Axiom EPM Whitepaper: Higher Education, How to Plan and Manage Through Financial Uncertainty

Axiom EPM:

Higher Education: How to Plan and Manage Through Financial Uncertainty

Applied Financial Intelligence

The Challenges Facing Higher Education The number and magnitude of external pressures facing the higher education sector have never been greater.

From Covid-19 and Brexit to impacts on research grants.

From student numbers planning to an associated instability in tuition fees. From the future impact of pension deficits to the uncertainty of future government funding. In addition to this, the financial landscape can also shift rapidly with unpredictable consequences.

Covid-19 Covid-19 is having a direct and a long-lasting effect on universities. The immediate outcomes of the pandemic include reduced income from student numbers and tuition fees and losses on long-term investments, as well as immediate access to financial resources. There are additional pressures as the sector moves to online learning and the sizeable costs that come with setting up online learning platforms, resources and systems.

Financial agility has become vital to institutions everywhere

UK universities generate more than £95 billion for the UK economy and over 940,000 full-time equivalent jobs. In a whitepaper to Government, UK universities say “There is a significant risk that the higher education sector’s capacity and ability to deliver these benefits will be greatly reduced due to the financial impact of Covid-19. Universities need investment from government to protect the student interest, to maintain research capacity, to prevent institutions failing and to ensure that universities are able to play a central role in the UK’s economic and social recovery following the crisis.

The UK higher education sector has seen a large number of significant changes over the last 20 years, with a boom in student numbers and a substantial shift in course funding. Yet right now, the sector is facing its biggest challenges to date, with multiple changes impacting our higher education institutions.

As a new landscape for the sector is rapidly being reshaped and reimagined, higher education institutions are increasingly finding they need to anticipate, plan and adapt to change quickly, as challenges affect tuition planning, capital investment planning, cash flow management, and budgeting.

01

Furthermore, there are concerns over the mounting financial losses from courses and how to measure future educational appetites – physical or online. The financial challenges are so vast that a recent study from the Institute for Fiscal Studies even suggested that thirteen universities might very soon face insolvency without a government bailout.2

In this whitepaper we will explore: • The challenges facing the higher education sector.

Financial agility has become vital to institutions everywhere as critical decision-making is required across the sector.

Plus, the importance of robust financial data has taken centre stage in order to manage cash carefully, develop forecasts and strategies for future enrolments.

• How the office of finance can drive change.

It also contributes to overseeing income streams and sustainability and developing growth strategies for future success.

• How Axiom helps address the higher education sector challenges.

• A case study on University College London (UCL).

• Making finance fit for the future.

“ Without government support, some universities would face financial failure; others would come close to financial failure and be forced to reduce provision.

Some will be in places where they are the only local higher education provider with damaging impact on the local community and economy. Many of those institutions most affected have higher levels of external borrowing, lower levels of cash reserves, and higher proportions of BAME students.”

Universities UK ‘Achieving Stability in the higher education sector following Covid-19’1

Applied Financial Intelligence

1

“Achieving stability in the higher education sector following Covid-19” Universities UK, April 2020

2

“Will universities need a bailout to survive the Covid-19 crisis?” Institute for Fiscal Studies, 6 July 2020

02

Applied Financial Intelligence

Brexit There are multiple issues associated with the UK leaving the EU, all of which will have far-reaching impact on UK universities, including uncertainty around international student fees, access to EU staff and research grants and partnerships.

• Fees: there remains considerable uncertainty around fees and the fee structure for EU students studying in the UK. • Research grants and partnerships: research funding from the EU has amounted to around £1bn per year.3 It is uncertain how these funding holes will be plugged.

• EU staff: large numbers of staff at UK universities, both academic and non-academic, have come from (non-UK) EU countries. For instance, over a quarter of academic staff at the University of Kent are from non-British EU countries.4

What else are universities facing?

Numerous other external pressures are currently impacting on the sector’s performance, most notably, pension deficits and their future impact on universities. The large private-sector fund, the Universities Superannuation Scheme (USS), which pools the pensions of more than 400,000 higher education employees, recently revealed it has a deficit of £13billion.5 There are also other significant challenges, including: additional demands for new technologies; the complexities that arise from running an institution that consists of multiple departments, each with their own set of objectives and goals; and the uncertainty of government and corporate funding.

“What has the EU traditionally done for UK universities?” The Complete University Guide, 17 August 2020

3 , 4

“Pension deficits are USS: Universities’ pension scheme teeters on the edge” Little Law, 9th August 2020

5

The Office Of Finance: Driving Changes Considering the scale of the challenges facing the sector, it is inevitable that the pressure on higher education finance teams is substantial and increasing.

