Upload
others
View
8
Download
0
Embed Size (px)
Citation preview
2021 Higher Education Financial Technology Trends Insights and Strategies to Keep Your Institution on Track
© Syntellis Performance Solutions, LLC, 2021. All rights reserved.
Introduction
2
For colleges and universities, 2020 was a watershed year. The first
effects of the global pandemic forced fundamental changes as
campuses closed, instruction moved online, and many institutions
refunded room and board. Finance teams remain on the front lines,
working through changes to budgets and strategic plans amid
continued uncertainty while dealing with the day-to-day challenges
of managing institutional finances.
Moody’s projects that higher education revenue will decline 5%-
10% over the next year, hampered by high fixed costs and an
uncertain recovery timeframe. The ratings agency estimates that
75% of public institutions and 60% of private ones won’t generate
cash flow margins above 10%.1
This report features findings of Syntellis’ annual survey examining
trends and priorities in higher education finance, including how 100
institutions coped with the pandemic and to what degree they
leverage technology to respond, recover, budget, and plan.
1 Thrown off Course: Institutions Weather Effects of COVID-19 Storm
2
3
Catching Up: Efficient Budgeting Processes Bring Quicker, Better Decisions
Advanced Training: Data Analytics Help Improve Scenario Modeling
The findings are organized by three primary themes:
1 Outlook for US higher education sector remains negative in 2021 as pandemic effects curtail revenue. Moody's, Dec. 8, 2020.
Thrown off Course
Higher education leaders showed tremendous agility
during the wholesale shift to remote learning and
working as most campuses closed in the spring
semester.
3
Teamwork, Agility Help Institutions Weather COVID-19 Storm
Inadequate technology played a role in this, as 57% did not have the right
tools to respond quickly to budgeting and financial planning
changes. Nevertheless, finance professionals heroically stepped up and
guided their institutions through unprecedented challenges, including
massive tuition refund efforts, securing funds for millions of dollars in new
expenses (PPE, testing, etc.), adjusting budgets mid-cycle, and more.
They addressed these challenges using labor-intensive spreadsheets,
which remain the most common tool for budgeting (42%), forecasting
(49%), tuition projections (53%), and scenario modeling (56%).
The ultimate sign of finance leaders’ agility and success? Long-term
institutional stability — despite the pandemic’s estimated higher
education impact of more than $120 billion,2 just 7% of institutions will
struggle with financial stability over the next 5-10 years.
Going forward, technology investments can bring data together to
improve agility and efficiency, streamline processes, reduce manual work,
and leave more time for value-added analysis.
were very prepared with budgeting, financial planning, and reporting technology15%
were very prepared for communication to faculty, staff, and students 12%were very prepared with technology to deliver online learning11%
The majority of colleges and universities weren’t well prepared to adapt to financial needs, communicate plans, or transition to online learning before the pandemic hit. Only:
2 Pandemic’s Impact On Higher Education Grows Larger; Now Estimated to Exceed $120 Billion. Forbes, Feb. 3, 2021.
Pandemic Decreases Enrollment but Not Long-Term Financial Stability
4
After one of the most tumultuous years in U.S. higher education history, 62% of finance leaders believe their institutions will be financially stable for the next five years or more. That number improved very slightly from 60% in last year’s survey.
However, finance leaders also recognize the ongoing impacts. Just under half (49%) agree it will take 12-18 months for their institutions to return to nearly normal operations. One-third chose a neutral response.
Decreases in cash reserves and enrollment will likely contribute to the slow return to normal.
Slightly more than half (51%) of institutions reported decreased enrollment for fall 2020. A fortunate 20% of colleges and universities saw increased enrollment. Of those institutions that lost enrollment, 44% said the loss was less than 5%, and 38% reported enrollment decrease of 5%-10%.
National data shows postsecondary enrollment dropped 2.5% in fall 2020, nearly double the decline reported the previous fall. Undergraduate enrollment fell 3.6%, and freshman enrollment dropped 13.1%.3
Depending on institution type, enrollment has been flat or lower over the past several years. Robust tools are now available to help college and university finance offices gauge the potential impacts of various enrollment scenarios.
My institution will return to normal operations in 12-18 months
Compared to the 2019-2020 academic year, 2020-2021 enrollment:
3Current Term Enrollment Estimates Fall 2020. National Student Clearinghouse Research Center, Dec. 17, 2020.
