Credible Reporting of School Financials

Schools face many types of risk and challenges. In this article series on ‘Keeping Your School’s Plates Spinning in Uncertain Times’, we are considering the operational and financial vulnerability of schools and this part focusses on the importance of effective financial reporting.

  • What are the risks?
  • How do we reduce the impact on our school’s financials?
  • What methods do we use to adapt our reporting?

There are many elements of financial reporting. The top 3 main areas that require our priority consideration are

  1. Timing – when to present relevant data?
  2. Content – what information to include at an appropriate level of detail?
  3. Stakeholders – who is the audience requiring information to make decisions?

If you have been following this series of articles, you will notice echoes of these 3 elements in other things we have already considered.

In all 3 of these reporting elements, the absolute key ingredient is data! Not just my thoughts…

“Without data you’re just another person with an opinion.” – W. Edwards Deming

“Data is like garbage. You’d better know what you are going to do with it before you collect it.” – Mark Twain

Whether you are in a Management Meeting, discussing results with a colleague, or a parent stakeholder in a Committee Meeting, what you have to say is just an opinion unless you are able to validate the presentation with hard facts and effective reporting data. If you are providing reports to another stakeholder it is the accurate, relevant data that underpins your report that enables that stakeholder to make big impact decisions for the school.

So if data is absolutely vital in creating credible financial reports, what about data garbage? Before we even get to having to prepare reports, we must ask how are we gathering the data and is what we are collecting relevant? Suitable consideration of this and relevant planning of data collection within our systems is very important well in advance of when that data needs to be used. When a crisis hits, it is too late. There is neither time, resources or the priority to address data collection during crisis and at a time when the reporting of relevant data is more important than ever. It can be the difference to being financially sustainable or not!

Let us now consider the types of reporting we prepare and present to enable the most effective decision making in our schools.  One thing is very clear and that is that Financial Reporting is not sufficient on its own, especially just the historical Financial Statements. This may seem obvious, but there are plenty of schools that are preparing little more and it is always good practice to review what we are reporting and why.

It doesn’t matter how quickly we prepare & release historical Financial Statements, because we should never make a decision from them. These types of reports are often a statutory requirement only. Schools need timely and accurate information that looks forward and helps make decisions. Schools need to include Management Reporting not just financial, reporting that includes other data not just historical financial figures. Reporting that tells stories with dollar figures. Reporting that looks forward and can be used to respond to a crisis.

Ask questions of your reports, like:

  • What do actual $ figures mean without the context of the strategic objectives?
  • What do the $ numbers mean without the context of the non-financial data?

Context and the backdrop to what we are reporting against is so important. Even then, strategic objectives change and do over-night in a crisis. Does our reporting change accordingly?

Context and the backdrop to what we are reporting against is so important. Even then, strategic objectives change and do over-night in a crisis. Does our reporting change accordingly?

Accountants in schools should be including non-financial data in reports to add meat to the bones or to provide a storyline to the final chapter e.g. student stats, economic and environmental commentary, performance of other areas of the school.

To assist with the type of relevant report to produce, consider the objectives of effective reporting:

  • Strategic measures to assess performance – This is necessary in all reports and not just board reporting. All financial reports need to be linked back to strategic objectives, so they can be used as an accurate and contextual assessment of how the school is performing in meeting those objectives.
  • Understanding your position – Reports are there to help leadership in the strategic achievement of the school. Where is the school currently on that journey?
  • Setting performance benchmarks – Include in reporting the context of other areas of your school, performance indicators of other schools, economic stats and other industry benchmarks.
  • Learning and adapting – All reports must be portraying the theme of ‘Learn from the past, adapt to the now, plan for the future’. Churning out the same reports using the same data month after month is NOT going to achieve all 3 areas of this theme.
  • Enhancing communication & engagement – Are we providing information our Stakeholders require or are we reporting how we like doing it or just how the system produces it by default? Our reports need to be engaging for the audience and communicating the critical information required.
  • Improving collaboration – Resilience and efficiency are financial qualities all schools seek, especially in times of crisis. Internal and external collaboration of departments, partners, suppliers, organisations, associations etc. and a reflection of this in our reporting will promote these relationships and their data to achieve strategic objectives.
  • Fostering continual long-term improvement – Especially during periods that are less hectic, review your reporting suite to ensure it promotes operational and strategic opportunities for improvement. Tell a story with a happy ending which encourages the reader to want to get to the climax in the last chapter!

Reporting

Much has been said about effective reporting, here are some pointers to get us thinking of how we can achieve this:

  • What are your strategic objectives? – Identify your stakeholders and what are they needing to achieve. Help them to be eyes wide open and aware of what’s changing. Strategic Plans must not just be kept in a drawer but a real element of everything we report on.
  • Know your stakeholders’ responsibilities & expectations – These will differ across your range of stakeholders. The same report is not relevant to all stakeholder. What do they each need?
  • Are your KPIs relevant to your audience? – Understood what they need to know now, today. Your reports can provide relevant snippets of information.
  • Does your report tell a story? – Everyone loves a story, it’s how we are wired. The same applies to reporting. Why not even call it a story? Financial and operational story telling!
  • Is focus maintained by a visually pleasing report? – How are we presenting? Are we using technology? Are reports available Online? Are the reports interactive? How you do this will depend on who your stakeholder is.
  • Clarity or confusion? – Make sure your reader is not bogged down in irrelevant information or overloaded with data. This is especially important in a crisis or emergency.
  • Is there balance between summary and depth of info? – Include an Executive Summary, charts, quotes, graphs etc. Further detail can be provided in an appendix or as hyperlinks.
  • Is your data real-time relevant? – Remember Financial Statements are not! How fast does relevant information in your pool of data change? How do you easily collect this information and report on it? Report on the ‘Now’ and suggest how best to respond. This too is critical in a crisis situation.

It is very important for schools to develop an effective reporting process for all areas of reporting. Business managers are encouraged to use technology as much as possible to produce reports. This will save time, improve the availability of information and enhance the interaction of the user. Create interactive dashboards with relevant widgets that are available online to provide relevant information. Give different dashboards to different stakeholders that are always available with real-time data. Make sure your online reports are dynamic and the format can easily be changed. Enable the stakeholder to drill down into data for more information and even be able to create their own scenario analysis. Much of this can be achieved by collaborating with software providers or partners.

When situations in the school do environment do ‘hit the fan’, Business Managers can be very effective in helping to guide leadership through to the other side. We have all been reminded in recent times too how real these crisis situations are too! So, here some things to consider when reporting in a crisis:

  • Parent & Stakeholder reporting – proactive story telling
  • Payment terms & concessions –to support parents’ loss of income
  • Present financial scenarios to board – fund deficits, worst case scenarios
  • Gearing – defer loan servicing
  • Staffing ratios – adjust respective to enrolment changes
  • Process costing – compare traditional/online/hybrid workflows
  • Budgets – identify non-essentials and avoidable costs
  • Expenditure – highlight immediate cost saving opportunities
  • Purchasing – bulk purchase, supplier savings & discounts
  • Supplier ledger –indirect spend profile & supplier benchmarking
  • Assets & People – repurpose to priorities
  • Buildings & capital – defer non-essential expenditure
  • Ratios – financial benchmarking

In the final part of this article series we will be next looking at increasing cashflow, reducing debtors and wowing parents!