Modeling vs Budgeting: Organizational Interdependency

9 min Read

Two different organizational challenges require two different solutions. Similar to how budgeting applications improve operational performance, Modeling Intelligence (MI) allows organizations to set financially sound trajectories for long-term strategic visions. Institutions should use interdependent but separate modeling and budgeting solutions to yield the greatest financial success in the short and long term.

Strategic visions cannot be informed through simple operating budget projections. Some budgeting software solutions support this idea through “integrated” planning features inside of budget-focused applications. These platforms are built to support operational management, not long-term strategy. 

The difference between strategic modeling and operational budgeting is visualized in the Financial Efficiency curve. Although budgeting software may include rudimentary planning and forecasting capabilities, those tools are far less efficient at analyzing complex strategic scenarios.

Modeling-vs-budgeting-financial-efficiency

Similarly, Synario is not meant to manage budgeting operations, and therefore has a low-efficiency value on the Operational Management axis. Unlike budgeting solutions, Synario offers Agile Modeling Intelligence, which connects integrated financial statements with the ability to project a limitless variety of strategic and financial scenarios. Synario is the pinnacle of the Long-Term Strategy axis on the Financial Efficiency Curve.

The following use case from Stetson University illustrates the difference between budgeting and financial modeling solutions.

Stetson University Enrollment Modeling

From 2009 to 2019, Stetson University increased its undergraduate enrollment by a remarkable 47%. As this significant enrollment contributed to the university’s financial growth, there was a desire among stakeholders to find out if further growth would continue to build financial strength. A full-field view of the initiative required advanced modeling tools and collaboration across various stakeholders. Melissa Peters, Stetson University’s Associate Vice President for Budget, combined enrollment drivers with key aspects of Stetson’s budget model and integrated financial statements into one Synario model.

Comprehensive Financial Strategy Model Stetson

Various enrollment cases were entered into the comprehensive model to reflect an increase in students.

Evaluating those assumptions through the model revealed cascading ramifications to the university’s financial outlook. Those related effects included a decrease in the faculty to student ratio and an increase in additional marketing costs, as well as a need to increase student housing and hire extra staff. Stetson incorporated various housing and faculty hiring scenarios into their model to see impacts on the integrated income statement and balance sheet.

Once stakeholders could visualize the impact an enrollment increase had across Stetson’s financial statements, it was quickly determined that the strategy was not at all a “slam-dunk.” All scenarios that accounted for the myriad of initiatives that support enrollment growth did not generate enough return to support the investment of effort. The proposal to implement increased enrollment was postponed until the costs of affected areas could be determined.

Modeling vs. Budgeting: Synario is built to...

Financial Modeling Synario vs budgeting 

With the help of Synario, Stetson University was able to efficiently make informed decisions regarding their strategic initiative to increase enrollment. To maximize efficiency in both operational and prospective strategy management, we recommend tailored software solutions for both modeling and operational budgeting.