How Financial Planning Needs Have Changed In Higher Education

Chapter I: Introduction
Chapter II: How to create amazing Pillar pages
Chapter III: How to promote your Pillar page
Chapter IV: How to optimize your Pillar page
Chapter V: Conclusions

Chapter I: Introduction

‘Good’ financial plans and forecasts have always been needed in the higher educational sector, but the strategic and operating environment for UK universities has changed radically in recent years. For many universities, today’s planning needs are different from what they once were, resulting in significant problems for existing planning processes and models.

In this guide from Account-Ability, we draw together several best practices that we have identified from working with a range of both educational institutions and private sector organisations, which have proven successful at meeting today’s challenges. You will discover practical financial planning strategies that you can implement quickly and without disruption, and the guide concludes with three recommendations and five takeaways you can use to implement the latest best practices.

Any organisation needs to plan what it wants to achieve and how it will achieve it, both in the short and medium term, as well as in terms of longer-term strategic goals. A ‘good plan’ will be one capable of optimising the use of resources across the university’s many and varied activities and goals.

Good plans seek to understand performance and how it is driven. It is only by doing this that performance can be improved. For this, good modelling based on drivers, KPIs and excellent reporting is a necessity. Part of this is understanding and managing your university’s individual risk profile, and for that the ability to run re-forecasts and produce multiple scenarios is extremely beneficial.

Financial planning models must be capable of taking into account and responding to the forces of change, both external and internal. These include: market and social forces affecting the demand for, and mix, of research and teaching portfolios; the influence of technological changes, especially digitisation and AI, on delivery mechanisms; changing domestic demographics and uncertain international student recruitment; changes in Regulation and the ‘social contract’ of universities; the demand for, and availability of financial resources, both revenue and capital; and all of this against a background of a competitive market between institutions, both nationally and internationally. Universities need a financial planning capacity capable of driving the change agenda, and not simply responding to societal trends.

Higher Education is not just about the money. Academic excellence and institutional reputation continue to be ‘co-prime’ priorities for universities and their stakeholders. But of course, these are only achievable with ‘financial sustainability’ - what a private operator would call ‘profit’. One without the other is not tenable.

Good models, plans and forecasts are needed to secure finance and the conditions attached to it, and;

Good plans and forecasts are required to meet the requirements of the regulators.

Optimise resource utilisation to achieve desired outcomes - operational & strategic

Understand how performance is driven, how it can be improved and to manage risk

Plan change in response external factors and internal drivers

Ensure financial sustainability and enhance reputation

Provide a high standard assurance to lenders

Demonstrate confidence and meet the needs of Regulators

Income pressures on universities

Especially through ‘fee rate stagnation’, in which tuition fees and other charges have either remained unchanged or grown at a very slow rate compared to inflation.

The student recruitment market

Once stable and predictable, the student market is now fluid and uncertain for many universities, and is also more subject to competitive pressures, government policy, changing demographics and changing subject choices.

There are intense cost pressures

On universities, such as inflation, employment costs, interest rates and estate needs.

Competition

Whether between UK institutions in a dash for growth impacting the sector, or further compounded by international competition. More than ever before, competition is a potent force in the UK higher educational sector.

The level of uncertainty

Remains high for many institutions, whether the origin of this is national, international, regulatory, or technologically based.

Income pressures: especially fee rate stagnation

Student recruitment

Cost pressures: Inflation, employment costs, interest rates

Competition

Uncertainty: national, international, regulation, technology

The result of this volatile environment is that there is more to plan (more variables to consider, more scenarios, re-forecasts, contingencies, and so on), and more urgency to do so. The process needs to be swifter and more efficient, to ensure the results are self-consistent, not out-of-date, and don’t consume unnecessary staff time. To remain agile and resilient, universities need access to an efficient, streamlined financial planning and forecasting process that allows them to foresee and respond to emerging threats and capitalise on opportunities.

