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January 20, 2023 | Long-range financial planning

Long-range financial planning is the next smart move for CFOs

Is the institution making the best use of its money? Are students and university stakeholders satisfied with their return on investment? Can we survive, or thrive, five to ten years from now? These are just a few of the questions keeping CFOs up at night, and rightfully so, since they are facing increasingly complex questions about their institution’s financial future. 


Amid the complexity surrounding higher ed’s business issues, institutions face yet another critical task: supporting decisions with data. Delivering reliable, relevant data that decisions can be made from is the CFO’s obligation to the Board. College Boards are becoming more financially savvy, and therefore expect more in-depth financial reports. Accreditors are also watching more closely, and making accreditation standards more stringent. 


To fulfill these expectations, it’s imperative for CFOs to have the right tools and processes in place. Financial decision makers need reliable access to validated data, not only on the purely financial aspects of the enterprise, but also the key metrics on students and faculty that drive the institution’s business functions. While campuses are ramping up investments in student success tech and IT innovation, digital upgrades in the finance department must also be stressed. 

Implementing Long-Range Financial Planning 

The pandemic reinforced the need for data and planning tools that provide advanced decision-making support. At the time, campus leaders needed to make important decisions quickly, but most of them had very little data to inform their decisions. Moving forward, it would serve CFOs and business leaders well to leverage data as a means of understanding the impacts of their decision-making over time. The long-range financial planning (LRFP) process is ideally suited to facilitating the decision-making process by measuring the impact of key business decisions over varying time horizons. 


The ultimate goal of LRFP is to develop a rigorous process for ensuring that financial resources are utilized in alignment with the university’s mission. LRFP empowers business officers to understand how key business decisions will play out under a wide range of possible future scenarios. Growing or declining student enrollments, investments in faculty and staff, adjustments to state appropriations, changes in the broader economic environment, and external or unforeseen shocks, are issues that confront many university leaders and for which an LRFP process can guide institutional planning.


A critical element of long-range financial planning is to help bridge the gap between traditional strategic planning based on mission outcomes (such as enrollment, retention, research, and diversity) and the financial planning required to ensure that resources are available to achieve the overall mission objectives. 


With inputs required from all areas of the institution’s operations, a well-functioning LRFP process can facilitate conversations between stakeholders on objectives, metrics, targets, and definitions all grounded in a data-informed approach. Actors across the institution can then factor in the long-range financial plan for important decision-making situations that arise on an annual and on-going basis.


To be clear, long-range financial planning is distinct from, but complimentary to, the cycle of annual budgeting. The long-range plan should inform the budget by providing a strategic framework within which particular budget allocations are made. The LRFP process is designed to account for the long-term impacts of any investment decisions, with those specific investments implemented through the annual budget. Furthermore, long-range financial planning allows for consideration of a wide range of possible scenarios whereas a budget necessarily operates under the fixed constraints of the current fiscal year. 

Key Benefits of Long-range Financial Planning

Once long-range financial planning is implemented, business officers can leverage it to:

  • Plan with Confidence: Create projections for a wide range of possible outcomes, including “best” and “worst” case scenarios. In either circumstance, it is critical to have a sound plan to guide institutional decision-making.
  • Ensure Financial Sustainability: Communicate to boards, accreditors, legislatures, regulators, and other stakeholders the soundness of institutional finances and the long-term plan to maintain stability.
  • Match Resources to Mission: Understand the short and long-term financial impacts of key decisions to ensure resources are deployed appropriately to maximize student and faculty success and provide positive ROI.

While long-range financial planning is not a silver bullet, it may offer CFOs some peace of mind in knowing that their team is well-equipped to make better projections, which should in turn lead to better decision-making. Perhaps then, CFOs can rest a bit easier knowing their team is doing everything they can to control what’s within their power to control. 

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