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Most Office of Finance leaders across industries have weathered the pandemic storm that arrived in March 2020, keeping their budgets and forecasts on track, and are now emphasizing future planning. Within higher education institutions, however, finance executives are still facing fierce headwinds that are holding them back from feeling that they are on solid ground and are prepared for whatever comes next.
The pandemic has added financial stress on many colleges and universities nationwide, which had already been facing wavering enrollment and weakening state government support since 2009, according to The Hechinger Report. When learning was forced to go virtual during a long drawn-out period of social distancing and no vaccine, many higher-ed institutions had to grapple with the uncertainties of tuition revenue and endowment funds to keep their schools financially sound.
Automated financial planning and analysis has become critical to navigating constant fluctuations in operating costs and revenue streams to thrive in a post-pandemic world. Yet, Prophix’s 2021 Agility in Planning, Budgeting and Forecasting Global Survey conducted in collaboration with FSN Research revealed 80 percent of finance teams are unable to forecast beyond a year, while only 19 percent of organizations use rolling forecasts. As the threat of market volatility persists, universities need effective forecasting and scenario planning tools that enable quick pivots to changes as they attempt to balance fiscal responsibility with the best interest of their students, faculty and staff.
According to the survey, 77 percent of organizations that find the time to run through their data and consider alternative scenarios for re-forecasting their earnings can do so within a week, compared to 41 percent of finance executives who say they don’t have the time for scenario planning. Scenario planning has also been proven to improve forecasting accuracy of earnings and revenue, with 54 percent of scenario planners able to forecast within +/- 5 percent. And efficient scenario planning is best done with automated, digital tools.
The ability to cull valuable insights from oceans of data is evolving the way every industry works, and it can change the way higher education institutions manage themselves. Capturing and sifting through a much richer data set in a Corporate Performance Management (CPM) system gives institutions the ability to understand and forecast demand automatically. This in turn enables finance teams to more proactively navigate turbulent times and capitalize on new opportunities, instead of always being in a reactive mode as in times past. But traditional tools used for financial planning and analysis no longer meet the needs of organizations looking to thrive amid turbulent market changes, and it has become clear that digital transformation in the office of finance has become a higher priority for higher-ed institutions today.
CPM systems can empower finance teams to run a variety of what/if scenarios and make on-the-fly adjustments to forecasts based on real-time data. For example, Ohio Northern University, using Prophix’s CPM solution enabled the university’s finance team to budget for 395 different fund department combinations, run variance calculations to compare the current year’s budget to the proposed budget, and gain a better understanding of the rationale for funding requests – among other tasks – that ultimately allowed the Office of Finance to spend less time on budget preparation and more time on analysis and strategic discussions.
Utah State University was also able to dramatically overhaul their budgeting process, giving their finance team the ability to start their annual budget at an operational or unit level and then roll them up into departments and the organization as a whole with little human intervention required. This approach allowed them to easily compare past years’ actuals to current budget data, improving budget accuracy and timeliness. By projecting their end-of-year standing monthly and looking at variance reports, Utah State has visibility into the amount of deviation that has taken place from the original budget, allowing them to improve the process for the following year, which is a critical change especially in today’s constantly shifting environment.
Looking beyond budgeting and reporting benefits, the next generation of CPM solutions also include new AI-powered software to help finance leaders manage today’s complexities – including navigating through vast amounts of data and expanding security and compliance directives. From predictive analytics to machine learning-based forecasting, these CPM tools will provide finance teams with the higher-level insights needed to meet evolving demands and integrate planning across departments in higher level institutions. This not only places finance leaders in a more offensive position for whatever comes next, but also elevates finance teams into a more strategic role within higher-ed institutions.
By using insights from data with financial automation tools such as CPM software, higher-ed institutions can truly become student-centric, by recognizing valuable trends in time to exploit them and therefore keep their enrollment revenue and additional funding strong. Schools will be able to offer the right classes, in the right forms, at the right prices, and as a result, they will deliver on their students’ success and satisfaction while improving their bottom lines. The alternative is to continue delivering higher education through an economically unsustainable model that fails to take advantage of technological developments and cultural changes. Today, that model is in crisis, which makes it no alternative at all.
Alok Ajmera is the CEO of Prophix.