Two out of three higher education finance leaders don’t believe their institution’s business model is sustainable over the next five to 10 years. Meanwhile, 64 percent of finance leaders are not confident in their institution’s ability to quickly and easily adjust their institution’s strategies and plans in response to a sudden change in business circumstances.
These are formidable statistics, and they represent a crossroads moment for higher education leaders. This spring, I spoke with finance leaders at Ellucian Live to understand:
- What steps are you taking to improve your institution’s budgeting and forecasting capabilities?
- What challenges do you face in providing financial information to your colleagues across the institution?
Their answers point to the need for more modern financial systems and processes in higher education to meet the demands of a rapidly changing business environment.
First Things First: What Is Ellucian Live?
Ellucian Live is Ellucian’s annual user, partner, and employee conference—and it’s one of the largest gatherings of higher education professionals in the world. More than 8,000 professionals from higher education institutions across the globe attended the conference this past April. They shared insights with Ellucian’s developers and users, networked and collaborated with peers, learned from Ellucian product experts, and discussed best practices.
Throughout Ellucian Live, I had the opportunity to hear firsthand how institutions of all types are dealing with challenges like declining enrollment, rising tuition costs, and uncertain endowment earnings and funding. I sought to explore whether finance leaders recognize these challenges as a critical turning point for higher education. I also wanted to understand how Kaufman Hall can better serve those in finance roles at colleges and universities.
During my discussions, a couple of themes emerged:
Accountability for budgets and budget performance is being pushed down across organizations.
Higher education institutions are addressing challenges to their current business model in a variety of ways. Many are looking at controlling costs, while others are exploring growth strategies. Meanwhile, leaders, boards, and even legislators are asking questions about college and university finances that they have never asked before. In general, there is a trend to push budget accountability to schools, divisions, and departments.
Finance leaders for higher education institutions need to support their colleagues in accessing the data needed to make informed business decisions. However, they are constrained by outdated reporting systems that were designed for operational reporting, not budget management. Finance staffs are small, and they are not likely to get bigger. Finance teams need better reporting tools as well as modern data governance to help them truly understand and manage their institution’s financial performance.
Everyone is feeling revenue constraints, from large public schools to small private schools and from healthy institutions to struggling institutions.
Finance professionals across the sector—from tuition-dependent colleges to large research institutions—are aware that future revenue growth will be limited. Many are seeking to improve their financial-planning and decision-making processes, and they recognize that the first step is increased transparency into the financial impact of decisions and activities. Current systems and processes simply do not provide the insight needed to truly understand the financial health of the institution.
To better position their institutions for success in a challenging operating environment, finance professionals recognize the need to answer big-picture questions such as:
- What is a sustainable tuition discount rate?
- What will happen if public funding for the institution decreases?
- What are our outstanding multi-year commitments?
- How can we continue to recruit top faculty in a financially responsible manner?
- What is the revenue and cost impact of a new program?
But while 50 percent of higher education finance leaders surveyed by Kaufman Hall say their institutions are working to improve long-range financial planning, 44 percent say their institutions are not—and this gives leaders an incomplete picture of how financial performance supports strategy execution.
The reality is that financial systems and processes designed years ago no longer meet the challenges in higher education today. Finance professionals need better solutions to improve budgeting, forecasting, reporting, tuition planning, and long-range planning.
Improving financial planning and analysis capabilities across multiple dimensions is demanding and resource-intensive work. However, it’s also an area where institutions can achieve tangible benefits. Now is the time to accelerate adoption of modern financial systems, processes, and tools that position institutions not just to survive in a disruptive environment, but also thrive.
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As an Ellucian Alliance Partner, Kaufman Hall’s Axiom Software is fully compatible and can be deeply integrated with Ellucian’s ERP and Student Information Systems.