The (Financial) Re-Model You’ve Been Waiting For

When the economic outlook is uncertain, an independent school business leader is wont to look ahead. You may be asking yourself: Where are we now, and where will we be, if enrollment is at this level or that? What do we need to do to ensure our stability in the next three to five years?

It’s with these challenges for independent school business leaders in mind that NBOA has developed and released an updated version of our Long-Range Financial Model for Independent Schools, which is available exclusively to NBOA members. Over the years, NBOA has developed a number of tools to monitor a school’s financial health, but the Long-Range Financial Model (the LRFM as we on staff call it) is the original.

While we at NBOA aren’t, in fact, magicians, the insight derived from the tool can certainly change how a school considers its financial future.

I have been known to call the LRFM “magic” because it allows business leaders to make a single change to enrollment, FTEs, tuition levels, or other levers, and instantly see how those decisions play out for as long as 10 years. While we at NBOA aren’t, in fact, magicians, the insight derived from the tool can certainly change how a school considers its financial future.

Version 2.0 was fully rebuilt to make forecasting easier and to take advantage of powerful new features in Excel. Forgive me if I wade into the weeds, which I don’t often do, but they are so relevant to our members I can’t help myself.

The new model includes a cash flow forecast as well as a robust net assets forecast, which together allow you to project how money will move in and out of operating, endowment and debt funds over time and provide a clearer picture of your school's financial future.

Additionally, the new model has a series of worksheets that make entering data more intuitive and allow for more customization. You can choose the month your fiscal year begins, for example, indicate how you plan for tuition remission and depreciation, and specify if your school has an endowment. You can also now load your budget information at the account level, then assign a type and category to each account, making subsequent years’ data entry easier.

A few additional improvements to highlight:

• More revenue and expense categories.
• Expanded sections on long-term debt and endowment history.
• Expanded grade levels with ability to add individual grades as well as assign grades to divisions.
• Expanded employment categories that can be defined by the user.
• Easier 10-year forecast, with two options for commonly used growth rates, CPI and CPI plus, which can track a second growth factor in your forecasting.

And directly related to my opening comments, version 2.0 has the option to build as many as three different scenarios for your forecast. You can adjust enrollment, full-time equivalent employee counts, financial aid and tuition remission as a percent of gross tuition and account for mid-year enrollments. The scenarios also allow you to factor in one time revenue or expense items for a year without them carrying forward from that point on.

A snapshot chart allows you to see the differences in the forecast at the five- and ten-year marks so you can monitor at a glance how items shift and change.

When you’re preparing to present to the school leadership team, board of trustees or other interested party, you can download the P&L forecast as well as charts for both the revenue and expense items. You can also download charts that illustrate your cashflow over time. And a snapshot chart allows you to see the differences in the forecast at the five- and ten-year marks so you can monitor at a glance how items shift and change.

A new webpage dedicated to the Long-Range Financial Model provides the fully updated Excel workbook, in addition to an instructional video and manual. While we just ran a live virtual workshop on this tool, we will certainly plan for new workshops in the school year ahead. Stay tuned.

I am reminded how many independent schools utilized the previous version of this powerful tool during the pandemic when financial uncertainty reigned supreme and scenario planning and financial forecasting were critical for schools to weather the storm. The same uncertainty seems omnipresent in today’s economic environment. 

I’d like to thank our colleagues from Mission and Data for partnering with NBOA to help us make a very good tool great. It's not an easy time to be steering the financials of any organization, but we know our independent school business leaders are up for the challenge — with a little help from their ever-vigilant professional association – NBOA!

Follow NBOA President and CEO Jeff Shields on LinkedIn.