In short, a typical financial plan now requires:

More options need to be modelled, such as multiple-self-consistent scenarios covering in-year, 5-year and longer terms
The process needs to be swifter and more resource efficient
Decision makers need clear, timely, relevant, reliable self-serve information to make informed decisions that drive meaningful action, unlock efficiencies, enhance departmental performance, and adapt strategies
Performance review and quarterly rolling re-forecasts on a rolling 18- or 24- month basis are necessary as outturns rarely match the plan completely

More options need to be modelled - operational and strategic

The process needs to be swifter and more resource efficient

Decision makers need clear, integrated information on options, performancе, sensitivities and risks

Performance review and rolling re-forecasts need to be easy to perform

Optimise resource utilisation to achieve desired outcomes - operational & strategic

To understand how performance is driven, how it can be improved and to manage risk

To plan change in response external factors and internal drivers

To ensure financial sustainability and enhance reputation

To provide a high standard assurance to lenders

To demonstrate confidence and meet the needs of Regulators

There may also then be a need to extend the process and blend other data into the sheets, perhaps using a scripting tool. This effectively combines the results of different models to create an integrated picture for university decision-makers. This is often seen in student numbers and fee income planning, for instance, where there may be different owners and models for heads and FTEs, and for fee calculations. Another area may be in I&E, B/S and C/F planning, where again there are different models for each part, or different models for in-year, 5 year, and 10+ year forecasts.

And finally, the data are formatted into a reportable form with the appropriate analytical capability, in order to be shared among decision-makers.

For financial plans and forecasts to reflect objective real time conditions and trends, you will also need source data from the finance, student records, HR, and other university systems. These are typically entered or imported manually at different parts of the process through different means. So it’s important that there is a reliable means for importing and validating the source data, so that the data can be verified and the process remains efficient.

And, having ‘cranked the handle once’, so to speak, many institutions find the need to consider additional scenarios, sensitivities, and re-forecasts. This can, unfortunately, involve repeating much of the process.

This is because legacy systems of this kind are:

Slow and resource-intensive
Inflexible and opaque
Weak in terms of data connectivity and version control, introducing significant error potential Unduly fragmented, lacking integration
Difficult and inflexible when it comes to re-forecasting and scenario modelling
Hard to provide decision makers with timely, actionable, relevant, reliable, self-serve information.

Slow and resource intensive

Inflexible, opaque

Data connectivity, version control, error potential

Fragmented, limited integration

Re-forecasts and scenarios hard

Lacking ownership, hard to share results

Plan efficiently:

Today, you have more to plan, in less time, and with fewer people - so you need to take the ‘treacle’ out of the process. Long, complicated processes are wasteful in effort, deliver less decision-making information and practical potential, less understanding of risk, and are often out-of-date even before they are completed. So, it’s essential to have an efficient system that allows you to quickly create accurate and adaptable plans with the resources you have, incorporate data from multiple sources without excessive manual input, and have the ability to revise and update the plans as needs dictate, without having to go back to the drawing board every time.

Integrate where sensible:

Integration makes models more dynamic, e.g. you change one figure and it cascades instantly throughout the model, maintaining a single version of the truth without having to run multiple updates on individual worksheets. In an integrated system there are fewer models to balance and less potential for errors across the boundaries. Student numbers and income planning are two key areas that benefit from integration, as does integrated I&E, Balance Sheet, Cash Flow and Capital planning.

Collaboration potential:

An efficient model has to be open to collaboration - whether this is for budgeting input or for sharing the output among stakeholders. Different audiences, with different levels of decision-making or accountability, need a ‘single version of the truth’ with reports tailored to their needs. Even if your financial planning hierarchy is centralised (and the case for this is stronger in the current climate), the technology behind the models should ‘open them for collaboration’, especially for reporting, based on business need, rather than being constrained by the technology.

Less is More’ – keep it simple:

This is a very clear message that we see in organisations of all sizes from diverse sectors - greater understanding and planning effectiveness comes with the right level of detail for each user. ‘Less is more’ can sound counter-intuitive when it comes to planning; surely the more detail in the model, the better the understanding and the more accurate the results? Sometimes, yes, but the evidence is clear: excessive or unnecessary detail can slow the process, ‘dulls’ understanding, and produces no more accurate results. Planning is about business unit managers being accountable for the results they achieve in their delegated areas of responsibility within defined controls. It is about understanding performance, managing risks, and achieving goals effectively. We find the most successful organisations we work with clearly understand the level of detail that it makes sense to plan at, and the level of minutiae to avoid because it is ‘just noise’, and worse, such clutter restricts insight and can harm the process.

