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Embracing Agility in Accounting: The Paradigm Shift towards Agile Accounting

In today’s rapidly evolving business landscape, traditional accounting practices are giving way to more dynamic and responsive approaches. The new-age accountants are open to change and at the same time are also forced to face the changing dynamics of the business demands and business reporting. Hence, borrowing and taking cues from a more efficient process is probably a timely remedy. One such borrowed framework that is gaining traction is Agile Accounting, a methodology that is inspired by the Agile Project Management framework widely practised in the software industry. Agile Accounting has the potential to transform financial processes and foster collaboration.

Agile Accounting is a departure from the traditional waterfall model, where accounting tasks follow a sequential and rigid structure. Whereas the traditional approach is past-oriented, agile accounting focuses more on the present and changing circumstances. The adoption and need for Agile Accounting can be credited to the startup community along with ever-changing busines dynamics where speed, adaptability and collaboration are the keys. Hence, Agile principles are finding a new home in the accounting and finance domain.

The key principles of the Agile framework remain the same. Let’s look at some of them from the accounting perspective.

  1. Iterations: There should be scope for continuous iterations, refinements and improvements. These enable the finance teams to respond quickly to changing business requirements. It also ensures alignment with the organizational goals.
  2. Collaborations: One of the principles of the Agile Manifesto is collaboration between different teams. Breaking down departmental silos helps in understanding the complete process and ensures a smoother workflow.
  3. Customer-centric focus: The various users of the financials and accounting data, whether internal or external stakeholders can be treated as ‘customers’ for Agile accounting. This approach helps in many ways such as improving readability, embracing change and improvements, and timely and quality decision making.
  4. Sprints: The projects should be broken down into easily trackable chunks for time-bound completion preferably within 1-2 weeks, otherwise known as sprints. A simple, yet effective way to do things faster.
  5. Communication and continuous feedback: Daily communication within the team is key to achieving sprint targets. Everyone should be allowed to speak freely irrespective of superiority and where team team reflect on ways to become more effective. A continuous feedback mechanism warrants improvement, adjustments, and thus achieve overall efficiency. This is one of the fundamental aspects of Agile methodology.

The agile framework for accounting and Finance does not revolve only around doing things faster and improving the process. It also includes embracing the cloud and digital technologies effectively. Additionally, it requires finance professionals to embrace continuous learning and develop broader skill sets in statistics, data analytics, data wrangling and data visualisation. As per a report on “Agile Finance Revealed” by Oracle and AICPA, Agile finance leaders are more likely than others (45% vs 17%) to implement cloud bases ERP. These organisations are also more likely to report better revenue growth (89% vs 63%) and increased profitability (95% vs 70%).

Business leaders need to re-determine the role of finance withing the organisation. Rethinking the finance mission is the need of the hour. It should not be limited to data-crunching but aligned towards making the function better support changing needs of the stakeholders. This ensures that the stakeholders get the information that they need to confidently move forward in a volatile, uncertain, complex, and ambiguous (VUCA) world.

Embracing agility in accounting can reap benefits in many ways. The traditional ways of forecasting can be modified with real-time data and kept ready to use at any given point in time. Hence, continuous planning can become a norm instead of an exception. With the adoption of technology, continuous monitoring and planning, it becomes easy to mitigate risks. One such ever-increasing and changing risk management is required for compliance and regulatory compliance. Changes in the laws can be made effective and complied with much sooner in an agile organisation.

Some real-life use cases for Agile in Accounting and Finance:

  • Use of cross-functional teams that collaborate closely to align financial strategies with business goals, ensuring adaptability in a rapidly changing industry such as the music or software industry.
  • Risk mitigation and compliance by improving efficiency, and increasing responsiveness by becoming more agile specifically for the insurance company and financial institutions.
  • iterative decision-making to quickly respond to changing market trends and customer preferences, specifically for industries in clothing and fashion.
  • For manufacturing entities, adopting agile principles in finance can make financial processes more responsive and aligned with the company’s strategic objectives.
  • Accountants in practice can also adopt the principles of agile. As explained beautifully by Frank Stitley, a prominent CPA , teams can be broken up into project teams. Project loads during a tax season can be broken down in to sprints to effectively manage and complete tasks.

Having said all this, adopting agility in accounting has its challenges as well. Since the whole concept is focused on challenging the complete framework of the traditionally operated accounting industry, with a modern outlook, hence resistance to such change is evident. Accountants are not generally seen as people in love with adopting newer technologies. The industry has long operated on legacy systems. The adoption of newer technologies such as cloud-based systems requires a change in outlook and approach to doing things. Also, it is rarely possible for any business to go ‘fully agile’. Quoting Agile for accountants by CPA Australia, “It may not be appropriate to allow junior staff access to sensitive commercial or financial information. This is rarely a significant issue given businesses soon discover which projects and tasks can best be completed by agile teams”. A change in the outlook of newer business leaders will go a long way in modernising traditional accounting practices. Be the Agile CFO!

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