2021 Higher Education Financial Technology Trends Insights and Strategies to Keep Your Institution on Track

© Syntellis Performance Solutions, LLC, 2021. All rights reserved.

Introduction

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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

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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.

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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

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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

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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.

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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.

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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

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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

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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

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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

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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

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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.