Budget scenarios: mapping your multi-academy trust’s future

With so many variables to keep track of, it’s inevitable that multi-academy trusts will encounter deficits at one time or another.

Martin Holyoak

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However, the DfE expects all trusts to operate their finances as a sensible business would. That’s why it’s crucial that you run through various scenarios to help plan for the unexpected.

Avoiding painful deficits

Without proper financial control, your trust can’t provide the excellent education that its students deserve, which is a huge failing.

If your deficits creep up year-on-year, there’s no longer any safety net in the form of the LA to bail you out. That’s why trusts need to tackle their year-on-year deficits with confidence. The consequences for neglecting your deficit are severe – no one wants to be in charge of a trust’s finances when it becomes insolvent.

Preparing for any future

It’s not possible to accurately predict what will happen in the future – the Covid-19 crisis has made that abundantly clear. However, it is possible to prepare for anything the future may bring.

You need to consider any major changes in funding that may come about – for example, as a result of change to legislation or even as a result of onboarding a new school into the trust. You also need to consider what may happen if there are to be changes to your major revenue streams.

As a minimum, you’ll want to look at the cost per pupil and estimated pupil number before building out three scenarios:

  • Cautious
  • Likely
  • Optimistic

This ensures that you’re prepared for every possible scenario and have plans you can action straight away.

You’ll also want to ask some important questions when building your scenarios:

Are you a growing MAT?

If your pupil numbers are still growing, be aware that this can affect your costs. Most pupil costs are stepped, which means they won’t increase until you hit a certain increment of students – for example, the point at which you would need to add an extra classroom teacher and classroom.

Bear this in mind, as you could end up inflating your costs without getting a good return for your students. Be aware of where your student number breakpoints are.

Are all of your academies accounted for?

You not only need to avoid an overall MAT deficit, but you should also look to minimise deficits for each individual member academy.

This is where the power of a trust lies. One powerful option for helping individual academies claw back their deficit is to take advantage of General Annual Grant pooling; you can read more about that here.

Are you planning a trust-wide policy?

To calculate the impact of a trust-wide policy such as blanket incremental pay rises, it may be wise to model them first. By running through the impact on staff expenditure, it could ultimately affect each individual academy’s approach to non-staff expenditure.

Do you have the right tools for the job?

If you’re not able to realistically model your scenarios for the coming years, they’re not going to do you much good when you need them.

These models aren’t just to satisfy the requirements of the DfE – they’re also a powerful tool that you should be able to rely upon when circumstances change. That’s why you should look for software that enables you to build flexible 5-year forecasts and that can streamline your budget planning across the entire trust.

If you’re interested in moving away from spreadsheets or upgrading your budgeting solution, visit the IRIS Financial Planner website to see everything that it has to offer your MAT.

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