Sharon Monteith lays out the importance of an efficient finance function

An efficient finance function is essential for running an effective school. It can help monitor and control costs and aid future planning, but it should not become a cost burden itself.

Creating efficiency in a school’s finance function is not just about monetary costs. It also involves using time effectively in areas that add the most value to the organisation. Many school finance teams spend a significant amount of time on transactional processing, leaving limited time for other fundamental areas such as data analysis, reporting and forecasting. If finance staff spend too much time carrying out simple processes, how much time do they then have to undertake strategic financial planning or provide support to the senior leadership team and governors?

This inefficiency within some school finance functions may be due to the significant number of schools that still rely on older technology and manual intervention. This digital financial skills gap may get worse before it gets better. The ‘Charity Digital Skills Report 2023’ found that three out of ten charities are spending less money on digital tools, 17% are spending less on upskilling staff and volunteers and 10% are shelving internal digital projects. And while not all independent schools are charities, these findings provide useful context for all schools in ensuring good practice in this area.

Demands on school accounting systems are high, especially at peak times such as termly billing and monthly payroll. Independent schools in the UK, especially those which are charities, face greater challenges than commercial operations of a similar size given the significant reporting burden and regulations in the sector.

While a move to a more modern accounting system can bring many benefits, it can also be a significant investment of school resources. It’s important that any move is planned carefully.

Key areas for consideration

1. Are the financial processes and controls currently in place fit for purpose?

If this is not considered prior to transitioning to a new accounting system, there’s a risk that inherent inefficiencies and weaknesses in financial control will just move over to the new system.

2. How well does your finance system integrate with the rest of the school? 

Does the finance system work seamlessly with the school’s management information system and learning management system to avoid significant time spent on manual intervention. How well does the system integrate with mobile apps in use throughout the school?  

3. Data analytics

Systems such as Power BI can work alongside your finance system to provide data analytics and insights to drive decision-making and deliver operational efficiencies. 

4. Has training and support for the new system been considered?

Initial and ongoing training of users of the new system is vital as part of the transition. Implementing an expensive and effective accounting system with minimal training for the finance team and others can lead to work arounds when they can’t get the system to do what they want. Data taken out of the system for manipulation, additional spreadsheets used off system, and controls circumvented as they become too cumbersome, can all lead to a system that’s even more inefficient than the one previously in place.

As well as initial training in the system, it’s important to understand the level of support that you will receive from the software provider. This will ensure that any issues can be resolved quickly to avoid disruption for the school, and that ongoing training and updates are provided.

The crucial need for schools to digitalise their finance systems

Efficiency, or a lack thereof, also involves using time efficiently in areas that contribute most to the school. The advancement of artificial intelligence and technology in the sector is why many leading accounting software brands have developed accounting software specifically for not-for-profit organisations including schools. Moving to a more digital system comes with several benefits, including integrated reserve accounting, digital links to other key systems, and the use of AI to streamline transactional processing and inbuilt approval processes.

Many sector-specific offerings are also cloud-based systems, allowing authorised personnel to access the data and complete tasks anywhere, on any device. This is great for offering flexible working for your staff.

An increase in digital processes means that the charity will need to consider the implications of this on cybersecurity.

Effective IT comes at a price and schools running older systems often make do with what they have rather than spend valuable funds on state-of-the-art technology. However, this may be a false economy, where the overreliance on manual intervention and older generation accounting systems actually creates a cost envelope larger than the potential to invest in newer, more automated, and safer finance IT systems.

Sharon Monteith is a director in the accounting and business advisory team at audit, tax and consulting firm RSM

Sharon Monteith