Scenario capable models:

Every organisation has more options than it has the resources to fulfil them, and external forces - whether governments, regulators, the market, or economic factors - have a major impact on plans and forecasts. So, the easy ability to run multiple scenarios is therefore essential for considering alternative futures and for managing risk. It should be quick to run multiple scenarios and to compare them directly with each other and with the agreed plan. This gives you the insight you need to accurately identify and mitigate risk, and make informed decisions based on the data.

Re-forecasting capability:

Nothing ever goes exactly to plan, and for this reason most organisations we work with are able to do regular quarterly rolling 18 month or 2-year re-forecasts. Fast and efficient re-forecasting helps keep you on-track and plan for contingencies and unexpected outcomes. Moreover, re-forecasting provides the basis for what we like to call ‘Account-Ability Reviews’, for example, between Deputy Vice-Chancellors and Heads of School, and between the Chief Operating Officer and Heads of Professional Service in regularly reviewing performance.

Use the planning process to understand performance:

While it’s possible to ‘strike it lucky (or unlucky!)’ in your forecasts, systematic performance improvements only emerge through an understanding of how the volume of specific activities, their costs, prices, modes, efficiency improvements, and capital requirements deliver measurable financial and reputational benefits. A good planning process should empower you to decide ‘what to do more of’, and ‘what to do less of’, and what areas are under-performing. This needs to be hardwired into the planning process and the technologies you use.

Embracing these best practices will help you ‘stay agile’, building greater resilience and flexibility into your financial planning models, and enabling you to respond to a wider range of opportunities, threats, and external circumstances.

Plan efficiently

There's more to plan, less time, fewer people

Integrate where sensible

Means fewer, more dynamic models

Open to collaboration

Offers wider input & more effective reporting

Less is more

Greater understanding comes with right detail

Scenarios

Clarity comes by understanding alternatives

Reforecasts

Rolling 2-year re-forecasts help keep on-track

Understand performance

Volume, activities, costs, prices, modes, capital

The largest expense category at any university is staff costs, often accounting for 50% or more of expenditure. Typically, the forecasting process is highly detailed, usually created with large Excel spreadsheet models, modelling every member of staff by FTE, grade, spine point progression, pension, increment dates and more. The existing population is then forecast forwards for the next 12 months.

With thousands of data points to integrate, these models can be time consuming to prepare, validate and approve. One university FD’s comment was “we spend an enormous amount of time forecasting pay to the penny, and it is always wrong because we don’t spend time focusing on the biggest changes to our starters and leavers”.

So, what is the solution? In most cases, the process can be simplified without compromising material accuracy. Most commercial organisations of a similar size to UK universities, and overseas HEIs, plan by the number of staff FTEs, and by type and grade by department. Separate figures for ‘pay’, ‘allowances’, ‘NIC, ‘pension’ and so on can be modelled with inflators for multi-year forecasting and scenario planning. Splitting by source of funding is also possible. Accuracies of 2% at department level and 0.5% at organisation level are achievable.

Further major benefits accrue because the model is far more flexible, allowing, for example, scenarios to be driven by future workloads linked to planned student recruitment, research plans, strategic change options, and increases in productivity.

This approach is less complex, allows more insightful planning, and saves considerable time and resources.

Common Planning Process

Detailed model by person & post
Models grades, spines, increments, benefits
Focuses on the current establishment
1000s of data points to validate
Time consuming to prepare overly complex

Simplified Process

FTE by grade and staff type
Drivers, average salaries, NI pension etc
Model focused on staffing requirement
Faster, clear, more flexible model
Retains a high degree of accuracy

A good example of where the integration of different planning models into a single dynamic model saves time and delivers considerable benefits is Student Numbers & Income Planning, linked also to the Cost Centre I&E budget. Why is this?

For most universities, student fee income is their largest source of revenue. However, forecasting Heads, FTEs and fees are complex, and often the process is slow, lacks transparency and it is difficult to run and compare across different scenarios. Frequently, the process is split into two or three separate models starting with new intake and progression, and finally turning heads and FTEs into fees. The output of these models is then often fed into a Business Intelligence (BI) system for further detailed analysis.

The system falls down because lack of integration between the models extends the time needed to produce the income forecast, leading to a loss of transparency and concerns about ‘version control’. Scenarios can also become more difficult to model.

