Allan Hickie: The SBM and achieving financial efficiency

Allan Hickie: The SBM and achieving financial efficiency

What is school business management? The role of the school business manager is far more than just financial management. Here Allan Hickie, partner at UHY Hacker Young, discusses the ever-developing role of the SBM and how you can ensure financial efficiency in the face of uncertainty and real-time cuts 

The role of school business manager (SBM) has never been easy; it’s complicated because it’s one that encompasses far more than just financial management. However, the strategic importance of the role will become increasingly important in the coming years as real term cuts and rising costs will mean every pound, if not quite every penny, will count.

Most schools will find themselves in a position where significant cuts will need to be made and those which are set to see their funding reduce when the National Funding Formula comes in will be the most deeply affected. This is where a good SBM comes into their own; a bad SBM may only exaggerate the problems.

Number one asset…number one cost

So how can schools ensure they are operating efficiently? With staff costs typically representing 70-80% of a school’s budget this is, naturally, the area where the greatest savings can be made but it goes without saying this is a sensitive area and has to be managed well, in terms of both maintaining education standards and keeping the morale of remaining staff high. The cost of the senior leadership team will be a significant proportion of the total staff budget so this is one area to focus on. Is your senior leadership team delivering value for money? A SLT position always involves more than face-to-face interaction with pupils but are your SLT spending enough time on direct educational matters? Are there too many meetings involving lots of expensive staff where many of the issues being debated should be taken elsewhere?

It is vital that forecasts are prepared covering at least the next three years, taking into account all expected cost rises

Of course, proactively cutting staff through redundancies to make longer term savings brings a short-term cost and, for some schools, this may prove prohibitive. Lots of schools are already adopting the passive approach where any senior, higher paid staff who leave are not directly replaced.

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Looking at the three to five-year horizon

So what else can a SBM do to ensure their school is operating efficiently? It is vital that forecasts are prepared covering at least the next three years, taking into account all expected cost rises. For example, it is likely the Teachers’ Pension employer rate will rise by between two to four per cent in April 2019 which will be a significant additional cost; even a 2.5% rise would add around £50k to the payroll cost of an average size secondary school. All good forecasts have a sensitivity analysis built-in to take into account a range of scenarios, and give a best and worst case result. This information is vital to academy trustees and LA school governors if they are to make informed decisions.

This information is vital to academy trustees and LA school governors if they are to make informed decisions

Support in all its guises

The DfE have produced a range of resources to help SBMs, including financial healthcheck tools and a financial efficiency toolkit. Each year they also publish benchmarking data and, although this is released quite late – typically towards the end of the following academic year – this is a useful tool allowing schools to compare themselves against others using their own chosen benchmarking criteria – for example size of school, location, school type. This tool can be a useful way of identifying areas where your – school may be overspending. If a SBM needs assistance they can look at the DfE supplier list detailing firms who are able to support schools to become more efficient and financially healthy.

The DfE released a document last year, Schools’ financial efficiency: top 10 planning checks for governors, which – although aimed at governors – is a fantastic resource for SBMs, focusing on the areas that should be reviewed in the annual budget planning cycle and when looking ahead at the three-to-five year position.

Don’t forget peer-to-peer support. It is always worth getting to know your counterparts in local schools since they can often be a useful resource for tips.

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