Drive Flexibility With an Agile Approach to Budgeting

Predict. Command. Control. These are the core principles of conventional budgeting. But in a world defined by change, these fundamentals can become liabilities. Amid continual disruption, finance teams need less control and more flexibility, less prediction and more adaptation.  

Organizations also feel the pressure to outpace the competition. However, speed and strategy must go hand in hand. Agile approaches help companies build confidence that they’re making the right choices in response to change—and work faster while they’re doing it.

That’s because agile organizations innovate by dividing big challenges into specific problems, then quickly testing potential solutions. Fast successes, and failures, let teams set priorities based on what works, in contrast to a more top-down approach. Agile organizations also focus on a smaller number of initiatives that are completed more quickly. Rather than juggling multiple projects, agile teams make uninterrupted progress toward specific strategic goals.   

As organizations make this shift, finance teams need to adjust how they approach budgeting as well. 

Agile Budgeting Basics 

The key to successful agile budgeting is accurate, up-to-date information about what’s working—and what’s not. Sometimes new information will show that planned initiatives need to pivot or be canceled outright. Either of those is far preferable than just continuing with an initiative, as so many companies do, even though the people working on it know that it’s not going to achieve the value that’s expected.

Understanding and adopting three key tenets of agile budgeting work can help finance, and the entire organization, become more adaptable and responsive.

1. Plan in Shorter Sprints 

Finance teams can’t predict the future—and trying introduces a lot of risk. Budgeting for a year or more can shackle an organization to an outdated strategy, a dangerous prospect in a volatile business environment. Planning more frequently and for shorter time horizons gives organizations the flexibility to react to market shifts while they’re still relevant. 

2. Prioritize Strategic Goals

While dividing a team’s time between multiple projects may seem efficient—even necessary—asking people to juggle priorities can make them significantly less productive. This is true for organizations as well. Businesses can get more done by investing in a few short-term, strategic initiatives than by trying to do everything at once. Prioritizing strategic projects and sequencing work lets teams reach goals faster—and deliver value to the organization earlier. 

3. Create Fast Feedback Loops

To accurately gauge which bets are paying off, finance teams need a constant influx of information. They need to know what each initiative intends to deliver, and how success will be measured. The leaders of each project need to define those metrics at the start, and the finance team should review progress at least monthly to avoid unpleasant surprises.

A Stronger Finance and Strategy Partnership

Moving to agile budgeting is often a big leap, and the change can be difficult for a company to absorb all at once. Often, leaders all the way up to the board of directors are involved with the planning, budgeting, and funding process—and these executives can be hesitant to change processes that worked well for them in the past. 

To reduce the pain and anxiety involved with such a significant shift, finance teams can take an iterative approach to adopting agile budgeting strategies. Starting with one business unit or funding area can help demonstrate the value on a small scale, which helps build buy-in for a broader rollout across the company. 

This process can also position the finance team as a stronger strategic partner, giving business leaders the information and advice they need to make better decisions for the future.