A well-integrated, dynamic model means that as soon as key assumptions are changed, the fees are instantly re-forecasted throughout the system, ensuring that there is a clear and demonstrable link between the drivers and the fee forecast.

Unfortunately, the inherent limitations of Excel make constructing fully integrated, flexible, transparent, multiple scenario and multi-user models difficult. However modern FP&A software, such as Corporate Planner, overcomes these difficulties and also enables easier data imports, validity checks, and enhanced reporting for all stakeholders, with substantial savings in resource.

Common Planning Process

Multiple models for Heads and Fee Planning
Single user models
Hard to create and compare scenarios
Every possible route modelled
Time consuming lacks transparency

Integrated Process

Single Model with heads and fees combined
Multi user collaborative models
Scenario modelling inbuilt at core
Small route variations combined
Fees reforecast as assumptions are changed

Common difficulties that many higher educational institutions face in their existing financial forecast models are:

Separate, un-integrated models for in-year and multi-year forecasts
Models lack the ability to create and compare scenarios
Models are predominantly focused on inflationary assumptions, and wider structural and strategic changes are difficult to model

Typically, these models are slow to update, and are often dependent on a single key individual, with the result that knowledge is siloed and that the models are updated infrequently. This makes it more difficult to convey the ‘full picture’ range of options and risks to the Executive and other key stakeholders at a time when transparency, integration, and collaboration have never been more important.

In the educational sector, planning and reporting needs have shifted towards a far more dynamic and integrated financial forecasting model in which, as financial assumptions and scenarios are updated, the impacts on all aspects of the financial system become immediately visible.

This can be tricky to achieve using Excel - but is possible using a modern FP&A platform such as Corporate Planner. These applications include a range of easily configurable logic blocks for I&E, B/S, Cash Flow, Capital Investments, loans, covenants and other financial factors. At the core of each model, key logic and assumptions for all parts of the financial statements are created and stored - ranging from tuition fee payments to research grant deferred income, as well as general expenditure terms.

A good FP&A platform can also provide you with detailed fixed asset and loans planning tools, in which assumptions are added such as acquisition date and stage payment and approvals. When one variable is changed, all future impacts on the financial statements are then automatically updated by the system.

Integrated models of this type deliver a single version of the truth that covers both historic actual data and future forecasts for in-year, 5-year, and longer-term strategic options, with multiple scenarios, all within a single model. Reports containing financial, non-financial and KPI data can be quickly produced for both internal budget holders and external bodies.

Achieving full integration of the financial plan in this way saves crucial time and resources, but more importantly enables clear messages and insights to be communicated to decision makers via a trusted and transparent process.

Frequently:

separate models for I&E, B/S, C/F, in-year, 5-year, 20-year
lacking in scenario planning
simplistic modelling beyond 1 year

Pains

Not dynamic, slow, update & version control, opaque & inflexible relationships between I&E, B/S, C/F,
Reporting is limited, scenarios are hard

Technology enhanced financial modelling

Single models to deliver both in year and multi year plans

Driver based assumptions for 1&E BS and CF

Fixed asset and loan planning

Report a single source of the truth

It’s worthwhile looking at ways in which existing processes can be adapted to deliver greater value, accuracy, and consistency. TRAC (Transparent Approach to Costing), the required methodology used to calculate the full economic cost of activities, is a good example.

Delivering TRAC is a regulatory requirement for universities, and the models used to do so are often complex, opaque, and narrowly focused. The process, however, can offer the best detailed picture of the contribution and fully absorbed costs of key activities across a university. The goal is to lever this information and utilise it to help inform operational and strategic planning priorities internally. Account-Ability’s Standard TRAC solution is designed to do just that, and is used by over 40 universities from all Peer Groups. Not only does the Standard Solution deliver the ‘statutory requirement’, but it also unlocks additional highly granular insights into the costs of delivering key activities at a department level - from core teaching to research and other activities.

Multiple exploratory scenarios can be then run, for example:

What is the impact of changing TAS and workload data?
How would a change in space utilisation/estates affect cost allocation?
How robust are the drivers, what would be the effect of different drivers, or different driver weightings?
What would be the impact of a change in student numbers?
What would be the impact of changed assumptions on research recovery rates?
How sensitive are teaching contributions to the data?

