Continuing financial challenges affect the whole HE sector with some universities financially critically stretched. Several of the ‘more stable’ income drivers such as home tuition fee rates and research funding have been declining in real terms. Costs, however, have been increasing, with a significant proportion of these tending to be substantially fixed, at least in the short term.
As the TRAC results show, increasingly large negative contributions are incurred by research and publicly funded teaching activities. This trend is likely to continue, at least for the next year or two. Offsetting this is the high surplus achieved by the rapid expansion of international taught students paying premium fee rates. The concern is that future such fees are volatile, and influenced by several factors which are outside the direct control of institutions.
So, how does this affect the ‘business models’ of universities, and in particular, what does this mean for the financial planning and forecasting process?
Why planning is harder than ever
Whilst the annual planning round remains key, its timescale is protracted and outputs can be overtaken by events, resulting in re-work. Today’s narrow operating margins, and the need to conserve cash and align income with expenditure, increases the need to plan for a wider range of outcomes. It also increases the importance of running frequent in-year re-forecasts, especially monthly cash flow forecasts.
All this takes time. What makes it harder is that many planning processes typically have their origins in a more benign and stable environment. They struggle to respond and meet today’s needs where margins are narrow and risk and uncertainty is elevated.
Added to this, Regulators and other authorities have increased their reporting and forecasting requirements with multiple deadlines during the year. This adds both workload and complexity to the planning process.
Finally, with continuing future uncertainty, financial strain and forces for structural change has come the expanded need to identify and evaluate strategic change options. Here the need is to model a wide range of ‘alternative futures’. These may cover everything from future institutional size, activities, specialisms, delivery mechanisms, estate, digital & AI investment, partnerships & joint ventures, etc, all whilst being shaped by the management of reputation, risk, and financial sustainability.
In short:
- There’s more to plan, in shorter timescales and with probably fewer people
- Narrow margins and in-year events make essential the ability efficiently to complete regular to re-forecasting, especially cash flow
- Strategic planning requirements are now much larger and broader in its scope
Indicators that your current planning process is holding you back
We’ve seen that today’s planning needs have changed greatly from, even the recent, past. However, Finance (and Strategic Planning) Teams often struggle with today’s needs because:
- Planning and forecasting takes too long and consumes too much scarce resource
- Re-forecasting and running multiple scenarios can take days or weeks
- Gathering and entering data and assembling submissions from different groups of people depends unduly on a manual process
- Ensuring consistency of ‘version assumptions’ and version control between different individual models is difficult
- The key model of I&E, B/S and Cash Flow is often spit into separate static models rather than a single dynamic integrated driver-based model covering everything from in-year to 10+ year forecasting
- The ability to evaluate, compare and report on an extended range of strategic options is difficult unless there is there is a single integrated, shared driver-based model
- Reporting, including variances and sensitivities on key assumptions, and responding to questions, often depends unduly on manual processes
Modern approaches you can apply today
With the need for ‘more, faster and more efficient planning’ (more options, more risks, tighter margins, frequent re-forecasting etc) here and now, here are four things you can do today to deliver rapid benefits:
- Pinpoint your biggest planning issues
- Insist on looking at each of them through the lens of ‘what can be improved quickly’ (in say 8-weeks) without ‘disrupting the day job of your team’
- Almost always 80% or 90% the benefit can come from small changes/projects in the fraction of the time of the ‘big-bang solution’ – which you are unlikely to have the time or budget for
- Look critically at process elements that rely unduly on manual processing as these create three barriers: (i) slowing the process; (ii) require more resource; (iii) introduce risk to model integrity and version control. Scrutinise particularly:
- How ‘actual’ data are imported into planning models
- How inputs are gathered from across teams
- How re-forecasts and scenarios are run compared
- How models are updated (or not updated because it is perceived to be too time-consuming) for changes in academic structure and new drivers and reports. Does automation assist this process, or is the process dependent, for example, on modifying a series of Excel sheets?
