Financial efficiency – stay in control

Written by: Julia Harnden | Published:
Photo: iStock

Times are tight and budget pressures in schools are increasing. Funding specialist Julia Harnden offers some broad principles to help schools manage their finances

Whatever financial position your school is in at the beginning of 2016, we are all aware that these are turbulent times. Budgets are under immense pressure because funding is effectively frozen and costs are rising. The situation in post-16 education is even worse with cuts that have left many sixth forms and colleges on the precipice.

The question that is uppermost in the minds of many school and college leaders then is how to address the toxic combination of funding uncertainty and unavoidable cost pressures. A tremendous amount of financial expertise already exists in many institutions around the country.

Leadership teams are rising to the challenge of delivering education in more innovative and efficient ways to meet the changing needs of the economy and ensure young people have relevant skills for the world of work. This article cannot provide all the answers but it will draw together some general principles and hopefully provide a helpful summary.

The most important consideration in battening down the hatches in difficult times is efficiency. The starting point for this is budget scrutiny. This means making sure the expenditure on each of the key areas of staffing, premises and curriculum resourcing is being used as effectively as possible and is set at the appropriate level. If schools are spending too much money on staffing, for instance, it squeezes the amount available for maintenance and upkeep. This is not a trade-off that is sustainable as it will ultimately lead to buildings deteriorating to a point where the costs will be more expensive in the long-term.

The generally accepted budgetary practice is that between 75 and 80 per cent of costs should go on total staffing. This leaves around 20 to 25 per cent to cover premises, costs associated with curriculum delivery and other non-curriculum expenditure. These figures are not set in stone and schools will need some flexibility according to their circumstances.

Benchmarking is a very useful tool in evaluating financial efficiency, allowing you to compare your expenditure patterns with other similar schools – either locally or nationally. Maintained schools can access benchmarking data via the financial benchmarking website and academies via the academies financial benchmarking website (see further information).

Non-staffing areas

Staffing is obviously the biggest budget item and it is this area which is directly affected by the rising costs being faced by schools and colleges. This is, of course, because increases to employers’ contributions to teachers’ pensions, rising National Insurance costs and salary increases have to be met from existing budgets without any additional money from the government.

It may be possible to make some savings in non-staffing areas. It is a good idea to look at service agreements for instance. Some IT contracts may offer a top-notch “gold standard” response to computer problems which is not essential when a more basic and less expensive service may be available.

Another area to examine is energy bills. Is the current service providing the best value for money or would it be possible to switch to another supplier who may give a better deal? Schools under private finance initiative (PFI) contracts might also want to make sure that they are not paying out separately for maintenance and other service costs which should actually be provided under the PFI agreement.

Schools might want to consider joining forces with other institutions to jointly buy goods and services, if they have not done so already, as this extra buying power can often secure better deals.


The scale of the additional cost pressures on schools and colleges means that a number will be left with no choice other than to reduce the amount they spend on teachers, support staff or both.

It may sometimes be possible to do this through non-replacement of staff who are leaving, but the reality is that redundancies may be unavoidable. If so, it is advisable to try to plan any restructuring so that it sees the school through the next five years and avoids the need for further redundancies year-on-year.

This approach will minimise the inevitable impact on morale and help to create a greater sense of stability following the restructure. It is also advisable to grasp the nettle sooner rather than later. A redundancy process can often take several months to complete, especially if you do not have an agreed process in place. So, if the restructuring needs to take effect from the 2016/17 academic year, the process should ideally be started now. As a safeguard, make sure that you receive appropriate HR advice ahead of and through the process.

Contact time

Another factor to consider is the proportion of contact time teachers spend with pupils. It is important to think carefully about how much time to allocate to planning, preparation and assessment. Maximising teaching time is an efficient use of resources, however too much contact time can lead to unacceptable pressures and additional absence and supply costs.

Budget decisions are likely to have an impact on curriculum and timetabling and this has to be factored into strategic planning. It may be necessary, for instance, to slightly increase some class sizes and have fewer sets in some subjects. Schools may also consider not running course options which attract very small numbers.

These are unpalatable and controversial areas, and such decisions are best left to individual institutions as they will know the needs of their students and the realities of their budgets. The guiding principle, however, is to develop a curriculum which includes the essential elements the school must deliver, as much as possible of what it wants to additionally deliver, and culminates in what it can afford.


Another area to consider in financial planning is risk-management. This is often associated with the threat of something bad happening, but it often helps organisations to identify opportunities. For instance, let’s say that a school is facing a situation in which a number of experienced teachers are due to retire over the next few years. This risk is exacerbated by the current challenges of recruitment and teacher shortages. Effective risk-management will identify this as a potential problem and should allow sufficient time for the situation to be addressed successfully and via a sustainable route.

Place planning is another key area for good risk-management. Understanding local demography is essential for ensuring that appropriate curriculum delivery and staffing is in place to meet the needs of changes in pupil numbers. For example, if an increase in student numbers will create accommodation pressures, forward-planning is critical to ensure that adequate specialist provision such as science labs and technology workshops are available when they are needed.

Equally, if there is spare capacity in your organisation an effective marketing strategy will provide a competitive edge.
Risk-management encourages this sort of horizon-scanning, enabling organisations to develop creative solutions to future threats into their plans and deal with them in a way which can turn a potential threat into an opportunity.

Robust planning

What all this comes down to is the need for detailed and robust planning. It is highly advisable to have a business manager on the leadership team, or access to a business manager if this is not possible. An appropriately skilled business manager should provide the expert financial guidance which is essential in developing a strategic financial plan. In 2013, the Department for Education (DfE) published a review of efficiency in the school system, which emphasised the importance of the business manager role.

The DfE found that a school business manager is a characteristic of the most efficient schools. It is also important that the whole leadership team understands the goals and works collaboratively across curriculum, staffing and finance to deliver them.


There is no escaping the fact that this is an enormously challenging time for many schools and colleges, and that strategic financial planning will need to be developed and executed exceptionally well to navigate these choppy waters. However, leadership teams should take confidence from the fact that their detailed knowledge of their organisations means they have the insight and expertise necessary to steer them through this difficult period and continue to do the very best for their students.

  • Julia Harnden is a funding specialist with the Association of School and College Leaders.

Further information

  • Financial Benchmarking: (schools) and (academies).
  • Review of Efficiency in the Schools System, Department for Education, June 2013:
  • Strategic financial planning and staff deployment, an ASCL course, takes place in London on February 24, while a session on strategic financial planning will take place at its annual conference in Birmingham on March 5. Visit


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