Traditionally, higher education lived in a world where enrollment was quantifiable. Over the last couple of years that has changed drastically. Colleges and universities are now facing challenges presented by unpredictable enrollment figures that make conventional, historically-based budgeting nearly impossible. In fact, data from the National Student Clearinghouse Research Center (NSCRC) shows enrollment across all colleges fell 2.7 percent in the autumn of 2021 and 2.5 percent in 2020.
The risk of these lower enrollment numbers is the waterfall effect these altered revenue projections have on financial planning across the entire institution. This includes everything from staffing and personnel budgets to additional operating expenses, facilities maintenance and upkeep, athletic programs, and more.
To plan, budget, and forecast in this new era of enrollment volatility, CFOs and other finance professionals at higher education institutions must be well-equipped with agile planning capabilities and tools.
Limitations of Planning in Excel
When planning with manual spreadsheets like Excel, one of the biggest challenges for higher education finance professionals is trying to consolidate information from other departments and groups within the institution, many of which are in different systems or formats and could be wrong, due to human error. As a result, finance teams spend extra time trying to make sense of the data, scrubbing it, and then inputting it into the centralized system for analyzing and generating reports.
Additionally, this standard approach to financial planning using Excel has significant limitations in securing the higher-level analysis needed to drive business decisions, impact the bottom line, and discover insights with the accuracy and speed needed today. With regards to enrollment, for example, leaders may want to see how a specific change impacts overall business performance, but there are no levers to pull in Excel to see the impact across the board. This can only be accomplished by having access to real-time data insights interconnected with other essential information across the institution.
Benefits of Agile FP&A Technologies
Using agile financial planning and analysis (FP&A) technologies like cloud-based corporate performance management (CPM) tools enables higher education executives to easily track actuals in real-time and make accurate forecasts to fully maximize all of their campus resources. With this type of functionality, an institution can run “what if” scenarios based on different enrollment calculations and be ready to make quick adjustments to forecasting for more strategic decision-making. Having this instant access to accurate, real-time data through a customizable dashboard provides the executive staff with a unified version of the truth for where they financially stand in the moment and a look into the months and years to come. This is just what schools need in today’s uncertain climate.
More modern CPM solutions also include artificial intelligence (AI) and machine learning functionalities, which creates even greater time savings for staff by enabling them to analyze data more rapidly for additional strategic impact. Essentially, in an unpredictable world, predictive analytics derived from these advanced technologies can hold the key to uncovering strategic insights and driving value in the finance office. AI-driven CPM solutions also promote anomaly detection, an added feature that can be quite valuable in an industry and time where finance professionals can’t afford any mistakes that typically may not be visible to the data user and go undetected.
Why is investing in these solutions the financially smart decision now, at a time when university budgets are spread thin, and revenue is unpredictable?
Without agile, digital planning solutions, a higher institution’s FP&A processes can become rapidly outdated. The age of “set it and forget it” is no longer viable. Financial executives may build out their annual budget based on a projected level of enrollment, but with a cumbersome conventional planning process, it is nearly impossible to reconcile once enrollment actuals are realized. The items that are incorrectly budgeted will compound throughout the whole year – costing institutions greatly.
Take for example one university that completed its budget cycle using traditional planning methods and preliminary enrollment numbers. The school ran revenue and personnel planning based on these preliminary numbers, but enrollment ended up being down by 100 students. This meant the school’s budget was incorrect from day one, leading to a negative fund balance from day one.
If this university had adopted agile planning tools, however, the finance team could have quickly re-forecasted and modified the budget with the actual enrollment numbers, and made informed decisions based on real-time data. This would have enabled the institution to establish a budget that more accurately reflected what was needed for staffing, room & board, etc.
Utilizing agile planning technologies enables higher education executives to best manage uncertain patterns amidst this new ambiguous enrollment reality. Finance teams that invest in modern, cloud CPM solutions will benefit from real-time, strategic decision-making capabilities based on enrollment projections and actuals and their resulting impacts. Those that don’t take this next important step will struggle to plan effectively for their institution’s future.
Melissa Harrell Frey is senior solutions marketing manager at Prophix.
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