For UK universities to continue to compete on the global playing field, agile financial management and planning is paramount, in order to keep fees affordable, meet student and staff expectations, and plan for regulation and financial compliance – while running in surplus with sufficient cash.

Not only that, but many boards are demanding better, more accurate financial and management information and longer-term financial planning – from improved cash flow management and asset management to student number planning and tuition fee forecasting.

As a direct consequence, many finance professionals are looking for robust short-term and long-term financial management and planning solutions to improve financial management efficiencies and forecasting – while also developing opportunities and innovations to stay ahead of the competition.

So how can the office of finance meet this scale and range of uncertainty head-on and empower change?

Apply financial intelligence At times like these, it is vital to manage and plan finances for the tricky balancing act of investing for the future or spending now to improve facilities that will increase enrolments and surplus. Alongside this, it is also important to properly assess which initiatives will give institutions the best return on investments in the shortest amount of time.

It is critical that institutions put aside time to plan ahead for all potential scenarios, to capture financial data with robust reporting and analysis, in order to provide their decision-makers with different versions of future success.

By using management and planning solutions, like Axiom, higher education institutions can accurately analyse and report on all aspects of their financial performance, develop forecasts and strategies, as well as plan for sustainability and growth. Institutions are able to manage and test different financial scenarios with in-depth ‘What if’ scenario planning, from grant planning to asset management. As a result – by testing a mix of plans – they can more easily prioritise the right capital investment to support future growth and develop opportunities, from potential new partnerships and acquisitions to emerging technologies.

6

03

Applied Financial Intelligence

27% “ Only 27% of institutions currently use predictive analytics to support financial planning activities and nearly half aspire to do so in the future. Those who leverage predictive analytics overwhelmingly apply this capability to the prediction of tuition revenue.” 6

76% “ 76% of higher education finance leaders say their institutions lag other industries in adopting modern financial planning practices and tools. Higher education may have a harder time charting these unknown waters.”

“Higher education Financial Trends’, Kaufman Hall Axiom

04

Applied Financial Intelligence

Become more agile: Know your data Agility in financial management and planning is all about making decisions with greater confidence.

By being financially agile, institutions can make it easier and speedier to respond to the changing landscape and to understand how to re-plan when further challenges come their way.

“ Research conducted by Axiom found that for 34% of higher education institutions, the budget cycle was greater than six months. In today’s environment, a budget is likely to be irrelevant in six weeks, rather than six months. And it’s possible that financial teams will need to produce financial scenarios in six hours rather than six weeks – a figure that’s impossible to achieve without the utilisation of automation and sophisticated financial planning software.”

Modern financial planning practices and tools have become more crucial than ever. If a university or college knows their financial data well, this will increase clarity around the drivers that affect an institution, linking operational drivers to financial results. For example, Axiom’s Budget & Payroll Planning solution enables an institution to combine its financial data to forecast staffing decisions and factor in various drivers that impact on staffing. Consequently, institutions can make accurate, agile decisions and maintain total control over finances by modelling different financial plans and initiatives.

Furthermore, by making informed decisions with accurate forecast and budget data, both financial and non-financial, institutions will be able to align strategies with immediate and long-term objectives. For instance, Axiom’s Reporting and Analytics module helps universities transform financial data into insights by analysing and visualising financial and operational data to identify and highlight trends, variances, and improvement opportunities.

There are many ways that the higher education sector can become more financially agile. These include: One point of data truth for accurate decision-making Financial decisions for the future cannot be made solely on historic financial data. Supporting information is required from all areas of the business, from human resources and operations to marketing and revenue from fees, data that is often housed in disparate systems. Aggregating data into one single system allows for the capture of both financial and non-financial data that is essential when budgeting, reporting, analysing, forecasting and planning.

Automating and speeding up the process Modern financial technology, such as Axiom software, can successfully shift an institution’s focus from data organisation into analysis. By managing planning assumptions and real-time reporting, financial teams can take advantage of driver-based planning models that enable greater financial agility and better decision-making.

Collaboration across the organisation Covid-19 has clearly demonstrated the requirement for collaboration across organisations. Input from budget owners through to negotiations, trade-offs and approvals means non-finance users can review and submit requests. This can increase confidence and foster buy-in while also enabling distributed decision-making and increasing financial agility.

Focusing on strategic activities Institutions need to make the right strategic decisions based on sound financial reporting and predictive modelling. By removing time-consuming tasks through automation, the office of finance can be redeployed and better utilised to help steer the institution through the many unpredictable challenges from Covid-19.

05

Applied Financial Intelligence

Fit for today. Fit for the tomorrow Robust financial management and planning can help the higher education sector meet the current challenges and enable institutions to stay fit for now and for the future. By using solutions that support specific higher education needs, the sector can reduce financial risks, deliver operational efficiencies, and improve financial performance.