- How reports, including variances and sensitivities, are compiled and made available to decision makers
- Identify if there are any important planning models that are ‘fractured’ into different static sub-models, for example:
- I&E, B/S and Cash Flow planning, either each component, or in-year from 5, 10 year
- Student numbers and income planning, a separate model for Heads, FTE and progression from a model for Fees
- TRAC, not always regarded as a ‘planning model’, but a good model is capable of delivering high value detailed performance information at a very granular level. Static, slow, and ‘impenetrable models’ are incapable of doing this
- The business model for evaluating strategic alternatives and scenarios. Is there a single model that covers multiple scenarios and all key elements of activities, resource inputs, outputs and performance measures?
- Take action (today) by picking one (or two) to fast-track improvements. You don’t need a massive project or budget to make real progress. In fact, that is the antithesis of delivering the swift improvements you seek. You will, however, need to introduce automation and productivity tools that are typically found in modern FP&A software (e.g., database solution, multiple user web-browser access, in-built modelling, budgeting and reporting tools, direct system links, ‘unlimited planning versions’ etc). These will enable you to deliver the ‘modern planning capability required, including:
- Planning more quickly, more reliably and with less resource
- Enabling re-forecasts and scenarios to be run whenever the need arises
Account-Ability can Help:
Corporate Planner FP&A Software – the Right Tool for the Job
The financial challenges in Higher Education means that FP&A have moved beyond what is deliverable in Excel. Corporate Planner is designed and built to deliver fast, transparent and auditable planning and on-demand rolling re-forecasting and unlimited scenario planning capability.
Two crucial aspects that make Corporate Planner the right choice today to deliver the modern planning capability needed by institutions are:
- Rapid implementation: you can go-live with Corporate Planner within four to six weeks, with minimum demand on the day-to-day responsibilities of your staff
- Affordability, value-driven and flexibility: every expenditure in HE today requires tough scrutiny. Corporate Planner ‘meets that bar’ and delivers crucial added-value, compared to other solutions in managing short, medium and long-term financial sustainability
Other key attributes that make Account-Ability and Corporate Planner the right solution for your needs include:
- Trusted partner with a deep knowledge and experience in Higher Education: having worked for over 25 years and with over 50 institutions
- Integrated dynamic forecasting: driver-based solutions where changing a figure automatically flows through the model and version control is assured
- Direct system links: integration with your existing finance system, maintaining data accuracy and reducing your manual entry needs
- Sector-Standard Solutions and In-Built Powerful Modelling Capability: our TRAC solution is the ‘sector standard’ used by ~ 40 institutions; our CP Finance Module comes with all the logic for connected I&E, B/S, Cash Flow, capital and, loans planning
- In-built automation: not only to assist budgeting (eg top-down and bottom-up and trend forecasting), but also automatic consolidation, and for easily updating model structure and reports to reflect organisational changes
- Professional reporting: high-quality, web-based reporting, offering a ‘single version of the truth’ dashboards, and analytics
- Self-Serve, User-friendly Management: Following initial implementation and training (~ 15 days’ of our time and ~ 8 person days’ of your team’s time), your team should be able to manage all aspects of the solution without requiring any significant external support or specialist software skills
- A transparent, auditable model: that builds confidence with stakeholders and is not dependent on a single individual
Find out more – get a modern planning solution to a priority need today
Call today to discuss your needs and view a demonstration. Account-Ability has the answer. Please call us on 01242 578966, or click here to send us a message.
Account-Ability Higher Education Solutions that can be implemented rapidly and affordably
- I&E cost centre planning and reporting
- I&E, Balance Sheet and Cash Flow planning
- TRAC
- Resource Allocation Modelling
- Student Numbers & income Planning
- Research recovery rate analysis
- Programme and Module Costing
- Pay and FTE planning
- Strategic options and planning
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