“For the very first time, I have absolutely no cunning plan” tweeted Sir Tony Robinson after Donald Trump was elected the 45th President of the United States.
However would he if asked, have a plan, cunning or otherwise, that the Governing Bodies of UK independent schools might follow as they face the fiscal challenges raised by Brexit? Well, maybe or maybe not. But it is still a $64,000 dollar question.
So what sort of strategy should Governing Bodies adopt for their schools during these uncertain times?
- Firstly they should establish a clear, disciplined structure for financial reporting. They should expect the bursar not only to prepare the normal financial schedules but also to provide them with a summary of KPIs, a summary of cash movements, and to undertake a benchmarking exercise comparing their school with the competition. Agendas for the termly finance meetings should not be a carbon copy of the previous meeting but should be designed to explore projections for the future.
- This is because financial forecasting is more important to the health of the school than analysing historic accounts. Although the bursar may need to give a brief update of the school’s financial position to the governors at each meeting, it is the decisions that are taken at these meetings that will have the most impact on the viability of the institution. Therefore during times of economic turbulence it is imperative to formulate yearly, a full 5 year forecast of the school’s financial situation. This should include both known and unknown contingencies. Likewise, the outturn to the year end should be calculated in order to assess the surplus and thus the feasibility of capital expenditure.
- Linked to this is the need to adopt a highly professional approach to cash management. At a time when many independent schools are facing fee affordability challenges coupled with crippling historic debt this is particularly pertinent. When access to cash was easy many schools were tempted to borrow extensively. However now that the banks are tightening controls and introducing stringent covenants, they are finding repayment increasingly onerous. Therefore maintaining a rolling annual cash forecast should be mandatory.
- Equally the management of risk and the need for contingency planning should not be underestimated. All too often a school’s risk register is nodded through at a GB meeting and not thoroughly debated even though it is as important to the viability of the institution as the income statement. Schools need to have systems in place to highlight potential trouble. Warning signs such as a decline in pupil registrations should not be swept aside particularly if, post Brexit immigration controls are tightened. This would mean that the traditional answer to contracting pupil numbers – the recruitment of overseas students - is no longer an option.
- Finally governing bodies should recognise that in order to maintain fiscal stability in the lead up to Brexit and beyond, they should ensure that a professional approach is adopted in all areas of the school management, particularly in the bursary, marketing and HR departments. In fact to quote Donald Trump: “It is very important that people aspire to be successful. The only way you can do it is if you look at someone who is”. Slightly rephrased, this statement could equally apply to the governance of schools during unsettled times.
By David Williams, Consultant Bursar and founder of BursarSearch. David can be contacted on firstname.lastname@example.org, and 07713 091657.