Staying fit for now includes robust financial management and planning across student numbers, fee forecasting and cash flow management.

Student numbers Right now, it is vital that institutions consider how to plan for further impacts on student enrolment and assess how best to plug immediate funding gaps. Management and planning solutions like Axiom can help universities accurately project tuition revenue by integrating student and financial admissions data across a range of fees and long-term plans.

Fee forecasting At this critical, challenging time, student enrolment expectations need to be as correct as possible, so that there are no surprises in subsequent tuition fee income. Management and planning solutions, such as Axiom’s Tuition Fee Planning, can empower universities to predict future income and create new strategies and opportunities. They will be able to assess the potential impact of variable and critical uncertainties and model the impact of tuition revenue on budgets and forecasts.

Cash flow management Management and planning solutions, like Axiom, can enable institutions to produce direct and indirect cash flow models with a good controlled balance sheet and cash flow management.

Solutions like these will enable the sector to initiate tighter controls and measures on spending and improve cash management. For instance, by accessing the right financial data easily, institutions can analyse past receipts and invoicing to ensure cash is received and invoices raised on time.

06

What happens in the present ultimately leads into what can be done in the future.

To stay future-fit, it is paramount universities use the financial information that they have now more effectively.

Current financial data can empower the very best decisionmaking for setting future objectives and testing out a range of initiatives. Financial information management and planning solutions can help institutions to: •S et robust long-term objectives and scope out initiatives, which are underscored by solid high-level, long-range financial planning.

•F ully integrate with operational budgets and forecasts and return on investment.

•P lan around budgeting and forecasting across student numbers, tuition fees, research grants and capital and commitment tracking. For instance, Axiom’s Grants Planning module helps institutions develop application to award modelling and provides universities with a complete forecast and analysis solution.

No investment decision should ever be taken in isolation. It is critical to ensure that insights are collected from across a range of financial data sources. Certain management and planning solutions, such as Axiom’s Capital Planning and Tracking module, enable institutions to collect various insights in order that decisions on deploying capital can be made with confidence.

Management and planning solutions can help you pose a series of questions for making important decisions, such as: •D oes this project represent the best use of our university resources?

•H ow will the additional outlay affect cash flow?

•W ill the long-term profit justify the short-term costs?

Applied Financial Intelligence

Planning for ‘What if’ We might not be able to predict the future, but we can still prepare.

Institutions can develop a more precise strategic outlook if they create and assess lots of different scenarios, effectively modelling the impacts of proposed initiatives and objectives on financial and operational performance and outcomes.

If institutions use their financial data to create a range of scenarios for plans for student numbers and tuition fee projections, this will ensure there are no surprises. Management and planning solutions can be used to empower decisionmaking across student deferments, marketing initiatives, teaching (virtual, physical and hybrid), operations, and personnel adjustments. Furthermore, universities and colleges will be able to consider different intake modelling, at different volumes of enrolments, and potentially also different spreads of domestic versus international enrolments.

Reduce risk. Improve accuracy. Provide certainty Many institutions are currently moving away from silo-driven outlooks across faculty income, assets, cash sources and operating costs. In addition, with current financial standards demanding that balance sheets reflect the potential of higher education sector assets, effective financial management and planning can also generate efficiencies and reveal unrealised commercial value in underutilised assets.

A vital component of successful financial management and planning is to improve the accuracy, reliability and efficiency in higher education financial processes, financial data, and across modelling, analytics and reporting. More accurate financial data will not only enable institutions to better understand the impact of internal and external factors that will affect the finances of your university or college, but will play a key part in risk mitigation.

By integrating structured and unstructured financial data from across an institution’s campus, you will be able to get a joined-up view of the entire institution, helping the office of finance to establish a single source of truth across various departments, locations, and faculties. A single source of truth means finance professionals can confidently empower their decision-makers with the best strategic approach going forward.

07

Insights to inform your future How the higher education sector adapts and responds to change now ultimately leads into the decisions institutions will make for the future. By making the right, evidence-based calculations, financial management and planning insights can help set future objectives and create new initiatives and strategies for managing growth. These might include: • Campus modernisation. While this might come with quite a bit of upfront investment initially, ultimately, over 10-15 years, institutions will experience increased enrolments and ultimately increased surplus.

• Income diversification. A review of how universities and colleges use reputation, research and other partnerships to redefine their product offerings.

• Optimising virtual learning. As online education grows, institutions will find opportunities to deliver content to increasing and wider audiences, with learning changing from short-term to life-long.

