Commercial Activities

Feeling the pinch

What strategies can independent school take to respond to the recession? Chris Cook and Robert Griffiths report

In difficult times, all businesses are having to find ways of improving their finances, although this can be particularly difficult in independent schools, where budgets are already stretched thin. Schools are understandably reluctant to exclude pupils whose parents are experiencing difficulties in paying their fees, so what other options are available?

As with any business, cash is king and it is important that schools get their credit control procedures right. It can be more effective for one person to undertake credit control (perhaps one or two days a week in a small school) than for several people to try to do it piecemeal. This approach means that the credit controller has all the facts available and is less likely to be fobbed off with excuses for non-payment. Having one point of contact will help the credit controller to build a relationship with parents, and should in turn encourage parents to be open and honest. This will enable the school to better differentiate between the “can’t pays” from the “won’t pays”.

Schools should then consider ways to ease the pain for parents who have been hit hard by the recession, particularly with redundancies. Many schools will already offer monthly direct debit payments rather than termly instalments, and this is likely to help parents who still have a monthly income. However, this could be extended to allow payments by instalment of existing debts. If the school is reluctant to expel a pupil for non-payment, it is better to receive some money than nothing at all. Any agreement to accept instalments should be recorded in writing and noted that the instalments are being accepted without prejudice to the right to sue for the balance if an instalment is not received on its due date.

Other measures
Another option is to agree with parents to register a charge over property that they own. This way, the school does not have to worry about the debt being repaid immediately, safe in the knowledge that the debt has been secured. Parents may be willing to offer such a charge rather than see their child expelled, and this arrangement also works well where parents expect to be back in work soon and earning enough to bring the account up-to-date.
However, for pupils that have already left the school, perhaps voluntarily, schools should not be afraid to use the full range of debt recovery options, including court proceedings and insolvency proceedings, to show that the school is serious about recovering all outstanding debts.

As well as ensuring that all outstanding fees, where possible, are paid, schools should also ensure that they are running as efficiently as possible. One possibility to consider is the cost of front-office administration, which should be only big enough to support a school’s operations. If resources are being under-used, saving money does not have to involve making redundancies. Alternative options include reducing the number of hours that employees work, encouraging applications from part-time employees and, if necessary (dependent upon the provisions of the employment contract), laying off staff for short periods pending an improvement to the school’s financial position.

Schools are increasingly taking advantage of cost savings from outsourcing support services. When non-teaching services, including caretaking, catering and transportation are opened up for competitive bidding, schools can potentially both improve the quality of its services and reduce costs.

Although many schools are experiencing difficult times, the silver lining is that there are many steps that can be taken to improve finances.

Chris Cook is an associate and Robert Griffiths is a solicitor at SA Law. www.salaw.com

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