Agile Financial Planning: The Key to Hyper-Growth Success in Modern Startups

In FP&A, "agile" is used so often. When building a budget, every startup claims to be modern and agile. But saying it doesn't make it true. 72% of companies do their financial planning in Excel. So numerous Excel spreadsheets act as a multi-purpose enterprise finance solution, even if the company spends dozens of thousands of dollars on expensive enterprise systems like NetSuite.

Let talk about data

The 2024 Global Planning Survey reveals that too many financial planners are simply scanning for potential risks rather than actively preparing for them. For example, 43% of respondents are discussing rising tensions between China and Taiwan but only 29% are actively scenario planning for an escalation in the region.

Specifically startups face immense pressure to navigate a complex and unpredictable future. The need to shift from conversation to action around scenario planning occurs on a weekly basis.

But in far too many cases, CFOs remain limited by tools like excel that are prone to errors and siloed data – leaving them vulnerable to costly mistakes and outdated insights. To better compete, they need to be proactive about anticipating volatile events, calculated scenarios and aligning strategic, financial and numerous operational plans.

When marketing teams want to access data to make decisions about product launch or build scenarios for product launch delay, they need to put in a request for information to CFO, they do not directly communicate with the R&D or product teams—which can take days or even weeks to fulfill. When you’re moving at startup speeds, who has that kind of luxury time?

So, what’s the right approach? Companies that actually collaborate on financial planning and scenarios have an advantage: agile financial planning.

What is financial agile planning?

Financial agile planning is an approach that applies agile principles to financial management and planning processes. It is designed to enhance flexibility, responsiveness, and collaboration in financial planning, allowing organizations to adapt quickly to changing business conditions and priorities. Here are some key features of financial agile planning:

Continuous Forecasting: Unlike traditional annual budgeting processes, financial agile planning involves continuous forecasting and revising of financial plans. This allows organizations to adjust their financial strategies based on real-time data and changing market conditions.
Iterative Budgeting: Budgets are developed in shorter cycles, similar to sprints in agile project management. This iterative approach enables finance teams to refine budgets more frequently, ensuring they remain aligned with current business needs and opportunities.
Cross-Functional Collaboration: Financial agile planning encourages collaboration between finance teams and other departments, fostering a more integrated approach to financial decision-making. This helps ensure that financial plans support overall business objectives and are informed by insights from across the organization.
Scenario Planning: Agile financial planning often incorporates scenario planning to prepare for various potential futures. By considering different scenarios, organizations can develop strategies that are resilient to changes and uncertainties.
Focus on Value Delivery: The approach emphasizes delivering financial insights and value quickly and efficiently, enabling organizations to make informed decisions that drive growth and innovation.

Financial metrics vs Agile planning

Tracking your company's financial metrics is crucial. Many startups share these metrics with their teams every month. They use dashboards to show this information, which helps more people in the company understand when performance goes up or down.

But even if everyone on the team has access to these dashboards, this type of information is not useful to react quickly to the changes. Watching metrics go up and down is useful, but it can only get you so far.

With agile planning, it's possible for non-financial budget owners like VP R&D or VP Marketing to create scenarios that compare data and point toward answers, like on Octopus AI. VP R&D can create several scenarios such as "What if the product launch is delayed?" and share them immediately with the marketing team that often plans launches a year ahead.

To make agile planning accessible to everyone, it’s clear that you need tools that anyone, including non-financial budget owners, can use. With thoroughly embedded AI and ML models, Octopus AI allows users to run historical data queries and build scenarios and dashboards in seconds, not Excel macro coding.

Financial agile planning examples

Spotify:

Spotify uses agile financial planning to manage its rapid growth and expansion into new markets. By adopting a flexible budgeting process, Spotify can quickly reallocate resources to support new product features or marketing campaigns based on real-time data and user feedback. This approach helps them stay competitive in the fast-evolving music streaming industry.

Airbnb:

Airbnb employs agile financial planning to navigate the uncertainties of the travel industry. During the COVID-19 pandemic, Airbnb used scenario planning to explore different recovery paths and adjust their financial strategies accordingly. This allowed them to manage cash flow effectively and make informed decisions about staffing and operational expenses.

Netflix:

Netflix utilizes agile financial planning to support its content production and distribution strategies. By continuously forecasting and adjusting budgets, Netflix can invest in new content that aligns with viewer preferences and market trends. This approach enables Netflix to maintain a diverse and appealing content library, driving subscriber growth and retention.

Agile financial planning is no longer just a buzzword – it's a necessity for startups and established companies alike in today's fast-paced, unpredictable business environment. By embracing continuous forecasting, iterative budgeting, cross-functional collaboration, and scenario planning, organizations can stay ahead of the curve and make informed decisions quickly.

Visit Octopus AI today to learn how we can transform your financial planning process and drive your business forward.

Octopus AI is at the forefront of this revolution in financial planning. Our platform empowers teams across your organization to engage in agile financial planning, breaking down silos and enabling real-time decision-making. With Octopus AI, you can create, analyze, and share financial scenarios in seconds, not days or weeks. Whether you're a startup aiming for hyper-growth or an established company looking to stay competitive, Octopus AI provides the tools you need to make agile financial planning a reality.

2024-10-15 21:53