If institutions use their financial data to create a range of scenarios for plans for student numbers and tuition fee projections, this will ensure there are no surprises

Applied Financial Intelligence

Driving change through the Office of Finance

42,000 students

1.6bn

£ Axiom has been working with UCL for nearly seven years, supporting the university with reporting and analytics across several planning areas.

With more than 42,000 students, nearly half of whom are international, and a current £1.6bn development programme, including a new campus in east London, UCL is frequently listed as one of the top universities in the world.

However, with over 13,000 employees, UCL’s budgeting and forecasting processes were often extremely time consuming, with inconsistent financial data between disparate sources and a lack of visibility into key business drivers. Added to that were many external challenges from the impacts of Covid-19 and Brexit, from an anticipated fall in student numbers and income to risks to government funding and research grants. Plus, UCL was also facing the ongoing challenges of pension deficit and maintaining reputation and student experience.

UCL required more accurate financial and management information system data at Board level to help monitor the financial health of the university and enable the right decisions to be made. For the finance teams, that meant blending the costs of current operations with important decisions on capital expenditure, along with creating robust long-term objectives, coupled with solid financial plans driven from KPIs. By implementing Axiom at the heart of financial planning, forecasting and analytics, UCL moved to a more ‘self-service’ model. End users had access to more financial data than ever before, shortening the budgeting cycle and improving reporting, and saving valuable time in budgeting and planning processes by having visibility of the results immediately. Financial data accuracy was improved by Axiom’s ability to integrate directly with other source systems. It also delivered a new agility in UCL’s planning, empowering thousands of end users with a reporting solution which integrates multiple data sources and is accessible to end users on all platforms.

08

development programme

13,000 employees

“ Axiom is a key system at UCL and is at the heart of financial planning, forecasting and analytics. The system is fully integrated with ERP (ORACLE) and student records systems (SITS), which get refreshed on a daily basis.”

Phil Harding,

Director of Finance and Business Affairs UCL

Applied Financial Intelligence

About Axiom EPM How Axiom helps address Higher Education sector challenges Higher education institutions require the ability to anticipate and adapt to change. Axiom makes it possible to integrate structured and unstructured financial data from across your campuses with a single, unified platform for easy-to-manage related processes.

Our software enables your institution to analyse results, model the future, and optimise decision-making. From admissions policies and tuition planning, to capital investment and HR management, Axiom gives you a joined-up view of your entire institution.

Our flexible approach and rich modelling capabilities enable the development of multi-year and long-range plans that are fully integrated with operational budgets and forecasts. In this changing landscape, we can help you plan for a range of outcomes with modules that are built for Higher Education including: Grant Planning; Tuition Fee Planning; Budgeting and Payroll Planning; Commitment Planning; Capital Planning; Balance Sheet and Cash Flow Management.

Fit for the future Gaining a better understanding of the range and impact of challenges and changes that will affect the higher education sector and its future finances is critical if institutions are to ride out the current difficulties and plan for any uncertainty ahead.

A vital step in this process is to ensure offices of finance are equipped with financial management and planning solutions that help them prepare for all uncertainties and lead the way through this crisis by providing improved, far-reaching financial management.

Axiom’s Higher Education expertise Axiom currently supports over 50 universities worldwide, including University College London, Stanford and Yale, with financial and higher education expertise that’s best in class.

Axiom higher education Suite has been specifically developed to improve the financial performance of your institution and is continually praised by industry analysts for its ability to help our higher education customers make better sense of their budgets, even for the most complex university operations.

With the experience and number of customers we have in the sector, we’ve been able to build specific management and planning modules to support the processes that are individual to universities, such as Grant Planning and Tuition Fee Planning.

It means we can enable higher education institutions to manage their financial position to ensure long-term success as well as sharing best practice insights.

There is now an urgent requirement for financial management and planning systems to be world-class and for time consuming and tedious financial planning tasks to be automated, leaving more space for all-important strategy. By employing agile financial management and planning, finance professionals are able to help their institutions adapt quickly both to the current challenges, and to new challenges when they appear.

Why not get in touch and see how Axiom can help your finance teams face the challenges of today and tomorrow.

If an institution can efficiently gather financial information from across the organisation, which is properly reported and accurately analysed, then it will be better able to plan for a range of different outcomes and make strategic, well-informed decisions confidently, now and for the future.

09

Contact us by emailing hello@axiomepm.co.uk or call us on +44 1932 548 465 to talk to one of our higher education specialists.

Applied Financial Intelligence

10

Applied Financial Intelligence

Dixcart House, Addlestone Road, Addlestone, Surrey, KT15 2LE T +44 1932 548 465 E hello@axiomepm.co.uk

axiomepm.co.uk

Applied Financial Intelligence