What is Agile Finance Operations?
Agile has quickly become a buzzword in software development, but it also holds some potential value in the finance world. Enter: agile finance.
Agile has quickly become the preferred method for software development, and with good reason. Many of today’s high growth companies use agile development to build their software quickly and efficiently.
Agile is so effective that other departments within agile companies are starting to use the principles of it to make their own processes more efficient. Marketing teams are using it to grow faster. Sales teams are using it to reduce their sales cycles.
But, there are still two departments in many organizations that haven’t picked up on agile yet — the operations and finance teams.
The ideas behind agile development can work incredibly well for the finance team. In fact, when we look at the principles of agile, you’ll see how easily they fit into financial planning.
The principles of agile development
In 2001, seventeen software developments got together and wrote the Agile Manifesto. As part of that, they outlined the principles of agile. Those principles set off a new age of software development.
Agile’s principles are focused around efficiencies. Here’s a quick summary of the principles:
- Focus on customer satisfaction -- Without the customer, you don’t have a company. That means everything you do should serve the customer. The decision makers of the organization must have the right approach to satisfy customers above everything.
- Welcome changes -- From customers to a new market landscape, things change. You can’t fight those changes so you have to adapt.
- Cooperate and communicate effectively -- This is a big one for any agile function. You need to make sure you’re communicating and cooperating with your team and finance leaders.
- Work with trustworthy, motivated individuals -- If an individual on your team can’t be trusted to do their work, or they’re not motivated to do great work, your whole team will suffer. You should have a performance management plan in place.
- Simplicity is essential -- Often, the simplest solution is the best one.
- Drive toward consistent improvement -- You should regularly take time to step back and think about your processes. Is there a way to do them more efficiently? Are there anto learn and implement within the company?
Despite the fact that these principles were written for software development, they can be easily applied to financial agile operations.
What is financial agile operations?
Like agile development, agile finance is about collaborating with your team to work smarter and faster.
Luckily, with new automation technologies being introduced in finance, collaboration and working smarter is easier than ever. That’s one of the reasons why you’re hearing so much about financial automation lately. It’s an important part of agile operations.
When you can take advantage of these new technologies, you can create an environment where your systems and processes are more efficient. That will give you time to focus on what really matters: growing your company’s revenue.
How can finance become more agile?
Agile finance also has to be grounded in the principles of agile. When you look at those principles that we previously mentioned, it’s clear that there are a few similarities between agile software development and financial agile ops.
We’ll examine each principle under the lens of finance to give you an even clearer picture:
Focus on customer satisfaction
Finance teams often struggle with this one. You might feel like you work in the back office and don’t really have any influence on customer satisfaction. That couldn’t be further from the truth.
For finance, focusing on customer satisfaction can mean a few things:
- Paying attention to customer-focused metrics, like NPS score. When you learn to optimize around customer-focused metrics, you’ll be able to improve your top line.
- Working on pricing. Think about your current pricing model. Make sure the finance team is using a pricing strategy that makes the most sense for your customers.
- Breaking down internal data silos. Data silos can lead to a bad customer experience. As a finance professional, you have a massive amount of data. If you’re not sharing that data throughout the company, you’re causing a data silo that can hurt your customers. There are a number of tools, like Lola, that can help you give your team automated insight into real-time financial data.
The ways finance can impact customer satisfaction and experience are nearly endless. Chances are that your biggest impact will happen with pricing strategies, but don’t be afraid to get creative and figure out how your team can improve the customer experience in ways you haven’t thought of.
Welcome operational changes
A great example of a company keeping up financial change is Adobe. From the time the company was founded, the maker of Photoshop allowed customers to purchase a perpetual license. That pricing strategy worked for years, but it prevented their team from updating software as often as they would like.
As a result, competitors started to close in on the market leader. In 2012, Adobe switched to a subscription model. According to Mashable, Adobe felt the shift to subscription pricing was necessary to their survival.
Keeping up with a changing market is what has kept Adobe in the fast lane when it comes to agile finance.
Cooperate and communicate effectively
Cooperation and communication are essential for any organization to run efficiently. When adding an agile financial function into the equation, it becomes even more important.
Cooperating might mean different things for your company. Chances are, it’s about putting egos aside and working together toward better decision making, whatever that may be.
You can also take notes from Amazon on cooperation. Their cooperation strategy of “disagree and commit” can be especially useful when you have many different voices on one team who don’t always agree.
‘Communicate effectively’ is all about clear, straightforward communication. If that means communicating clearly via email, do that. If that means face-to-face conversations, do that. The point of communicating effectively is to use whatever method works best for your finance team.
Work with trustworthy, motivated individuals
This principle comes down to your hiring and employee development process. You can learn more about this in our Guide to Agile Operations.
Hiring trustworthy employees, especially in finance, is incredibly important. Just because you’re running an agile team, doesn’t mean you need to hire quickly. It's quite a decision making process. Take time to hire the right finance team. If you’re not sure where to start, talk to your finance leaders and people ops team to understand their approach to hiring.
Simplicity is essential
We love this principle at Lola. It’s one of the driving principles behind how we work. Simplicity is difficult though. It’s often much easier to create confusing, convoluted processes.
In an agile finance function, simplicity is becoming easier by the day. Tools like Lola are helping to automate some of the more manual business processes. Automation might sound daunting, but it will actually simplify many of the manual budgeting and forecasting processes that you’re currently doing.
Drive toward consistent improvement
This principle is often forgotten about in agile finance. People have the best intentions with it, but then work gets in the way. You have so much work to do that you never take a step back and ask yourself, “Is there a better way to do this?”
Make time every month to review all of your financial planning and processes and see if there’s a way to simplify them. But, don’t do this alone. Your whole team, including finance leaders should be involved in improvement projects. There’s a good chance each of your employees has ideas about steps that can be taken to improve the efficiency of your finance team.
Agile finance is about efficiency
If there’s one thing to keep in mind as you move your finance team toward an agile environment, it’s that efficiency is the key. Efficiency in hiring, work improvements, communication, capital allocation, resource allocation, and every other part of your job will allow your team to work smarter. Smarter work leads to quicker work with fewer mistakes.
Once you pull that off, you’ll have an agile finance model within your team.