The context of the larger part of the last year has, of course, been set by the coronavirus pandemic. Managing the worst Covid-19 has thrown at us has drained energy, emotion and finances from our schools. Indeed, the financial health of our schools has been brought even more sharply into focus by what has been happening across the globe.
It is not as if schools were not exercised by the need to balance the books before March 2020, but for many schools staying safe and solvent are now the two highest priorities.
When the first lockdown arrived there was much pessimism in the air for the financial prospects of the independent school sector. Our schools offered discounted fees to parents, in some case fearful that fees would remain unpaid, but in reality most schools received 95 per cent of the fees invoiced. Why did they pay? Partly because our schools responded so effectively with their online offer, partly because of the reductions offered to parents but mostly, and very encouragingly, because of loyalty to the school of choice for their children.
At this time of renewed lockdown things are different in a number of key ways. Firstly, and very importantly given that many schools are charities, the timing of the lockdown announcement. It came after fee invoices had been issued, and it was too late to offer discounts.
“Schools will not want to undermine the goodwill the parents have demonstrated.”
Secondly, the virtual online offer was up and fully working from day one and both children and staff were well versed in how this works. In this situation the overwhelming majority of staff are involved with few teachers being furloughed. Thirdly, of course, school finances are in a more fragile state than they were before the first lockdown.
No doubt schools will not want to undermine the goodwill the parents have demonstrated. Many will look to make some kind of fee reduction in the summer invoices. The big question though is by how much? If savings on costs can be found then probably these should be passed on to parents. If a boarding house has not been open and things such as catering have not been operating then that saving can be passed on.
If most of the staff have been working delivering lessons however, then the largest element of school expenditure is at levels experienced in more normal times. It will be much harder to offer a significant reduction in the summer invoices without accepting the school will make a significant loss. Any reduction should be seen as a goodwill gesture and is likely to be much less than in first lockdown.
The best run schools where vision, positive supportive governance, and strong confident leadership align will have had a strong grip on their development plan before Covid-19 had ever reared its ugly head. It has never been more important to have that vision aligned to the potential market. There are certainly many successful IAPS schools and some are reporting record levels of demand. Where there are “winners” there are probably as many others who are losing roll.
“The message is be clear in your vision and be bold in your decision making.”
If you were struggling before Covid –19 arrived and you were not sure if you were ready to move on restructuring the school then we are at the point where such calls need to be made to ensure survival. Have you analysed the cost per pupil, per lesson, and total expenditure for the core and co – curricular activities? Too often expensive co-curricular activities are retained by schools, even if they are not core in parents’ eyes. Their presence is seen as untouchable even though small numbers of pupils actually access what’s on offer and so staffing numbers are inflated to allow them to run.
There is a direct relationship between total staff cost and the fee level parents have to be charged. Tough as it is to wield an axe to non-core activities when they have been in the offer for many years, now is the time to act decisively and make the cuts.
Expenditure on capital items needs to be maintained. Don’t put off servicing boilers or even replacing them, especially if you’ve already delayed such a decision by twelve months. However, now is not the time to look to take on extra debt to fund capital schemes, even with low interest rates, particularly where significant loans will not finance increased pupil numbers. If schools, as they should do, are considering a financially-driven amalgamation or a merger, that may well be inhibited by financial liabilities such as a new loan.
The message is be clear in your vision and be bold in your decision making and there is a very good chance you will hit the ground running when we come out of the other side of the current crisis.