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As the landscape of education changes & most schools become self-managing academies, the future funding of education is set to be increasingly challenging.

With the announcement, prior to Christmas, of the potential required cuts to the school’s budget of £3bn by 2020 is it time for a fresh look at how schools operate financially?

With most long established institutions, the ability to change and examine new ways of operating is a challenge.  With the landscape of education changing whereby most schools will be academies and therefore self-managing, compounds this challenge.

As today’s report states, approximately 60% of secondary schools will be or are currently operating in deficit, there is a radical change needed to manage the operating expenses of any school.  Worryingly the call seems to be from the sector is that this will result in staff cuts.  Whilst it is inevitable that some staff cuts will take place due to the size of the required cuts there could be other areas of opportunity that can be realised.

Having worked with a variety of schools and institutions we are often faced with a reluctance of “changing from what we have always done”.  The reliance on existing recognised buying clubs and council run procurement activity has not produced the required savings or efficiencies that schools require to meet the future demands of expenditure cuts.

Whilst dealing with some schools that are open to change, we have been able to use our experience from other sectors in how we have optimised operating costs. Whilst commercial businesses recognise the need for outside expertise, the school’s environment seems reluctant to accept this.

Suppliers are keen to work in the education environment but are often prohibited due to the use of framework agreements or OJEU.  Therefore, the availability of alternative sources of supply and a challenge to existing costs may be limited again making the challenge of cutting costs difficult.

Commercial businesses have long faced the challenge of ensuring costs are comparable to income and it could be argued (as I have on previous blogs) that schools must now operate in a similar manner.  This and, I believe, any future government need to balance the fiscal budget and therefore this challenge will not diminish but will increase.  Schools need to look at new ways of operating and explore services that are outside of the existing ones that have been used. As a wise man once said;

“If you always do what you’ve always done, you will always get what you’ve always got” in the case of schools this could be a £3bn budget gap.

Acquiring or merging businesses has a multitude of benefits and is often a mark of success and growth.

However, some of the opportunities that arise from this process are often not capitalised on due to the intensity of the process and the need to merge cultures, people and processes.

During this time the benefits from the larger entity need to be identified to ensure that any financial growth is realised.  Quite often the increased sales revenues are not returned directly to the profit line due to inefficiencies in ordering, pricing or process.  Existing suppliers need to be brought into any transition where additional efficiencies can be realised together and a better margin achieved for all parties.

This process can also be an opportune moment to review existing suppliers and most importantly their service levels.  Whilst contracts may be prohibited from being terminated, leverage can be used to achieve a better level of service or indeed price. Supplier are often keen to work with a growing business as it cements relationships but also business continuity for their own supply chain.

By understanding the suppliers cost base and the efficiencies they can make through logistics, administration, marketing and sales support can be utilised to drive a reduction in cost to the end business.  These savings can be multiplied along the supply chain to all suppliers and discounts can be moved to a new level.

Pressure to deliver a return on any investment is never keener than at this time of any businesses life and examination of the cost lines should be undertaken at this time.  It is the norm that financing has been used to make any acquisition or merger take place.  Unforeseen costs such as redundancy, implementation of new processes and a normal downturn in production can all be by products of any merger / acquisition.

Balancing all these financial demands can reduce staff motivation and a downturn in business can occur whilst at the same time needing a instant return on any investment is required.

Bringing in expertise would deliver benefits and assist in achieving a quick return allowing a business to focus on increasing sales revenue and cultural integration.

As we have seen forecasting the future has come to be an art rather than a science, … and an art without too much accuracy.

You only need look at the performance of recent polls for the past elections and of course the numerous differing predictions of the economy’s performance following Brexit.

Only last week I reflected on the predictions of the bank of England predicting challenging issues for the economy and now we have PWC predicting that Brexit will have little effect on the economy and it may produce a positive long term future.

What do we know for sure?

Well we can be sure that businesses will adapt to trading conditions and the strong will survive and the weak (maybe maybe not) but that’s not unusual in any trading environment.

In any case I think that businesses should be examining the pillars of any business.  That’s not to say these are the finite ones but it’s a good start

People – have you got the right people in the right place.  Do you need to recruit or can you outsource and bring in short term expertise to give the business an injection or kick start?

Sales – How do you improve the sales from your existing customer base, how do you get more customers

Costs – how much does it cost to run the business, what are your minimum costs for just producing selling one item, when did you last actively engage with your suppliers

Competition – how are they doing, can you learn lessons from them, how do they do what they do

Most would argue that this should happen throughout the business cycle ad I dare say it does to a greater or lesser extent but is it always done by the same people internally and surprisingly no change is made.

Using someone who doesn’t have a vested interest in not upsetting the boss / board / shareholders / colleagues is probably a better bet and so would recommend thinking about who would do the review first – should they be internal or external