Beyond Spreadsheets: It's Time to Rethink Budget and Planning Tools

Over the last three years, pandemic-induced stresses on higher education have uncovered the impacts of an outdated budget planning process that’s still prevalent throughout higher education. While most colleges and universities quickly pivoted to offer new learning modalities and ensure the continuation of operations remotely in response to COVID-19, financial planning analysts had a more difficult time adapting to change. Many of them are still using spreadsheet-based systems that may have adequately met their needs for years. But meeting current conditions requires a shift in philosophy and scope for budgeting and planning. Institutional financial planning and analysis needs to move beyond the finance domain and capture all areas of enterprise planning and analysis.

For most institutions, the annual budget planning process is still anchored on systems of spreadsheets that lack version control, reducing agility and increasing risk. Institutions report that hundreds of spreadsheets can be produced during a typical budget cycle. This creates institutional risk in managing those files and ensuring data moves between them accurately with every update and iteration. The process is also incredibly manual: Calculating changes can take days or weeks.

The typical electronic paper chase designed around Excel and focused on revenue allocations and expense controls also delivers little insight into an ever-changing financial landscape. Moreover, the process often ignores other factors such as future enrollment, tuition volatility, workforce planning, and grants commitments and planning that need to be considered to develop fundamental insights and multi-scenario predictions for meeting the challenges higher education is facing today.

Modern budget and planning tools offer more robust processes and workflows, enhanced reporting and analytics capabilities, faster scenario planning, direct integration with financial and other systems, and the ability to support these processes sustainably, thereby reducing institutional risk by not relying on individuals and spreadsheets.

Several considerations exist in the selection of a new toolset to move beyond the spreadsheet-centric model. While many solutions in the market can provide rich functionality such as scenario planning, what-if scenarios, predictive modeling, and long-range forecasting capabilities, getting the most out of these tools requires a significant institutional commitment. Time and effort expended on analysis, communication, and training will help ensure the solution has broad-based adoption and goals are achieved. Several practice recommendations have surfaced from Tambellini research and interviews with campus leaders.

Consider an issue many institutions are experiencing post pandemic: declining enrollment. Most institutions have not seen enrollment return to pre-pandemic levels since the return to a relative normal, and they’re feeling the accompanying impact on tuition revenue. The situation may only get worse in the coming years if we’re to believe all that’s being written about the demographic cliff. Analyzing program and course viability through this new lens is now a business imperative.

In an honest appraisal of your current institutional budget and planning environment, how well prepared is your institution to build a three-year forecast for net tuition revenue given continued enrollment declines of 3, 4, or 5 percent in subsequent years? What if there’s a decline of 7 or 8 percent in years 4 and 5? The point is that if the only tool you have available to make a prediction is a spreadsheet, this task is daunting.

Identifying the most pressing need for your institution is critical to advancing the budget and planning process. Is that need building a scenario model for tuition planning? Budget-to-actual planning? Analyzing commitments against projected grants revenue? Developing an all-funds model to forecast financial sustainability over the next five or 10 years? Modern solutions can solve all of these problems, but institutions must be clear about their highest-priority problem to solve while ensuring the acquisition of a tool aligned with their long-term goals. Here, the research supports the benefits of taking an incremental approach with a longer-term focus on expansion in the future. If you like, a crawl-walk-run approach.

While the central finance office typically leads the evaluation, selection, and implementation of a budget and financial planning tool, other stakeholders should be included in the process to ensure long-term institutional needs are considered. For example, labor and workforce planning will require a partnership with human resources, so being as inclusive as possible in tool selection will increase the likelihood of their support when it’s needed. Further, the more inclusive the selection process, the more likely the effort will garner broad-based institutional support.

The needs and expectations of users outside the core financial office will likely vary from those of heavier users, so it’s essential to give voice to those needs and expectations to successfully reduce localized business processes and data maintained outside the system. In evaluating solutions, consideration should be given as to how aligned the tool will be with the skills and expectations of users outside of central finance. Does the solution assume an understanding of accounting practices or advanced expertise in spreadsheet development? Will it involve a large time investment for training?

Selecting a tool to advance budgeting and planning beyond the limitations of the spreadsheet-driven process practiced by many institutions is a complex undertaking. While several vendors offer similar features, there are significant differentiators in functionality and depth of expertise in higher education. Developing cooperative, integrated partnerships among campus stakeholders to identify short- and long-term needs will help ensure that the selection of a tool that best aligns with institutional goals.

In any event, it is time to move beyond spreadsheets if your institution is going to thrive in the new higher education reality.