3. Financial Management

In spite of the economic claims made for Agile (e.g., enhanced return on investment, cost risk management), financial and accounting aspects of Agile are a relatively neglected topic (e.g., advice on accounting for capital and operational expenditure, pricing models). Yet value delivery and economic risk mitigation lie at the heart of Agile one of whose central tenet is the use of feedback loops to validate and refine solutions. Moreover, the iterative and incremental structure of agile projects directly contributes to improved rates of return owing to the frequency of benefits enablement which improves the net present value of expected future cash flows. It is therefore prudent to embed classical appraisal thinking into agile projects (e.g., increment level assessment of return on investment) in order to demonstrate value to the customer and to ensure that an appropriately agile contracting framework and pricing model are in place that recognise the unique features of Agile whilst permiting the learning that takes place within such environments to enhance value.