Keys to Financial Stability

TABLE 8.4 Twenty keys to Financial Strategy

1. Eliminate deficits by balancing revenue with expense growth rates.

2. Build a coherent net pricing strategy.

3. Raise funds to reduce unfunded financial aid.

4. Focus strategy on main income flows into the college.

5. Diversify the main income flows to reduce risk.

6. Trade gifts for debt to raise the debt ratio above 2:1.

7. Formulate budgets by:

a. Making forecast, goals, and plans of major business operations;

b. Adding employees discriminately;

c. Containing expense growth;

d. Estimating revenue conservatively and before expenses;

e. Increasing revenue conservatively and scrupulously; and

f. Designing incentives to improve college efficiency.

8. Build a reinvestment fund for renovations and replacement.

9. Provide a contingency fund.

10. Monitor financial performance with internal and external measures.

11. Install budget controls with policies for:

a. Handling over expended budgets;

b. Tracking variances between actual and forecast revenue and expenses;

c. Deciding what to do with budget variances; and

d. Limiting the addition of new employees during the fiscal year.

12. Conduct regular financial review meetings.

13. Bill students monthly and enforce collection procedures.

14. Set a bad-debt goal with a not-to-exceed goal, for example, 2.5 percent of receivables.

15. Set cash and short-term investment goals equal to 16 percent of expenses.

16. Require auxiliaries to achieve their net income.

17. Outsource auxiliaries, administrative services, or other operations that fail to meet financial goals.

18. Ensure that income from alumni relations equals or exceeds its expenses.

19. Set recruiting and retention goals for athletics.

20. Use strategic options to promote flexibility.