Introduction
It’s funny how often in my conversations with School Business Managers, Trust CFOs and every role in between, the same delicate issue comes to the surface:
“We’re not precisely sure what the income from our childcare should be, and therefore, whilst we hope we are receiving all payments, we cannot be sure that we’re collecting all the money due”
It’s a delicate issue, because it speaks to the fact that without a fit for purpose booking & payment system, and/or a significant amount of administrative time and effort, it’s such a difficult job that will often fall by the wayside. Schools will accept that they will not have accuracy (to the pound, let alone to the penny), because, at the end of the day, there are many other important things to be getting on with.
In my experience, the larger the provision, and the more cash it generates, the more this problem exists. Where schools are generating in excess of £100,000, they are typically too busy to stop and consider this, and are just grateful for the additional income the club is providing for their budget.
So, how can schools check to ensure they are capturing every payment?
A cautionary tale – Reported Income versus Calculated Income
I had a revealing conversation with a School Business Manager (SBM) last year that taught me a lot about how difficult an issue this can be to discuss with schools. The school in question ran a very successful breakfast and after-school club. The club was appropriately priced and consistently had a “Reported Income” (what is entered in the school’s accounts) of £90,000 a year.
The SBM was confident that all of the revenue was being collected… but the raw data that she provided told a different story.
Doing the maths
- As part of our initial conversation with schools, we ask if there have been any recent changes to either attendance, pricing or capacities at the club. In essence, we want to compare like with like.
- Next, we ask for their current pricing and average attendance figures at both breakfast and after school club.
- Finally, if the school offers discounts (for example for siblings), or offers free places for certain pupils (such as children who attend whilst their parent works in the club), we factor these into our calculations to get an accurate average price paid for a session.
Once we have this data, we produce a “Calculated Income” value for the club. This is a simple calculation:
Average Session Cost x Average Attendance x 190 Days
We complete this calculation for both breakfast and after school, and this gives us a Calculated Income value.
In the above example, the Calculated Income for this school was £119,000, some £29,000 more than the Reported Income. Ah.
Unpicking what’s happening
It’s important to say at this point that we aren’t trying to catch anybody out: this occurrence is very common, and we have established many reasons as to why this happens. In fact, it’s in this gap that our service really comes to the fore, and is a major reason why so many of our partners are so delighted with our service.
But nonetheless, there is often a moment of discomfort when you ask “Do you have any ideas what may be causing this difference?”
In this particular instance, despite the undeniable maths of the situation, the SBM struggled to accept the possibility that not all of the children attending were paying. In this particular case, the school made a virtue of being as flexible as possible with parents. I suggested that allowing last-minute bookings at 2:55pm for that afternoon, and not having a watertight system to ensure payment is taken in arrears, might explain some of the gap in income. The stony silence in response spoke volumes!
Reasons for the gap
There are many, many legitimate reasons why a gap can exist, but in 95% of cases it simply boils down to the fact that school offices are incredibly busy places, and nobody has the responsibility to ensure that every penny is collected, every booking is accurately recorded, and everything is cross checked. So, what can schools do?
Check your income
To check your calculated income:
- Follow the calculation above
- Remember to ensure there are no differences in the periods you are comparing (such as a sudden increase in attendance)
- Then, compare it to your reported income.
If you find there is a significant gap – don’t panic! There will be reasons for this, that aren’t immediately obvious. And know that having a gap is normal in school-run care.
If you’d like some help in understanding why your gap exists, or to find out how we remove this gap (and add further income to your budget), we’d love to support you with this.
Why not get in touch for a quick chat?