AgreeNeutral
Disagree
Increased
Decreased
Remained Flat
51%
20%29%
49%
34%
17%
Getting Back on Track
5
In 2019, just 14% of finance leaders were very confident in their
team’s agility to respond as needs change, and in 2020 higher
education finance teams showed them just how wrong they
were. Armed mostly with cumbersome spreadsheets, finance
teams ushered their institutions through immense challenges
to help keep students and employees safe and maintain
financial stability.
But the pandemic cost colleges and universities preciously —
both in depleted cash reserves and decreased tuition revenue,
which will impact revenue for at least 2-4 years. Looking
forward, finance teams will again be charged with finding new
ways to do more with less, and one key lesson learned from the
pandemic is that technology can help.
Enterprise performance management (EPM) solutions
incorporate data from general ledger, student information, and
other systems to help finance teams react more quickly, better
forecast changes, and drive efficient decision-making based on
real-time data — all of which will be critical as COVID-19
recovery continues.
LEARN MORE
Catching Up
Colleges and universities will struggle to make up for their
significant revenue losses if they maintain the status quo, and most
are ready to adopt more effective processes and technology to
assist in recovery.
6
Updating Systems and Processes Drives Quicker, Better Decisions
say higher education lags other industries in terms of adopting modern budgeting and financial planning tools55%
believe they should be doing more to leverage financial and operational data to inform strategic decisions75%
Thirty-four percent of colleges and universities use EPM solutions
for budgeting, and 25% or fewer use them for forecasting, tuition
planning, and scenario modeling. Those that do use EPM software
solutions selected them to help:
Streamline/automate efficiencies95%Provide more trustworthy data to support decision-making74%Change day-to-day experiences74%
As savvy finance leaders reflect on 2020 challenges, many are examining processes to discover better ways to work and collaborate.
Most colleges and universities will continue to use Excel for certain finance work, but finance leaders realize it’s a poor tool for compiling and calculating complex budgeting and financial data because it lacks the transparency and collaboration functions that teams need.
Enterprise performance management (EPM) software, data, and analytics solutions designed for higher education help finance professionals elevate performance and deliver demonstrable efficiency and return on investment (ROI) benefits.
Creating and distributing reports takes 40% less time
Budgeting is 50% faster
Average ROI of 235%-438% realized in 3 years
Among Syntellis EPM users:4
4 Understand the Value of Axiom in Higher Education Institutions. Hobson & Co. in collaboration with Syntellis Performance Solutions, Feb. 3, 2021.
In-year Forecasts Ease Budgeting PressuresAlthough 2020-21 budgets were nearly complete when COVID-19 hit, 25% of finance leaders said their budget process lasted 11 months or longer, up from 19% in last year’s survey. Forty-one percent have budget cycles that last 4-6 months.
Long budget cycles can leave staff weary of the process, and approved budgets quickly obsolesce as conditions change, as we learned when the pandemic hit. In response, higher education finance teams quickly adopted in-year forecasts.
7
Just 6% said their institution doesn’t perform in-year forecasts, a significant decrease from 23% last year. In 2019, 64% of institutions performed in-year forecasting 1-4 times per year; in 2020 67% did so quarterly or monthly, suggesting that in-year forecasting was commonly used to respond to COVID-19 and ease budgeting pressures.
In-year forecasting helps finance leaders bring in real-time revenue and expense information as a foundation for modeling the future, and waterfall reporting tracks the forecast over time, updating as new data is available.
How frequently does your institution perform in-year forecasting?
2020 2019
67%
64%
6%
27%
45%
22%
23%
29%
35%
13%
We don't perform in-year forecasting
1-2 times per year
Quarterly
Monthly
Going the Extra Mile
8
Process and technology updates can dramatically improve day-to-
day efficiency and streamline processes. Institutions are wise to
look for where they can invest in new technology tools to
improve and enhance existing financial processes.
But institutions should look beyond operational budgeting and
forecasting to consider how data integration, reporting, and
analytics can propel them to a more agile, sustainable future.
Informed decision-making starts with reviewing and analyzing
data in a way that makes the information actionable. However,
75% of institutions believe their organization should do more to
leverage financial and operational data to inform strategic
decisions. This is difficult because many institutions store data in
disparate systems. Collecting and combining the data are
cumbersome, manual, and time-consuming processes.
Ideally, an EPM solution brings together disparate finance, HR,
and student data and provides efficiencies in collecting,
collating, and distributing reports, so finance teams have more
time for analysis and stakeholders across campus have the
information they need to confidently make decisions that align
with strategic goals.