And so on. In addition to delivering these benefits, our Standard Model of TRAC also speeds up and reduces the resources required to produce your TRAC Return, with a model that is robust, flexible, transparent, easily audited, and - crucially - not dependent on a single individual. This gives you hugely enhanced multi-level reporting and ad hoc analysis capabilities. The model can also be autoupdated annually for all changes to TRAC Guidance, avoiding the need to modify a complex Excel model.

Complex, slow, opaque, dependent on a single user

Very limited reporting & analysis, ‘static’ and no scenario capability

Provide highly detailed and reliable inter-departmental analysis capable of informing operational and strategic planning

Easy value-add potential

Unlock cost efficiencies, understand departmental performance

View total costs of teaching by Department

Analyse in depth costs & cross-subsidies between activities

Important input to portfolio reviews & programme costing

Use ‘standard model’ to help achieve this

So, in what ways can a modern FP&A platform, such as Corporate Planner, enhance your financial planning and analysis outcomes? One key benefit comes from the way in which FP&A software is designed to draw and integrate data from various sources and systems into a transparent and easily updatable source of truth, minimising the risk of error. This enhances both your reporting and forecasting potential.

However, a dedicated FP&A platform goes far further than simply being a ‘budgeting module’ in your finance system in terms of planning and reporting. A good FP&A platform will also give you advanced business modelling, Business Intelligence (BI), planning, and forecasting capabilities that simply aren’t possible using an Excel-based process.

Additionally, it will enable you to create multiple versions of forecasts and budgets within a single model, giving you the ability to create and compare an unlimited number of potential scenarios.

FP&A technology will enable you to speed up the planning process and make it more efficient, helping you meet today’s key planning imperatives of ‘more to plan, in less time, with fewer people’. It saves your team countless hours.

Instead, of producing and collating multiple spreadsheets, forecasts and plans can be automatically collated on completion, and formatted in an intuitive and easy to understand format that can be quickly rolled out to stakeholders so they can assess the key information. Re-forecasts can also be produced over any rolling time period, including in year and cross financial year, with parameters customisable to the needs of your university.

Another benefit of a dedicated FP&A platform is the way that many manual tasks and processes are automated. In practical terms, this means that more time can be spent using the data and assessing the results, rather than painstakingly preparing analyses and reports. Month-end, annual, and multiyear reports can also be collated and published rapidly, streamlining your accounting and financial planning requirements, and giving your team greater real-time visibility over the financial performance of your university.

Advanced Business Logic

Fast, Transparent, Modelling & Planning

Versions

Actual Budget, forecasts in single place

Speed & Efficiency

Plan more, faster, more efficiently

Integration

Work with a single version of the truth

Rolling Forecasts

Create regular forecasts

Scenarios

Create compare understand scenarios

Collaboration

Multi-user planning platforms with workflows

Automation

Standardise and automate processes

Has Financial Planning in Higher Education Become More Challenging?

Our free guide, shows you how to ditch the clunky old spreadsheets and take a faster, smarter approach to planning.

Inside, you’ll discover how to:

Save time and reduce manual effort by moving to dynamic, integrated models.
Gain agility to react to change with rapid re-forecasting and scenario planning.
Make confident decisions backed by the right tech.

Want to plan with more clarity and confidence? Complete the form on this page to get your copy sent straight to your inbox.

Step One:

The first step is to identify quickly the key pain points or bottlenecks your team experiences using your current financial planning processes. You likely know what these are already, but it could be speed and efficiency, a lack of integration, excessive detail in your modelling, lack of flexibility, difficulty in understanding and communicating performance to stakeholders, the time required to generate multiple scenarios, and so on. Make a list so that you can prioritise the areas that most need attention.

Step Two:

Next, pick one of these processes that offers a high-value win. Several of the examples we have discussed in this guide will likely fall into this category. For instance, student numbers and fee planning; Pay & FTE planning; Integrated I&E, B/S, C/F and capital planning; I&E cost centre planning; and TRAC where a ‘standard model’ can yield large returns. In our experience it is usually possible to deliver any one of these changes in under 12 weeks, without significant disruption to your current processes or major capital expenditure. Taking this initial action will help set the pace and define the culture for subsequent changes.

