The Best Financial Drivers/Metrics for post-secondary decision makers
10 drivers and metrics that financial decision-makers in post-secondary institutions should track to ensure financial stability, optimize resource allocation, and support strategic growth.
Navigating Financial Complexities in Higher Education with Metrics/Drivers
Financial management in post-secondary institutions is a complex task that requires careful planning, precise execution, and continuous monitoring. With rising operational costs, fluctuating enrolment, and increasing pressure to deliver quality education, financial decision-makers in universities and colleges must rely on accurate data and powerful tools to make informed decisions. Tracking the right drivers and metrics is crucial for ensuring financial stability, optimizing resource allocation, and supporting the institution’s long-term strategic goals. Here are ten essential drivers and metrics that every post-secondary institution should be monitoring.
1. Enrolment Growth Rate Metrics
Metric Name: Enrolment Growth Rate
Purpose: Track changes in student enrolment over time, providing insights into the institution’s growth and helping to predict future revenue streams.
Enrolment Growth Rate = ((Current Year Enrolment - Previous Year Enrolment) / Previous Year Enrolment) * 100
Why: This metric helps financial decision-makers understand trends in student enrolment, which directly impacts tuition revenue. An increasing enrolment growth rate indicates successful recruitment and retention strategies, while a declining rate may signal the need for intervention.
2. Cost Per Student Metrics
Metric Name: Cost per Student
Purpose: Measure the average cost of educating each student, including faculty salaries, administrative expenses, and operational costs.
Cost per Student = Total Educational Expenses / Total Number of Students
Why: Understanding the cost per student allows institutions to evaluate the efficiency of their operations and make informed decisions about budgeting and resource allocation. It also helps in setting tuition rates and managing financial aid programs.
3. Revenue per Full-Time Equivalent (FTE) Student Metrics
Metric Name: Revenue per FTE Student
Purpose: Calculate the revenue generated per full-time equivalent student, providing insights into the financial health of the institution.
Revenue per FTE Student = Total Revenue / Total FTE Students
Why: This metric helps assess the institution’s ability to generate revenue relative to its student population. It’s a key indicator of financial sustainability and can guide decisions on tuition rates, financial aid, and resource allocation.
4. Operating Margin Metric
Metric Name: Operating Margin
Purpose: Measure the institution’s financial performance by comparing operating revenue to operating expenses.
Operating Margin = (Operating Revenue - Operating Expenses) / Operating Revenue * 100
Why: A healthy operating margin indicates that the institution is generating sufficient revenue to cover its expenses, which is essential for long-term financial stability. This metric helps in evaluating the effectiveness of cost management strategies.
5. Student-to-Faculty Ratio Metric
Metric Name: Student-to-Faculty Ratio
Purpose: Track the number of students per faculty member, which affects the quality of education and the institution’s reputation.
Student-to-Faculty Ratio = Total Number of Students / Total Number of Faculty Members
Why: A lower student-to-faculty ratio is often associated with better educational outcomes and student satisfaction. Monitoring this ratio helps institutions ensure they are providing a supportive learning environment and maintaining academic standards.
6. Endowment Per Student Metric
Metric Name: Endowment per Student
Purpose: Measure the institution’s financial strength by calculating the endowment available per student.
Endowment per Student = Total Endowment Value / Total Number of Students
Why: A strong endowment per student provides financial stability and allows the institution to fund scholarships, research initiatives, and campus improvements. This metric helps in assessing the institution’s long-term financial health and its ability to support its mission.
7. Graduation Rate Metric
Metric Name: Graduation Rate
Purpose: Track the percentage of students who complete their programs within a specified time frame.
Graduation Rate = (Number of Students Graduating within Time Frame / Total Number of Students) * 100
Why: Graduation rates are a critical measure of an institution’s effectiveness in helping students achieve their academic goals. Higher graduation rates reflect positively on the institution’s educational quality and can influence future enrolment and funding opportunities.
8. Retention Rate Metrics
Metric Name: Retention Rate
Purpose: Measure the percentage of students who return to the institution after their first year.
Retention Rate = (Number of Returning Students / Total Number of Students Enrolled in Previous Year) * 100Why: Retention rates are a key indicator of student satisfaction and the institution’s ability to meet student needs. High retention rates suggest that students are receiving the support they need to continue their studies, which is crucial for maintaining enrolment numbers and revenue.
9. Debt Service Coverage Ratio (DSCR) Metrics
Metric Name: Debt Service Coverage Ratio
Purpose: Assess the institution’s ability to meet its debt obligations by comparing operating income to debt service payments.
DSCR = Operating Income / Debt Service Payments
Why: A high DSCR indicates that the institution has sufficient income to cover its debt payments, which is critical for maintaining financial stability and creditworthiness. Monitoring this ratio helps in managing debt levels and planning for future capital investments.
10. Research Expenditure per Faculty Metrics
Metric Name: Research Expenditure per Faculty
Purpose: Measure the average amount of research funding allocated per faculty member, indicating the institution’s commitment to research and innovation.
Research Expenditure per Faculty = Total Research Expenditure / Total Number of Faculty Members
Why: This metric is crucial for institutions that prioritize research and development. It helps in assessing the effectiveness of research funding and the institution’s ability to attract and retain top-tier faculty by supporting their research initiatives.
Driving Strategic Success with the Right Metrics and Drivers
For financial decision-makers in post-secondary institutions, tracking the right drivers and metrics is essential for achieving financial stability, optimizing resource allocation, and supporting the institution’s long-term strategic goals. By focusing on these ten key metrics, universities and colleges can ensure they are making data-driven decisions that enhance their financial health and contribute to their educational mission.
Ready to take your institution’s financial management to the next level? Discover how Pluvo’s advanced FP&A tools can help you monitor and optimize these critical metrics, ensuring your institution’s success in an increasingly competitive educational landscape. Book a demo today! 🌧️
Discover 4th Gen FP&A today!
Speak with a
Customer Success Manager
To watch Pluvo progress, follow us on our socials: