflect the recommendations or guidance of the Agile Business Consortium.

 

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