Step Three:

Our third recommendation is to plan to invest modestly in the technologies you use, as legacy processes are likely to have inherent technical limitations that will only become more pronounced as the financial planning landscape and technologies used by the sector evolve over the coming years. What sort of technology should you invest in? We recommend an FP&A platform with several inbuilt capabilities:

Data connectivity and import tools
Advanced business modelling and planning capability
The capability to deliver a broad range of solutions, including operational controlling, strategic planning, integrated financial controlling, and if you require it, financial consolidation
The ability to provide a single version of the truth access for every type of user

Quickly identify the ‘key pains’ in your current planning process

Speed & efficiency? Excessive detail? Multiple models?

Scenario capability? Sharing results? Lack of value-add? etc

Pick one element to change in next 12 weeks (fully feasible and sets the pace)

Student Numbers & Income Planning? Integrated I&E, B/S, C/F? Capex? TRAC? Staff FTE & Pay?

Use technology that facilitates best practice – cost effectively

Financial forecasting and reporting needs in higher education have changed vastly, even from 3- 5 years ago.

There is more to plan, in less time, and with fewer people. More options also need to be considered, risks are greater and need closer management, and performance needs to be understood and projected.

As a result, planning models and methods need to change and become more dynamic, more integrated, more scenario capable, and exclude the clutter of irrelevant detail.

Financial pressures, risks and uncertainty are high across the sector, so pace is required in attuning your financial planning processes to meet the new needs of your institution. The good news is that real change is possible in only 12 weeks, without commitment to a large, risky, and unaffordable project.

You may also want to consider a modest investment in new technology, such as a good FP&A software platform like Corporate Planner.

Financial Forecasting needs have changed

More to plan in less time with fewer people

‘Less delivers more’, integrate, re-forecast, scenarios

Real change can happen in only 12 weeks

Invest in technology

How Financial Planning Needs Have Changed In Higher Education

Contents

Introduction: How Financial Planning Needs Have Changed In Universities, And What You Can Do About It

Good Plans & Forecasts Have Always Been Needed

What’s Changed?

And how does it impact your planning, forecasting and reporting process?

Income pressures on universities

The student recruitment market

There are intense cost pressures

Competition

The level of uncertainty

How These Changes Impact Your Planning Needs Today

How These Changes Impact Planning & Forecasting

Good Plans & Forecasts Have Always Been Needed

Why Legacy Processes Often Fall Short Of What Is Needed Today

However, This Is Only Half Of The Process:

How Does a Typical Legacy Process Shape-up?:

7 Best Practices For Financial Planning Today

Plan efficiently:

Integrate where sensible:

Collaboration potential:

Less is More’ – keep it simple:

Scenario capable models:

Re-forecasting capability:

Use the planning process to understand performance:

Your Guide To Financial Forecasting

Plan efficiently

Integrate where sensible

Open to collaboration

Less is more

Scenarios

Reforecasts

Understand performance

4 Practical Examples You Can Implement Today

Example 1: How 'Less is More': Staff FTE and Pay Planning

Common Planning Process

Simplified Process

Example 2: The Benefits of Integration For Speed and Efficiency: Student Numbers, Fees, and I&E Planning

Common Planning Process

Integrated Process

Example 3: How Integration Drives Insight: Dynamic I&E, B/S & C/FScenario Planning

Common difficulties that many higher educational institutions face in their existing financial forecast models are:

Frequently:

Pains

Dynamic Financial Forecasting Models

Example 4: Maximise The Value Of Your Existing Processes And Systems: Sector Standard Model For TRAC Delivers Operational And Strategic Insights

Multiple exploratory scenarios can be then run, for example:

Example: Get More From What Exists Already

How Modern FP&A Technology Powers Best Practice Planning

Technology - Faster Reporting & Rolling Forecasts

Advanced Business Logic

Versions

Speed & Efficiency

Integration

Rolling Forecasts

Scenarios

Collaboration

Automation

Has Financial Planning in Higher Education Become More Challenging?

Moving Forward: Our 3 Best Recommendations

Step One:

Step Two:

Step Three:

Quickly identify the ‘key pains’ in your current planning process

Pick one element to change in next 12 weeks (fully feasible and sets the pace)

Use technology that facilitates best practice – cost effectively

Corporate Planner: Transform Individual Data To Make Targeted Decisions

5 Takeaways

Summary

How Account-Ability Can Help