Experts share why the data is concerning, and how to make budgeting faster
Is the budgeting process getting you down? If you’re finance leader at a higher education institution, it probably is, according to the Syntellis report, Higher Education Financial Trends: Priorities, Challenges, and Insights to Get Ahead in 2020.
Budget cycles are getting longer
Institutions with cycles lasting more than six months increased steadily from 34% in 2018 to 43% in 2020. While longer budget cycles alone aren’t cause for concern, 19% of institutions with long budget cycles do not reforecast, which prevents finance teams from allocating resources to strategic, academic, and operational goals as they emerge throughout the year.
The length of a college or university’s budget cycle can indicate whether the institution can perform critical, basic functions efficiently. Long budgeting cycles often — but not always — indicate inadequate tools that prolong the institution’s budget development and approval and limit budget and finance teams’ abilities to adjust the budget to fit needs as they arise.
“One concern I have with a long budget cycle without frequent reforecasting is that it becomes out of date way too quickly, and it’s never refreshed,” said Jim Dobbertin, Assistant Controller, Financial Systems and Support Operations at University of Rochester in New York.
“When you do a budget in November and it goes into effect in July, it’s already more than six months out of date, and you can’t adapt it to change or react to current needs.”
Other finance executives who commented on the report indicated that the ideal budget length is around three or four months, allowing institutions to balance necessary detail and agility to adapt to changes.
Interestingly, length of budget cycle doesn’t seem to influence whether finance professionals have ample time for value-added analysis to inform strategic decisions: responses were split about two-thirds yes and one-third no, regardless of whether budget cycles took three to four months, five to six months, or more than six months.
Budget cycle length is tied to reforecasting frequency
Seventy-four percent of respondents with budget cycles lasting more than six months perform reforecasts one to four times per year. Only about half of institutions with shorter budget cycles (six months or less) reforecast this frequently. This supports what finance leaders said about the necessity of regular reforecasting to make longer budget cycles work for their institutions, but this creates even more work as the teams who are already in long budget cycles now must add work to reforecast.
“We’re constantly in the budget cycle,” said Kathy Whisman, Chief Budget Officer at The University of Arizona in Tucson. “Throughout the process, we make adjustments to the budget and change it based on current activity. Reforecasting and adjusting are critical to the success of our model.”
Unfortunately, regular reforecasting isn’t standard for all institutions with long budget cycles: among those with budget cycles lasting more than six months, 19% do not reforecast at all.
Inadequate budgeting and forecasting solutions may also play a role in long budget cycles and reluctance to reforecast, as only 54% of budget and finance leaders are satisfied with their current budgeting solution.
Length of budget cycle alone is not an indicator of an institution’s ability to budget effectively
Because allocating resources according to strategic academic and operational goals is critical to college or university operations, budget processes and timelines must accommodate frequent adjustments to meet goals as they emerge throughout the year.
Equipping team members with the right tools to budget and reforecast allows them to support institutional plans and goals. Teams with adequate solutions also report:
- Faster budget cycles
- Increased accuracy
- Better version control
- Improved data integration and integrity
- Stronger collaboration
- More secure data access
- Easier reporting
If your institution struggles with long, inflexible budget cycles, you may need to adjust processes or replace solutions to improve budget speed and agility. To learn more, read Higher Education Financial Trends: Priorities, Challenges, and Insights to Get Ahead in 2020.