It can be difficult to develop budgets for new programs that reflect actual revenues and expenses due to the complexities of including retention rates, discounting and how students progress through a program. In our upcoming webinar, Optimal Campus will describe a self-contained tool that can be used to build a five-year pro forma budget (plus an additional ‘seed’ or pre-launch year).
A description of the first webinar in the series can be found here.
This budgeting tool generates a series of reports:
- The ‘Enrollment Report’ shows detailed tuition and fee revenue for each entering class over a five-year period. The gross revenue and net revenue (if discounts are involved) are part of this report. If there are multiple variations (part-time full-time, accelerated, certificate, etc.) these are also included in the report.
- The ‘Revenue and Expense Report’ includes a summary of the revenue and a detailed of projected expenses.
- The ‘Summary Report’ is designed for upper-level administrators to quickly see the projected enrollment, revenue, expenses and program margin.
- The ‘Break-Even and Settings Report’ includes a break-even graph and table indicating the number of students and credits needed each year to break even as well as the settings used for benefits, increases (or decreases) in tuition, fees, salaries and operational expenses. If there is a discount applied to tuition, the details and tuition per student that is applied for each entering class over the five-year period is also included in this report. Metrics and milestones (credits and margin) are included and can be used as measures of program success.
The development of standard reports allows decision makers the ability to compare proposals which is critical.
Six-Year Pro Forma Budget Model
A six-year pro forma budget model is used to evaluate the financial aspects associated with new program ideas. This tool can also be used to help evaluate programs post launch and can be used to assess whether to expand existing programs (there is additional actual data required which generates a comparative report of projected versus actual).
The model can be used to test ‘what if’ – we changed the launch year, the tuition type (comprehensive or per credit), tuition amount, changes to financial aid and a host of other factors. Changes are immediately carried through all the reports. Changes can also be made quickly to the settings – changes to annual tuition rates, benefits, tuition discounting, salaries and expenses and retention rates; all of which would be carried through to all the reports. Revenue sharing is incorporated to calculate how revenue might be assigned to different schools or colleges within the institution. (Please note that changing tuition does NOT automatically change projected enrollment numbers since the price elasticity of program disciplines, competitive environment varies greatly across possible situations).
The model is designed to accommodate a combination of up to four variations of part- or full-time undergraduate and graduate programs, as well as certificates that are credit-bearing (transcriptable) and non-credit-bearing continuing education certificates.
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