In this new era of Covid-19, institutions are scrambling to meet students’ unique needs while also remaining functioning and delivering high quality education. They are facing many unparalleled challenges such as declining or flat revenues and increased expenses to new competition from other attractive learning alternatives. It is now more important than ever to properly plan and budget to account for this new landscape. Status quo is no longer an option.
One way colleges and universities can strive to maintain financial sustainability and longevity is by having a long term strategic financial plan. Now, more than ever, effective and efficient budgeting and planning is at the forefront of sustainability. Having the right plan will set the course for success.
There are several budgeting methodologies available to help achieve a strong plan.
Incremental Budgeting: This is where institutions maintain their starting base budgets and (then) allocate incremental dollars based upon specific needs.
Driver-based Budgeting (also known as proxy-based budgeting): This is where the basis of the plan is correlated to internal metrics, such as student credit hours or number of courses taught, to estimate and allocate fiscal resources.
Zero Based Budgeting: With this model, institutions start with a “clean slate” at the lowest possible responsibility level.
Activity Based Budgeting: Institutions disaggregate the resources and allocate them on the basis of “activities” they intend to fund. (e.g., student services, advising services or educational technologies etc.)
One commonality that all budgeting processes have, regardless of the actual budgeting tool or methodology, is that the institution’s financial data must be fully integrated. Even the most sophisticated budgeting tools won’t produce the results you expect if you don’t have the right data to populate them with, or if the data is inconsistent across the board. Having the data integrated into a single source not only increases efficiency but also ensures that throughout the institution, the right KPI’s are used to develop the budget. By using the right data, institutions can develop a plan that matches their overall strategic financial vision and empowers the decision makers to truly understand the plan.
But how do you get that single source of truth? This process can be difficult to say the least. Depending on the strategic direction you choose, the budget methodology you implement and the software tools you use, your data will likely be housed in silos across the university. As a result, one must approach these challenges by leveraging a data platform that is based on the institution’s main source system. This is typically a real-time, up to date, data warehouse that can capture the critical data elements, combine them and then visualize them to stakeholders across the institution.
By leveraging data from the General Ledger, the HR system, or the Student Information System, and displaying it in a way that properly informs the specific department budget, managers can ensure that all the constituencies involved with the plan are using the same data. It is also important to socialize what data to use and how it is aligned to the strategic direction of the institution.
In today’s new and changing higher education learning environment, it is imperative for colleges and universities to have a successful budgeting tool, informed by data to allow them to meet and maintain institutional financial sustainability.