Whitepaper Agile Finances

1. Agile finance – part 1
New methodologies for delivering value
to your organisation
Agile
1

2. How it works
New methodologies for delivering
value to your organisation
Traditional hierarchical organisations
were designed to impose a central
‘command and control’ management
style. They developed strong central
finance functions that implemented
the essential financial controls and
developed company-wide reporting
regimes. This worked well for
many decades whilst organisations
experienced a relatively stable
business environment.
However, the modern business
world is is subject to constant
changes. These are driven by
customers, fashions, social trends,
economics, governments, regulators,
mergers, supply chain disruptions,
technological change and so on.
There is very little that organisations
can actually now control. The key
to success these days is to react
quickly to each unforeseen change
as it emerges, requiring considerable
organisational agility.
An agile business has a clear overall
vision, but delegates responsibility,
not just tasks. It constantly
experiments with new ideas and
tolerates errors. It regularly re-
organises itself, working through
informal self-organising project teams
that collaborate closely with its supply
chain. Detailed central planning has
been replaced by a set of overall
long-term objectives. These are met
through a constant process of tactical
planning and forecasting, driven
by mid-managers who are given
contributory targets and incentives.
The agile organisation must be
supported by an agile finance
function. Instead of imposing
a reporting regime, it provides
managers with powerful interactive
tools that monitor the progress
of the business in achieving its
objectives, help identify causes of
poor performance, support decision-
making to bring it back on track and
monitor the effectiveness.
Business as usual is out, adapting
to change is in
Finance departments that view
“business as usual” as their primary
goal could be putting their company
at risk. They could overlook changing
market conditions or be unable to
adapt to them quickly enough. While
finance teams still need to stay on
top of cash management and internal
control, their effectiveness in the
current climate now depends more
on understanding how the business
really works and collaborating and
with other departments to drive
efficiency and improve performance
in order to meet the overall strategic
objectives.
Managers must be able to create
and change their reports themselves.
They must be able to identify areas
of poor performance and investigate
the detail in order to seek causes.
They must also be able to create new
reports to monitor new problems
as they emerge. They must also be
able to share reports with others,
as they work together to ensure
that performance in each area will
meet the overall objectives. Financial
reporting systems must be able to
cope with constant tensions and
interactions.
A good core
Agility is inconsistent with the
traditional protracted IT procurement
model based on detailed users
needs, which will have changed
by the time the contract has been
signed and again before it is live.
Organisations should use new
procurement practices that seek
identify what potential systems need
to do to deliver business value as
quickly as possible. The chosen
system must be capable of rapid
change.
The core business software must
be capable of tight integration with
key business processes, such as
customer relationship management
and procurement. This ensures
that all revenue opportunities are
maximised and customers are given
a good experience throughout every
interaction with every part of the
organisation. It also allows staff to
quickly and easily enter information or
transactions directly into the system
themselves, to reduce time and errors
that act as a brake on the business.
Collaboration
An agile business requires flexible
business systems that can respond
quickly to both external changes
to the business environment and
internal organisational changes that
are required to meet them, without
one negatively impacting the other.
The systems must also support
collaboration between ad hoc internal
and external work groups. They
must work with teleconference,
web conference and social network
systems.
The finance function must ensure that
constantly changing organisations
and teams can work together, both
internally and with external suppliers
and customers. This will create a fluid
and frequently changing processes
and reports that can match the
constantly changing business
environment.
Measuring performance
Agility is the only way to maintain
competitive advantage in a constantly
changing world. However, many
organisations are focusing on
traditional financial measures of
performance, such as profit and
share price. Agile, innovative and high
performing organisations focus on
non-financial and qualitative aspects
of their business, such as staff
morale, customer satisfaction or idea
generation. Achievement of these will
result in improvement in quantitative
measures.
Agile finance
In some organisations the finance
function is burdened by its traditional
role as the guardian of organisational
behaviour and data gatekeeper.
Both in the role they play and their
attitude to colleagues, some finance
managers have prioritised the
demands of centralised systems
over the information needs of line
managers.
This is now changing, as constant
flux in the business environment
drives the organisation to react. Web,
mobile and Cloud technology are now
supplementing a new generation of
highly flexible core business systems.
Whilst they provide the necessary
internal controls to ensure good
governance and compliance, they
also provide the flexibility to quickly
adapt to changing conditions.
Empowering managers to monitor
and analyse their own area’s
performance, create and modify
their own reports, removes a major
burden from the finance function.
This gives managers the insight to
make informed business decisions
and serve their customers more
effectively. In the finance department,
it allows staff to be more efficient
and productive, giving them more
time to concentrate on contributing
to the organisation’s overall strategic
objectives.
Part 2 - Tools
In the second part of this white
paper we look at rapid application
development techniques aimed at
keeping systems in line with changes
that happen as new systems are
being developed. We also look at
reporting in more detail, along with
data analysis and appropriate key
performance indicators.
Sage
Agile finance – part 1
Sage
Agile finance – part 1

3. An agile manifesto
• It is critically important to have
a clear long-term vision for the
organisation, supported by broad
key performance indicators.
Managers must have their own
contributory indicators.
• The organisational culture must be
based on trust and transparency.
People must be aligned to the
common vision and values; be
good at spotting emerging trends;
open to new ideas; and sensitive to
customer needs.
• Delegate responsibility and let
people know how far they can go
in taking risks with agile actions
that can be carried out without
waiting for all the details to be fully
worked out.
• Leaders must create the conditions
for faster decision-making. For
example, allowing customer-facing
staff to determine how customer
issues are resolved, within overall
guidance.
• Knowledge workers must not
be tied to corporate hierarchy;
must be intrinsically motivated;
highly mobile; and be treated
as associates, rather than as
subordinates.
• People must work in teams with
a diverse mixture of people, skills
and backgrounds. Isolated work
should be discouraged, whilst
encouraging full and frank debate;
strong opinions; and diversity of
thought, ethnicity and background.
People with different views and
perspectives generate alternatives,
from which good new ideas
emerge.
• Be unreasonable with timescales
and don’t relent. If something takes
a ‘regular’ business six months, an
agile one should do it in two.
• Don’t suppress potentially
innovative ideas by telling people
to come back when they have built
a business case. Your role is to
encourage them by helping them
to prepare a sound one.
• Put systems in place to
capture and prioritise business
development and innovation ideas.
• The strategic plan is a living,
evolving process throughout the
organisation. Top management
encourages each manager to
use forecasts to drive a constant
process of tactical planning for
their own areas of responsibility, to
help the organisation to achieve its
overall objectives.
• An endless cycle of cross-
functional, cross-regional strategy
collaboration generates a
continuous flow of improvement
initiatives that are energetically
delivered and resourced.
Sage
Agile finance – part 1
Sage
Agile finance – part 1

4. Sage (UK) Limited,
North Park,
Newcastle upon Tyne,
NE13 9AA
Telephone: 0845 111 99 88
Email: customer.development@sage.com
Web: www.sage.co.uk
© Sage (UK) Limited 2014
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