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Enhancing the strategic value of the finance function

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Given the dynamic nature of today’s operating environment, it is growing increasingly important for higher education boards, finance committees and administrators to expand their view of their institution’s financial performance. While colleges and universities routinely develop strategic plans to re-evaluate their market position, assess institutional priorities and trade-offs, and chart a course for the future, such initiatives are conducted with varying levels of participation from and coordination with chief financial planners. Although some finance executives are intimately involved in these initiatives, others have historically maintained a relatively nominal role. Finance professionals are increasingly being asked to offer insights and deliver greater strategic value to their institution’s long-term planning and resource allocation decision-making.

Finance professionals are increasingly being asked to offer insights and deliver greater strategic value to their institution’s long-term planning and resource allocation decision-making.In addition to participating in discussions and partnering with institutional leaders to confront pressing issues and offer pragmatic solutions to critical issues — tuition rates, financial aid, investments, benefit and pension plan sustainability, cost containment, revenue diversification, and debt refinancing, among others — finance executives must maintain a keen eye on navigating the tumult associated with the months and years ahead, while taking measured steps to position their institution for financial sustainability and future success. These leaders are charged with the difficult task of balancing their institution’s ambitions with financial capacity and the opportunity costs of resource deployment. While an annual budget and year-to-date variance reports and forecasts can play a vital role in helping finance and institutional leaders maintain a finger on the pulse of near-term performance, it is essential that boards, finance committees and administrators understand the institution’s anticipated trajectory over the long term.

With enrollment figures less certain than ever before, increasing price competitiveness and rising health care costs, establishing a multiyear financial plan and developing long-range financial projections will help constituents better understand baseline financial performance projected for the next three to five years. This planning will also offer valuable insights regarding the institution’s sensitivity to changes in key business drivers under a variety of “what-if” scenarios. In addition to understanding the institution’s trajectory in relation to the status quo, long-range financial plans enable finance executives to make more informed decisions regarding their institution’s ability to pursue growth, fund capital expenditures and service debt. These plans will also shed light on how heavily their institution might have to rely on investment income or fundraising to support core operations.

An integrated long-range financial projection, informed by institutional strategy, is increasingly becoming a valued resource to help inform finance and board discussions.

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