Agile Financial Planning

The ability to manipulate expenses, create a sustainable cost structure, and quickly reallocate resources is crucial in financial planning in general, and becomes more challenging when you work with Agile Financial Planning.

Agile Financial Planning is Not an Isolated Concept

Being agile in your planning was a good idea even before the pandemic. It has always been essential to quickly respond to changes and ensure that your organisation is business-resilient. However, it has now become evident to many that the ability to swiftly adapt has become business-critical.

Agile Operational Management and Agile Financial Planning are closely interlinked. In most cases, an overarching course change requires that you can rapidly adjust your finances as well.

On your way towards Agile Financial Planning, you typically need to review and adjust the forecasting process, key performance indicators, targets, reporting, Risk Management and, if you want, start working with Financial Scenario Planning.

However, it's not something you need to plunge headfirst into. There are tools you can grow into, but it's a good idea to consider planning as a whole right from the start.

That your company becomes more agile in its Financial Planning and/or in its Strategic Planning does not mean that the overarching (long-term) goals become less important. It's about recognizing that the path to the goal is not straight and being prepared to adapt your planning process.

The goal of your Agile Financial Planning

One of the key goals of Agile Financial Planning is to have the ability to change swiftly when required. To make this possible, it is advantageous to see and understand your operations and your forward movement more clearly. This also includes being able to look further ahead in your planning process.

In practice, you want to achieve a dynamic, rolling, and operation-supporting process, or if you want to see a broader solution; a solution linked to the business planning process where you control your Financial, Operational, and Strategic Planning in one tool, and draw quality-assured data from several source systems (such as business systems, financial systems, and HR systems).

Budgeting as a First Step

The logical first step for most is to start with budgeting. This will assist you in making decisions related to cash flow and liquidity, among other important financial KPIs.

Paradoxically, one of the potential efficiency gains from transitioning to Agile Financial Planning may be that you can eliminate unnecessary budgets.

Instead, you will likely want to combine rolling actuals with rolling forecasts and shift from account-based budgeting to working with operationally relevant drivers.

This not only aids in effective forecasting but also helps you identify early warning signals. With these components in place, you can also begin to work more efficiently with various scenarios that provide a clearer picture of the future.

Effective collaboration among those involved in the budgeting process is also a prerequisite for your financial planning to become "agile". There are also benefits to working with drivers that are closely related to your company's operations (business). They make financial planning more comprehensible to your colleagues at all levels and foster greater engagement and accountability.

Tools for Agile Financial Planning

A role-based and web-based system, with a high degree of automation and integration with source systems, will be essential in your transition to Agile Financial Planning.

You want the information to be credible and available to the right person, in the right way, at the right time to allow them to do their job effectively. The system will then assist you with both communication and collaboration while providing a relevant basis for decision-making.

It also helps to create understanding in the business, as users can see trends, visualised data, information, and understand what they need to do, and how they contribute. Together, you can move away from manual routines and quality shortcomings.

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