Higher education faces a challenging future; finance transformation is the key to survival for many.
Higher education is all about the future, but academic institutions are struggling. A recent study found that more than 1,200 schools have shut down in the past five years, sometimes with little or no notice — sometimes with just a few credits to go before earning a degree. These shutdowns impact older and minority students the hardest, as these population groups are over the age of 25, and 57 percent of the students displaced by those closings were minorities, many of whom were relying on grants for their living expenses. The crisis is bringing increased regulatory scrutiny and creating a pressing need to modernize the systems used by these schools to track financial transactions and student information.
A big part of the problem, according to Kevin Guyton, vice president of North America Higher Education at BlackLine, an enterprise software company specializing in automating the financial close process, is technology — or a lack thereof. “Colleges and universities today are highly manual in many areas” he says. “They’re using tools like Excel for key financial processes, email for approvals, and it’s not integrated, it’s not auditable.”
Hidden costs
Schools generate and manage an enormous amount of data, typically through a (student information system) SIS that has been in place for years. These systems have typically been in place for a decade or more, and usually lack many tools that are standard in more modern data systems. For example, older SISs typically cannot integrate with the Internet or modern software-as-a-service solutions, have outdated and inefficient user interfaces that cannot be updated or significantly improved, rely on slow relational databases, lack robust scalability, often have hard-coded academic models when it comes to degrees offered and their requirements, and, in many cases, have reached the end of their product life and are no longer directly supported by their manufacturer. This often leads to a slowly accumulating list of workarounds, hacks, and temporary solutions that have been in place for years. Ironically, these ad-hoc solutions make it increasingly difficult to replace an old SIS, as the disruption is perceived as too damaging.
Worse still, most older SISs lack automation tools, leaving it to the school’s small IT and accounting staff to manually sift data. This usually involves migrating huge volumes of information from the SIS into Excel spreadsheets, then using a manual “tick-and-tie” process to substantiate transactions in the SIS finance system and other sources, such as bank accounts and email trails.
These tedious tasks represent a waste of a talented financial professional’s time. A report released by Accenture, a professional services company and one of BlackLine’s partners, found that embracing automation gave staff back 50-75 percent of their time — time they could then devote to more important and innovative projects.
That was the experience of Michelle Soss, assistant controller at Gonzaga University. “At Gonzaga, we started using BlackLine as a way to automate processes where our accounting software was lacking,” she reports. “Automating has improved not only our accounting close processes but also employee morale and access to information. Since implementing BlackLine, we now have the time to make a positive impact on higher-value activities.”
Automated benefits
Automation solutions like the ones that BlackLine offers can be seamlessly integrated into existing systems. “We’re SIS-agnostic,” explains Guyton. “Institutions find they are able to find hidden value in their existing SIS investment by adding automation tools. “Other institutions are considering a student information system change, yet very few of these transitions go smoothly, and very few of them are on schedule. Often it’s the exception if you’re really on budget both financial and from an internal resource investment perspective. BlackLine insulates them from that disruption. You can switch the student information system, but it’s not going to disrupt your key financial processes.”
Automating the financial close processes and increasing early visibility also helps schools spot challenges before they become crises. When an institution shuts down suddenly, it’s not just disruptive to the students, it can have serious financial implications as financial aid, loans, and rent stipends become snarled. Automated systems are much better at spotting unusual transactions and accounting patterns, providing visibility that can warn an institution of trouble ahead and give it time to either change course or, at the very least, give students the chance to get their affairs in order.
The future
Guyton sees this shift to automation as inevitable and predicts dire consequences for institutions that don’t embrace automation due to calls for new regulation and increasing demands for accountability when it comes to funding. “If you look at the corporate world, we have consequences,” he notes. “There are SEC filings, you need to report finances. A lot of academic institutions are just reporting to their boards, but that net of stakeholders is going to expand, and they’re going to be forced into a position of needing to show how those dollars are being spent. People want to know that you are fiscally responsible, that you are allocating your financial resources in the right areas.”
As for what that automation looks like, Guyton has a good idea. “You’re going to increasingly hear more about robotic process automation,” he predicts, “automating routine tasks. At BlackLine, for example, we’re rolling out machine learning capabilities in our transaction matching engine. It will become more intelligent as you use the system.”
“It’s a really exciting time to be in our particular area,” Guyton adds thoughtfully. “There’s much change occurring, and we’re at the forefront of managing this transformation for Colleges and Universities. The reaction that we receive when we go on campus and present this concept is pretty spectacular — institutions have that ‛a-ha’ moment and wonder ‛how have we not been doing this?’”