A couple of weeks ago, just after the announcement of the results of the CA exams, I had an opportunity to interact with some of the students who had qualified. One of them posed an interesting question as to how they should prepare themselves in their career.

Youngsters confront an extremely volatile economic environment driven by geopolitical events, technological developments, currently being driven by the advent of generative AI, not to speak of the influence of the millennials and Gen Z that constitute over 40 per cent of the workforce. The convergence of all these elements could potentially represent the new normal for young professionals.

The dynamic changes will require young professionals to reorient their approach towards a collaborative, interactive and a multidisciplinary approach and they need to become agile, physically and mentally, which brings me to the topic of agile accounting.

‘Agile’ embodies principles and methodologies centred around flexibility, efficiency, and collaboration in project management and product development. Originating in manufacturing, and subsequently adapted by the software industry, to address the rigidity of traditional processes, agile focused on responsiveness to customer needs, streamlining production, and inter-departmental collaboration, thereby improving efficiency, reducing waste, with speed and enhancing product quality.

Adapting these principles to the financial realm, offers a modern approach to financial management and reporting. This method aligns accounting practices with the fast-paced, dynamic nature of contemporary businesses. It supports speed, continuous planning and adaptation, moving away from the rigidity of traditional budgeting cycles. Agile accounting enables financial systems to be more responsive to change, enhancing overall business responsiveness and financial forecasting capabilities.

Better decisions

In agile accounting, financial planning is dynamic and continuous, shifting away from the traditional annual cycle to one that requires more frequent reassessment and adjustment. This approach aligns with the uncertainty and inconsistencies of market conditions and stakeholder expectations. Agile practices enable swift financial reassessment in response to unexpected business changes, allowing for proactive rather than reactive adjustments. It will require focusing on a period of trailing 12 months or four quarters rather than the traditional financial year. This will ensure that the annual growth rate is consistently monitored rather than at the end of the financial year.

Better cost management

In an era where corporates are consistently facing increasing pressures on their margins, agile accounting significantly enhances cost management through real-time financial monitoring and dynamic budgeting. It facilitates swift identification and addressing of cost issues, fostering timely adjustments to financial strategies. The iterative nature of agile accounting in financial planning and analysis ensures ongoing refinement of cost strategies, dynamic pricing and aligning them closely with business objectives and market needs. The inclusion of advanced technologies like AI and data analytics optimises cost tracking and analysis, making the process more efficient.

Managing cash flow

Agile accounting enhances cash flow management by shifting from traditional working capital methods to real-time, data-driven practices helping continuously monitor cash flow, identifying issues and opportunities more rapidly. It promotes the use of dynamic, cash flow-based short-term financial instruments, offering potential cost savings and increased flexibility compared to static models like traditional loans including cash credit and overdrafts. The collaborative approach ensures integrated aligning operational activities with financial performance, resulting in more effective overall cash management.

Better regulatory compliance

Agile accounting enhances regulatory and compliance management through real-time data analysis and adaptable reporting, ensuring timely compliance with regulations. Its flexibility allows swift adaptation to regulatory changes for continuous compliance. Agile methodologies foster collaboration across finance, legal, and compliance departments, distributing compliance responsibilities and integrating various perspectives. This approach includes iterative refinement of compliance strategies, ensuring they remain current and effective. Proactive risk management and comprehensive documentation are emphasized, aiding in early detection and correction of compliance issues. All these are typical issues that are engaging the investor concerns.

Changing role of CFOs

The role of the CFOs is evolving into a broader strategic position, namely “Chief Future Officer.” This shift expands beyond traditional financial management to encompass strategic leadership, technological innovation, and risk management. CFOs are increasingly instrumental in guiding the future direction of their organisations, particularly in rapidly changing markets and amid technological disruptions. This new paradigm forces young professionals to be forward-thinking, capable of anticipating and adapting to future challenges.

(The writer is Partner, RVKS and Associates)

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