How can you transform finance at your college or university?
Hint: the back office matters.
Higher education has been forced to tighten its belt recently. Colleges and universities must meet higher expectations with diminished resources. From mushrooming student debt to private colleges closing around the country, never has it been harder to prepare students for the demands of a modern world.
In this article, we will survey the changing landscape of higher education. We will consider the survival strategies available to schools before suggesting one step with the potential to redefine financial imperatives.
In order to meet increased expectations, schools desperately need financial insight
The pressure points vary for different institutions. Within higher education, students, who borrow well over $100 billion in student loans every year, have begun acting like consumers. They expect the value they receive to match what they borrow. At an average debt load of $37,102 per student, colleges and universities have a tall order to fill.
Yet despite ballooning tuition costs, higher education institutions do not occupy financial citadels. Moody’s forecasts an growing imbalance between expenses and revenues across the sector. Fewer than half of admissions directors report meeting their school’s enrollment goals for 2019, with five-sixths concerned that mounting debt is driving students away from their institutions. Meanwhile, only half of business officers express confidence that their schools will be financially stable over the next decade—down from three years ago. .
Not even publicly funded schools are immune to disruption. Structural budget deficits in US states have prompted cuts in spending on schools and financial aid.
Confronted with declining enrolment, schools can be tempted to spend into the red on highly visible projects like new athletic programs or campus renovations.
But sports is rarely a path to profit; athletic powerhouses like Auburn and Clemson run regular deficits. Likewise, slick new buildings usually require debt and distract from the needs of existing structures. In one year, US colleges spent $11.5 billion on new buildings while deferring $30 billion in urgent maintenance spending.
Other schools reckon that students will flock to institutions with lower average debt loads. So they aim to cut costs. They slash funding for sports programs. They dig deep into scholarship funds and focus on securing financial aid for their students. They walk back tenure policies, relying more on adjunct faculty and technologically-mediated learning. They push EdTech initiatives, certain that smart classrooms will save them.
While laudable, these approaches often leave schools’ core financial processes unchanged.
Administrators redecorate the front office without touching their back office functions.
This is not to say that cost-cutting measures always fail. But if universities don’t address the inefficiencies in their core business processes, then operating costs will continue outpacing revenue in the long run.
Back office thinking
Sector CFOs are in a tricky position. Loath to introduce more risk to their institution’s balance sheet, rising expectations demand that they do so anyway.
In theory, unified ERP software should give CFOs what they need to revamp their finance department. However, many schools owe at least part of their financial predicament to outdated enterprise products like Datatel, Jenzabar, and Peoplesoft. Typically, CFOs find it more expensive to upgrade their system than to keep operating it, leaving them to face modern challenges with increasingly outdated software.
Bruce Vieweg, CIO of Concordia College, describes traditional ERP as
Likely the largest single investment in technology any institution has ever or perhaps ever will make. And the initial investment is only the beginning. Annual maintenance, hardware, technical staffing to support the software and the hardware upon which it depends subsumes an ever greater percentage of our increasingly limited budgets.
Yet CFOs often find it imperative to trim their back office. And since RPA-enabled finance solutions remain one of the only ways to streamline processes without cutting staff, finance directors can’t afford to ignore them.
Above the clouds
In the early 2000s, only a few cloud solutions existed. Today, even historically on-premise providers offer one or more ‘cloud’ options, with ‘cloud’ meaning anything from pure multi-tenancy to single-tenant private setups.
We have argued elsewhere that the cloud requires pure multi-tenancy. And multi-tenant cloud solutions do maximize a range of variables, from lifecycle and accessibility to the ease with which the provider distributes updates. Edtech analyst Navneet Johal observes that schools largely understand “cloud computing” to be “the paradigm that will enable new services without requiring huge investments in hardware, software, and infrastructure.”
However, in today’s crowded market, CFOs can no longer rely on simple platform differences to guide their search processes. They must perform due diligence and take full ownership of the process.
Thankfully, the ERP buyer has increased in power as providers have multiplied. Colleges and universities should assert their new-found rights in the selection process. Administrators should know the right questions, select the right platform, and take however long they need to ensure a transformative impact on their finance department.
Xledger empowers colleges and universities to save time on manual processes, freeing scarce resources and finance staff to revamp business processes. With over 10,000 customers in 50 countries, Xledger delivers the market’s most automated ERP solution via the pure multi-tenant cloud. We equip institutions such as Swindon College and Plymouth College of Art with robust BI tools and limitless scalability. Xledger’s commitment to personalized service has earned us an industry-best 97% lifetime customer retention rate.
For more information about how Xledger can transform your college or university, please contact us. We look forward to speaking with you.