LEARN MORE
Advanced Training
9
Decreased cash reserves and declining enrollment forced institutions
into difficult "what-if" decisions about programs, departments,
facilities, and more. Colleges and universities hope to better
leverage data to drive decisions in the future.
Over half of institutions (53%) plan to use scenario analysis in 2021.
Scenario modeling helps colleges and universities better understand
their current state and anticipate potential future states. Among
those that will use scenario modeling, 96% say it’s useful to gauge
the impact of internal and external drivers 1-5 years out. Nearly half
use scenario analysis to make go/no-go decisions on strategic
initiatives.
Modeling tuition rates and fees among various cohorts (in state/out
of state/international students) or at the program level can help
leaders see the impacts of assumptions and initiatives.
How will you leverage scenario analyses? (select all that apply)
Scenario analysis helps institutionsmake better, data-driven decisions
96%
Model the impact of internal and external drivers in 1-5 years
12%
Model the impact of internal and external drivers in 6-10 years
46%
Evaluate strategic initiatives to make go/no-go decisions
Sixty-seven percent of colleges and universities reported depleting cash reserves in 2020; just 7% saw increases. Though many institutions (55%) depleted reserves by 10% or less, 15% of institutions depleted cash reserves by 20% or more.
67%
26%7%
Decreased No change Increased
Cash reserves
% Cash reserves decreased
11%-20%
1%-10%
>20%
30%
55%
15%
Prepare for Whatever Lies Ahead
10
Economic and societal factors will likely continue to roil college and university budgets and strategic plans for the foreseeable future. To prepare for uncertainty ahead, institutions must perform scenario modeling to stress-test their financial models.
While 85% of respondents are conducting or considering scenario modeling, over half (56%) leverage Microsoft Excel to build scenarios. Excel will always have its place in the Office of Finance; however, Excel has several limitations that make the process of analyzing scenario impacts difficult and time-intensive. These include the inability to quickly build new scenarios, compare scenarios to understand impact, and ensure data integrity/consistency across spreadsheets.
Scenario modeling allows finance leaders to mix and match assumptions and initiatives to provide a range of possibilities for analysis, alignment to strategic plans, and C-suite consideration. This mixing and matching helps finance leaders understand what levers are available and quickly and easily evaluate the impact of changes to assumptions.
With continued uncertainty around future enrollment, state appropriations, and market conditions, finance leaders need to educate executives on how changes to assumptions can impact an institution’s overall financial health. This includes evaluating expense-containment strategies, cash reserve levels, debt capacity, and capital outlays.
The pandemic made the need for scenario modeling clear, but once implemented, this valuable tool can help organizations improve long-range plans, capital plans, and more.
Key Takeaways
11
The ongoing pandemic has changed higher education — including the Office of Finance — forever. College and university officials showed incredible resilience during the initial shutdown of campuses to move instruction online and deal with the subsequent financial impacts while trying to deliver a quality student experience.
College and university leaders relied on finance teams to understand those monetary impacts, including potential enrollment declines, needed technology investments, and sacrifices that might be required to keep the institution solvent.
Many finance leaders soon learned they needed more dynamic tools to increase agility and quickly respond to market changes. Leaders interested in embracing the opportunities for improvement revealed in 2020 should:
1Access reliable data aggregated from disparate systems to create a single source of truth
2Model scenarios based on different drivers to bring insight and context into decision-making
3Supplement the annual budgeting process with in-year forecasting, which updates projections based on the latest data
4Gain a complete budgeting picture by considering all funds, including grants, endowments, and gifts
5Gauge the longer-range impacts of financial and operational decisions
About the Report
12
The 2020 Financial Trends Report is the fourth annual in-depth look at financial challenges, priorities, and progress at U.S. higher education
institutions. The report is based on a survey of 100 senior finance professionals from four-year, two-year, public, and private colleges and
universities. The online survey was completed from September-November 2020 and captures responses from individuals that work for a range
of institutions.
What type of institution do you represent? What range best represents your institution’s total full-time student enrollment?
Four-year public college or university
Four-year non-profit private college or university
For profit college or university
Two-year non-profit college (community college)
Less than 5,000
5,001-10,000
10,001-20,000
Greater than 20,000
40%
12%
44%
4%
33%
22%
19%
26%
Syntellis Performance Solutions, previously Kaufman Hall Software, provides innovative enterprise performance management software, data and analytics
solutions for higher education institutions. Syntellis’ Axiom software helps finance professionals elevate performance by acquiring insights, accelerating decisions and
advancing their business plans.
For more information, please visit www.syntellis.com.