Budget Toolkit

November 6, 2020 

In chatting with many of you over the past couple of weeks, you are deep into your budgeting process for the next academic year. I heard from you that the modeling or scenario building process has been even more challenging than usual, and there is increased pressure to present a balanced budget in these most uncertain times. Where is that crystal ball when you need it?

An article in the Harvard Business Review, suggests, An Agile Approach to Budgeting for Uncertain Times may be the answer. “Rather than tedious templates, endless financial forecasts, haggling over targets, and battling for resources you may have the opportunity for a clean break.” Here are some suggestions:

  1. Change the purpose of planning and budgeting. Shift the focus from predict, command, and control to learning, adapting, and growing — not on trying to predict the unpredictable.
  2. Shift the focus from financial precision to strategic success with these questions:
    1. What are the outcomes that will be most important for strategic success?
    2. In light of those priorities, where should resources go?
    3. How much of our resources should go to running the business (operations) versus changing the business(innovations)?
    4. Within innovation, what’s the right balance of resources going toward incremental innovation versus breakthroughs?
    5. How much should go to various customer segments?
    6. How much should go to different sales and distribution channels, geographies, business units, brands, or product lines?
    7. How much of our technology resources is properly spent on keeping current systems running versus developing new features or improving architecture?
    8. What hypotheses must be true for these resource allocation strategies to work, and
    9. How can we test them most quickly and efficiently?
  3. Plan faster and more frequently. Adjust a long-term forecast every quarter, month, or week, to improve its accuracy in far less time and with far less effort.

Another article that might be helpful is Overcoming Obstacles to Effective Scenario Planning by McKinsey and Company. Scenario planning can be extremely valuable in the budgeting process, but the results can be disappointing if they are hampered by the deep-seated cognitive biases that it should be used to address, such as anchoring, neglecting low-probability events, or overconfidence. Check out these do’s and don’ts for scenario planning:

  • Fight the urge to make decisions on what you already know
  • Beware of giving too much weight to unlikely events
  • Don’t assume the future will look like the past
  • Combat overconfidence and excessive optimism
  • Encourage free and open debate

And speaking of debate, PAISBOA has joined SAIS and other independent school associations to bring you a 2-part follow up to the Back from the Brink presentation from last spring: Buckle Your Seatbelts! Navigating the Path to the 2021-2022 School Year on Thursday, November 19 (5:30 -7:00 pm) and Thursday, December 3 (5:30 -7:00 pm). I hope you will join your colleagues from independent schools across the country to tackle some of the challenges we all face in the next few months and beyond.

I also want to remind you of three important tools that all PAISBOA members already have in their toolkit:

  1. PAISBOA Annual Data Survey results are available to all participants right now! It is not too late to complete the 2020 General and Salary Surveys and receive your results right away. If you need assistance, contact [email protected] and please attend our How to Use Your Data Survey Results webinar on Wednesday, November 11 with Holly Maki from Dynamic Benchmarking and some of our PAISBOA Survey Gurus to review accessing and using the survey results. REGISTER HERE!
  2. Financial Modeling Tool: In conjunction with our colleagues from Cal-ISBOA and MISBO, PAISBOA has a customized financial modeling document that centers around best practices for forecasting and leveraging the information you already have to understand and predict what comes next. As part of your all-inclusive PAISBOA membership, this exclusive document is now available to our Member Schools. Look for your download instructions AT THIS LINK.
  3. How Will COVID-19 Impact Your School? Armanino’s Private School Financial Framework Toolkit is free to PAISBOA members for 90 days, and can help Business Officers forecast the impact of COVID-19 on their tuition revenue, financial aid and enrollment numbers - with the click of a button. CLICK HERE to access the financial tool.

As always, PAISBOA is here to support you with your budget process with tools to add to your budget toolkit. For those of you interested in Zero-Based Budgeting, we have collected some resources for you, and have a Webinar presentation from fellow business officers Carol Lerner (The Philadelphia School) and Lisa Carbone Warren (Moorestown Friends School) in our archives for your review. View the Webinar HERE.

Good luck with your budget preparation!

Take Advantage of the Power of the Flock...

Share this post:

Comments on "Budget Toolkit "

Comments 0-5 of 0

Please login to comment