The starting point for financial measurement of software development efforts often starts with the accounting department. As businesses grow and complexity increases, accounting departments begin to address software capitalization requirements. This often acts as the first impetus to focus financial measurement efforts into the function.
One of the most important design elements for accounting departments is to limit the amount of overhead time that gets utilized to implement a measurement and software capitalization methodology. What this often leads to is an accounting process that can exist in spreadsheets and memos outside of the rest of the measurement processes being deployed by other functions. Essentially, it’s an effort to get a set of journal entries each month, that focuses only In working with one of our initial software clients this issue came front and center, and is a perfect example of how important it is to establish a simple and automated measurement framework.
We initially began working with the Chief Accounting Officer at this public software company as they were transitioning to an agile accounting process. While the move to agile was important for their organization, and the shift off of timesheets was welcome by almost all, the accounting team still had to continue to keep a fairly complex spreadsheet that exported data from multiple systems each month, even though they had shifted to an agile approach of utilizing a proportional points based financial attribution method.
In beginning to work with this client, we asked the question of how other departments, in particular FP&A and Product Management (PMO), integrate with their process, and what we found was that neither group had any integration with the outcome of their measurement process, and that each group was theoretically producing their own separate analyses, similar to what the accounting department was doing.
There are two critical reasons why this scenario existed:
- Each function has its own needs as it relates to the financial analysis/measurement of the function.
- It is extremely hard to institutionalize excel models across functions.
Ultimately, parallel processes are developed because the various analyses can’t be integrated across teams. What’s so important to note here though is that the accounting process, with it’s necessity to be auditable and traceable, provided essentially everything all of the functions would need to begin their broader analysis and insights.
As we are working with this client to simplify and optimize the accounting process, we are paying special attention to how FocalOps serves as a single source of truth across these relevant functions.
By helping the accounting team measure the value of every story delivered, there is a subsequent ability to implement historical metrics across all products as well as map financial value directly into the product backlogs. Now, budgeting and forecasting conversations can be more seamless because there is a clear understanding of the actual value on the horizon as well as historical patterns of plan to actual, maintenance to new features and so on. Finance is more holistically integrated into the agile development process, and there is essentially no additional overhead placed on the development team.
The centerpiece of this all is bringing finance into the agile process. Agile teams are producing a tremendous amount of information in their development processes, and small efforts to help finance synch with what they are doing can go a long way in driving efficiency and insight across the organization.
When finance and accounting teams speak the same language as your software team, it’s a win-win for all teams and your bottom line.