How to manage university financial resources

This article discusses how to manage campus financial resources effectively and efficiently. This topic is certainly interesting to review, especially the financial resources of universities become a key factor in the implementation of university services in academic such as teaching and learning, research as well as community services. 

There is basically a significant difference from the financial profile and complexity of operations between universities whose sources of income are from research compared to universities whose sources of income are only from education or teaching.

The success of research and teaching conducted by universities lies in financial stability and good financial management, where this can be achieved by the availability and allocation of appropriate resources, a good understanding of financial statements and administration.

The academic life of a university lies in the majors within the university. In this regard, central steering core has the role of providing support to the ambitions of each major and managing the process that will realize these ambitions in order to achieve the university's strategic goals. The responsibility of the central steering core is to determine who will provide support and support to emerging initiatives in ways that can encourage the emergence of other new ideas.

This responsibility relates to the strategic management undertaken by the university. A good university will encourage the creation of a conducive climate of development and innovation, where new ideas are given support and initiatives are rewarded. Strategic management must be built on the ambition of the institution, the pressure of competition, and the realization that in a competitive climate there must be parties who win and lose. In a competitive climate, strategic management deals with the creation of success, rather than maintaining the status quo.

Most universities experience failure to compete due to the following factors: rigid structures, failure to recognize the dynamics of a changing environment, hierarchical and conservative decision-making processes, and reluctance to compete.

There are fundamental differences in financial management among universities, which arise due to differences in commitment to research. Research-oriented universities, explicitly or implicitly, have a commitment to collaborate with other institutions and by themselves share financial control with other institutions (companies, etc.). This has an impact on the demands for performance and accountability and a healthy financial system that is satisfactory for funders and other stakeholders.

Although the above differences have an impact on differences in organizational structure for financial management and the determination of financial strategies, but the five major principles of success in financial management remain the same, namely: 1) The existence of financial stability which is the key to success in carrying out academic activities; 2) The existence of good financial management and understanding of financial performance indicators; 3)  Expenditures made by the top management level of the university is a message that will be sent to all existing institutions and will become a university culture; 4) The risks that will be faced must be taken into account carefully but not too stingy in carrying out investment activities to ensure satisfactory impact, and: 5)  Good financial management requires financial messages when facing problems such as failure to meet financial targets. This should be solved by providing warnings and handling in an effective manner.

Research-oriented universities are unlikely to be able to maintain their competitiveness by relying solely on government sources of funding. The reputation of the university (Good university image) is a favorable thing for the university to get funding support. But there are also new universities (assumptions: not yet reputable) that succeed, where this is possible due to the ability of the university to compete in competition oriented to the market system.

In general, key assets for the university in generating admission include: managerial capabilities, academic reputation, location, staff, and buildings (infrastructure), where generally the assets are related to each other.

The development of diversification from sources of admission is a key characteristic of entrepreneurial universities.  But it emphasizes that the processes of diversifying sources of income that are characteristic of entrepreneurship are directions/ demands that are more academic than financial. The entrepreneurial vision put forward does not make the source of acceptance an end point, but rather refers to further matters of innovative academic activity, such as the creation of a new course structure that can result in acceptance, the implementation of research projects that attract significant outside investment, or the capacity of individual academic staff to develop new activities that can result in acceptance. The ability to produce innovative academic products and the ability to gain acceptance will generally go hand in hand, and successful universities will find ways to integrate the activities of both aspects through the creation of new organizational forms, such as centers, institutes, or programs. One important thing to note here is, the above entrepreneurial context should be accompanied by a clear understanding of the financial and academic benefits provided as well as the costs that must be incurred by the institution.

Activities that are part of the management of government and managed by the business sector, in practice have a relationship. Therefore, naturally the success of one activity will strengthen the success of another activity. But the real benefit that must be achieved is that different activities are consciously used to strengthen other activities.

The important thing to note is that activities aimed at generating receipts must provide a surplus/ profit. This surplus should serve as an indicator of performance success, rather than acceptance. In this regard, an important step that must be done is to create a mechanism and financial system and awareness that will ensure that institutions (universities, faculties, departments, study programs) understand the costs that must be expressed.

Generating a surplus is much more difficult than generating admissions, therefore universities need to assign a dedicated team to handle it. The first step that must be done is to establish a board/ committee that is responsible for the process of activities that take place. To that end, various revenue flows must be identified and accounting mechanisms must be created in order for the board to assess the development of each receipt and surplus flow compared to the estimated. At this stage, the management carried out by the board/ committee includes monitoring activities and ensuring that the person in charge of the activity can communicate the difficulties and get solutions.