20 | UNDERSTANDING RISK | MONE Y
W:
www.ie-today.co.uk
Schools need to understand the risks they face if they are going to remain in good financial health, says Mark Cummins
VIABLE OPTIONS
The word ‘risk’ has evolved and nowhere more so than in the independent education sector where schools face a large number of complex risks. These challenges, however, have become more intense in recent years, with governors, heads and bursars increasingly having to consider an evolving list of objectives and targets. General affordability levels in the independent sector have previously been hit and schools have been faced with difficulties in making surpluses from activities and being able to reinvest in school development. The key is to understand how
independent schools perceive the risks they face and the early indicators that can be identified. What is the main concern for headteachers? How do bursars feel their school is protected against revenue risks? Are governors more worried than they were in 2014?
Early indicators of risk Falling pupil numbers: running below capacity and not generating the income to make a school sustainable is a vital issue. It inevitably leads to hard choices in terms of resources and investment in infrastructure. Cuting back on either of these, though, can have a significant impact on future pupil numbers. Staffing costs and retention: these costs
far outweigh other operational costs and are ones that have to be diligently managed. A drop in pupil numbers has an impact on the important KPI percentage of teaching costs to net fees. Also if staff members are leaving, and increasingly so, then it is vital for the management to understand why. Cashflow: just as all companies require
a budget, schools have their bills and debts. However, schools are in a unique position: their income arrives in fairly
shortfall in pupil numbers so that any commited programmes and schemes, infrastructure investments and operational elements remain unaffected. Shortfalls do happen: contingency plans are key. These are needed to enable the school to continue operating effectively on a reduced budget if the worst was to happen. The issue of enrolment
numbers and understanding the predicted income is not something that governors can do
INDEPENDENT SECTOR STILL FACES A MULTITUDE OF CHALLENGES”
“WHILST IN A MORE STABLE POSITION NOW THAN IN THE MIDST OF THE RECESSION, THE
predictable tranches as fees are paid in September, January and April. This seasonal cash inflow, whilst predictable, can pose a challenge in that there are expenses incurred every month that need particular foresight and planning. Gearing up for the start of a new school year also has the potential to incur more costs than the rest of the year. Increasing fee debts: there is increased
financial pressure on parents, therefore schools may see them taking longer to pay fees with an increasing number of bad debts. It is down to schools to become nimble and efficient businesses in order to thrive. Parents need the reassurance of excellence in education provision while being certain that the money they spend is being directed appropriately.
How to ensure ongoing viability Independent schools need to have a plan B for situations when there is a
on their own. It requires a close working relationship between school management and governors. Having a balanced team of governors is vital as they can bring skills to the table that management may lack. Independent schools can have
their cash flow levels severely hit. Governors must undertake the correct planning throughout the previous academic year to cater for this. This should ensure that contingencies are in place for issues which may require expenditure such as environmental disasters, pupil shortages and limitations in funding. In order to stay ahead of the
competition, a school needs to ensure that what it is offering is unique. Therefore its unique selling point is critical to its success and must be known throughout the marketplace. Whilst in a more stable position
now than in the midst of the recession, the independent sector still faces a multitude of challenges such as maintaining educational standards whilst simultaneously ensuring that student numbers are kept at acceptable levels and operational and capital budgets are under control. These factors are interconnected and almost reliant on one another in terms of the success or failure of the institution. iE
Mark Cummins is charities and education partner at Russell New W:
www.russellnew.com
© Lightkeeper |
Dreamstime.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51