A decrease in student enrollment due to the economic downturn has many private educational institutions modifying their budgets and preparing to get by on less.
Between the normal issues of balancing rising costs, schools and universities also have to juggle the need to consider raising tuition fees – since it is often their main source of income – without deterring potential students.
Here are a handful of best practices we’ve seen some of the more successful educational institutions implement over the past few years:
- Analyze your educational mission as a business enterprise. Does your organization’s cash flow from “operations?” Does your budget provide cash flow to cover existing debt? While donations and contributions are no doubt important to any school’s livelihood, think of your institution as a business and treat your budgeting as such. Consistently and strategically measure against your budget on a monthly, quarterly and annual basis – it’s not just a one-time process. And yes, hold your department heads accountable to their budgets once they are approved.
- Anticipate the market and know how to react. The schools that have been successful during this downturn have been prepared enough to anticipate the worst, such as a drop in student count. With a little planning and flexibility, they then are able to modify their operating budgets based on a new normalized number of students than were originally anticipated.
- Take a zero-based budget approach. Are your expenses necessary? Are they adding something to your mission? Are those expenses helping revenue come through the door? Shed the mentality of spending funds in the same way every year, even if those line items have been allotted that way for as long as you can remember. Be open to change and accessing your school’s needs on a regular basis. Make sure your spending is tied into your mission and your revenue stream.
- Take a hard look at capital expenditures. Do you need that new fine arts facility or better yet, do you have the funds to build it? Heavily weigh cost benefits of whether to build or maintain. If building is the option, make sure a plan is in place that will bring in additional revenue to cover all the costs – whether that’s in the form of new students or programming.
- Be willing to pay for competent financial staff. What may seem like a hefty investment in the form of a highly experienced financial executive will often pay off handsomely in the end. The schools we see doing the best under this economic climate have very competent financial resources on their staff. They are often paid more than what some schools may feel comfortable paying but they make up for it in spades. An investment in quality can greatly impact an institution’s operational success.
With a little planning and business perspective, those at private schools, and universities and colleges can be better prepared and thrive under the pressures of the ever-changing academic environment.
To schedule a meeting to discuss your institutions’ needs, please feel free to contact us. Our professionals have many years of experience working with educational institutions in varied ways to enhance operational efficiency.