5 Steps to Effective Financial Planning for Higher Education
Between 2001 and 2011, per-student subsidies at public two-year, four-year and doctoral universities declined by between 24% and 31%.* As state funding contracts, a lackluster economy means new revenue sources are increasingly difficult to come by. The result is that students are footing more of the bill while universities are under intense pressure to keep costs down - to spend every dollar wisely, and on the resources that make the most sense for the entire institution.
Many institutions today are managing enormous capital commitments including facilities, infrastructure and human resources, and attempting to closely align those commitments with variations in enrollment, tuition and grant funding. This requires a multi-year approach to tuition planning, enrollment planning, expense, position and allocation planning. It's a daunting task that drives many universities to adopt technologies that can help them easily answer key questions with real-time data.
When implementing a financial planning solution, universities should start with the approach before they begin to consider specific tools. What are the key goals of the new process? How will you drive widespread participation and collaboration by those that actually own and spend budgets? How can you most effectively leverage risk- and what if- analyses? How important will it be to incorporate input from multiple sources, and how can you achieve that? What are the expected benefits of real-time visibility into the current budget? Ask and answer as many questions as possible so that going in, you have a clear picture of the program's goals.
* The Delta Cost Project, 2000-01 to 2009-10; NCES, IPEDS 2010-11 finance data; calculations by the authors.
It's helpful to look at what peers have discovered in their financial planning efforts. We interviewed numerous higher education professionals in the office of finance and discovered the five best practices higher education institutions are adopting into their financial planning process to deliver the greatest return.
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