Using Agile Methods in Small Business Finance and Accounting

In May of 2022 I attended a CFO conference put on by the American Institute of Certified Public Accountants.  As is often the case, there are 3 to 4 themes that emerge throughout the week. At this particular conference, one of those themes was the use of agile methodologies in finance and accounting departments. 

At a different point in my career, I served as the leader of a finance department for a medium sized software developer. I was familiar with some agile concepts, but had never thought of how they applied to accounting and finance.  At the conference hearing from speakers from Nationwide Insurance and Bank of America didn’t necessarily translate over to my client base – the small business. 

Never the less, the experiences I heard inspired me to research more about the topic. Before we go any further, you may be asking (and rightfully so), what is agile methodology? The Agile methodology is a way to manage a project by breaking it up into several phases. It involves constant collaboration with stakeholders and continuous improvement at every stage. Once the work begins, teams cycle through a process of planning, executing, and evaluating. The phrase to key in on is “planning, executing, and evaluating”. 

The Agile process can be applied to any team or department looking to improve their efficiency and productivity.  As an outsourced CFO, I believe that this methodology can be used to help small business owners build better finance departments in an efficient way. 

The speaker from Nationwide told a story that resonated with me. They talked about working with end users to determine the requirements for a specific process that needed to be implemented.  Once they got the requirements, they laid out a plan to match the requirements they heard.  Upon embarking on the effort to build this process and system, once they got to a half way point, they realized that they had satisfied all of the users requirements.  While the users thought they had certain requirements, they realized through an agile development process that they didn’t need everything they had originally envisioned.  The speaker gave the example of an A to Z plan, however, they realized getting to L was enough. 

In this blog post, we’ll explore how the Agile process can be applied to a small business accounting and finance department.

Set Clear Goals and Priorities

The first step in the Agile process is to set clear goals and priorities. This is especially important for an accounting department, where there are many tasks that need to be completed in a timely and accurate manner. To do this, create a list of all the tasks that need to be done, and then prioritize them based on their importance and urgency. Once you have a clear list of priorities, you can start to plan how you will tackle each task.

While many small businesses don’t have an accounting department, they can think of this in a different way. For instance, a clear goal may be to develop a system that enables the collection of accounts receivable on a more timely basis. A small business may set several goals such as this.  Once all laid out, priorities typically emerge. 

Break Down Tasks into Smaller Chunks

The Agile process is all about breaking down large projects into smaller, more manageable tasks. This can be applied to accounting by breaking down larger projects like accounts payable or financial reporting into smaller, more specific tasks. This allows you to tackle each task one at a time, which can help you stay focused and motivated.

Several of my manufacturing clients come to me with the same problem – they don’t know how much it truly costs to manufacture their goods. They talk to me about wanting to capture 100% of the costs. I often tell them the process of developing costing around their manufacturing is an iterative one. Often, by the time we are on step 2 or 3, they are satisfied they materially know their costs. The thought (and work) to get to step 7 or 8 and complete the project is no longer attractive to them. By breaking down this process into smaller chucks, we are also able to realize when in the process we have achieved the value we are looking for. 

Embracing Change

One of the key principles of Agile is the ability to adapt and change as needed. This is especially important in accounting, where regulations and requirements can change at any time. To embrace change, it’s important to stay up-to-date with industry trends and your own requirements, and be willing to pivot your approach if needed. By doing so, you can ensure that your accounting department is always compliant and efficient.

The iterative process is a powerful one that I often apply as an outsourced CFO.  For instance, with new clients I tell them that the development of their financial statements will be iterative. Often there is a need to accept that what you think is important in your business and what is really driving in the business may not be the same. Further, as we develop reporting, we know that the organization will change and as such, we need to continue to change our systems that help us with reporting. 

Continuously Improve

The final step in the Agile process is to continuously improve. This means taking the time to reflect on your processes and identify areas for improvement. This can be done through regular team meetings or retrospectives, where team members can share feedback and ideas. By continuously improving, you can ensure that your accounting department is always operating at its best.

In using Agile for accounting and finance, you must be able to gather feedback from the organization.  If you are developing a way to collect accounts receivable faster, this often involves several functions. As the business and environment change, this process will need to change as well. Its important as a leader to have a process in place to evaluate your processes and systems so they can be updated as needed. 

In conclusion, the Agile process can be a valuable tool for small business accounting departments looking to improve their efficiency and productivity. By setting clear goals, breaking down tasks, using Agile tools, embracing change, and continuously improving, you can ensure that your accounting department is always operating at its best. None of this is rocket science.  However, taking a conscious approach to the development of your accounting and finance processes can build a best in class department. 

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