U.S. colleges and universities face a challenging year ahead as they continue to cope with the repercussions of COVID-19.
Since spring 2020, the pandemic has forced many campuses to close, shift from in-person to virtual instruction, and refund student payments such as room and board. A new Syntellis report finds that 67% of colleges’ and universities’ cash reserves decreased in 2020, and just over half reported a decline in enrollment for the fall semester.
Campuses across the country have taken varying approaches to the spring 2021 semester, with some reopening in-person classes, some remaining virtual, and still others pushing back the semester start or delaying planned in-person classes for a month or more of virtual instruction.
Though responses to the pandemic have varied across campuses, Syntellis’ 2021 Higher Education Financial Technology Trends report shows many similarities in how Finance teams overcame key challenges in 2020 and their plans to ensure stability in the long term.
An Uncertain Future
The ongoing impacts of COVID-19 remain to be seen, as evidenced by the nearly even split among those who anticipate a return to normal operations before the end of the 2021-2022 academic year and those who were unsure or disagreed, according to the report.
Decreased cash reserves and tuition revenue from declining enrollments could affect revenues for two years or more. Moody’s Investors Service projects higher education revenue will decline 5%-10% over the next year, with cash flow margins falling to 10% or below for 75% of public and 60% of private institutions as they face additional pandemic-related shocks.
Of the two-thirds of colleges and universities that had to dip into cash reserves to maintain operations in 2020, 45% saw them reduced by more than 10% (see Figure 1). Twenty-six percent said they had no change in cash reserves, while just 7% saw an increase. Among the 51% of institutions that lost enrollment in the fall, 56% reported enrollment declines of 6%-20%.
Figure 1. Most Institutions Dipped Into 2020 Cash Reserves
Lessons in Agility
More than any disruption in recent history, COVID-19 has tested the ability of colleges and universities to respond quickly in the face of rapid change. The majority of colleges and universities weren’t well prepared to adapt to financial needs, communicate plans, or transition to online learning before the pandemic hit. Only:
- 15% were very prepared with budgeting, financial planning, and reporting technology
- 12% were very prepared for communication to faculty, staff, and students
- 11% were very prepared with online learning technology
Inadequate technology played a role in this, as 57% did not have the right tools to respond quickly to budgeting and financial planning changes. Nevertheless, finance professionals heroically stepped up and guided their institutions through unprecedented challenges, including massive tuition and room and board refund efforts, securing funds for millions of dollars in new expenses (PPE, testing, etc.), adjusting budgets mid cycle, and more.
Finance leaders largely addressed these challenges using labor-intensive spreadsheets, which remain the most common tool for key financial processes, including budgeting (42%), forecasting (49%), tuition projections (53%), and scenario modeling (56%).
The ultimate sign of finance leaders’ agility and success? Long term institutional stability — despite the pandemic’s estimated higher education impact of more than $120 billion, just 7% of institutions will struggle with financial stability over the next five to 10 years.
Syntellis’ report found that colleges and universities showed tremendous fortitude and moved quickly in the early months of the pandemic to adapt their operational and instructional models. While many managed to do this with sub-optimal resources, continued dependence on time-consuming and labor-intensive tools and processes will only prolong recovery efforts.
Increasingly, institutions will be forced to do more with less. Yet most senior finance professionals are optimistic. Sixty-two percent said their institutions will be financially stable for the next five years or more. A comprehensive enterprise performance management solution can help by enabling finance leaders to incorporate data from disparate sources — including general ledger, student information, and other systems — to improve accuracy, speed response time, and drive efficient, informed decision-making.
Colleges and universities should consider making critical investments now to ensure they have the technology needed to enhance efficiencies, streamline processes, and optimize time for value-added analysis.