A crystal ball might be more useful than a spreadsheet when it comes to financial planning for multi-academy trusts.
Your MAT is required to have a sustainable financial strategy for years to come. But you’re expected to produce that strategy without any clarity about many of the most significant costs you will face, even in the coming months.
This blog will sum up some of the key “known unknowns” this year. It will argue that you should focus relentlessly on data about “actuals” at the same time as you make your best judgements about what might be ahead.
MAT finance heads need no reminding that they’re responsible for taking a longer-term view of a trust’s financial plans. The Academy Trust Handbook sets out the requirement to submit three-year budget forecasts to the Department for Education.
But many costs fluctuate wildly over much shorter timescales than that. And budgets can be dramatically affected by decisions that are only made very close to the time when schools have to implement them.
What we know: The government has told the School Teachers’ Review Body that a 2.8% pay rise for 2025-26 would be “appropriate”. Unions, and the Association of School and College Leaders (ASCL), say schools are looking at budget cuts once the cost of funding pay increases is taken into account.
What we don’t know: The review body is independent, of course, so we don’t know what its recommendation will be – and we won’t until the end of March. We also don’t know how the government would respond to any other recommendation than 2.8%. Ministers’ response probably won’t come until the end of the summer term.
What we know: The three unions representing support staff have submitted a claim for a £3,000 pay rise across all jobs in schools and local authorities, plus a minimum hourly rate of £15. The claim also includes extra leave and a two-hour reduction in the working week. As with teaching salaries, schools have been told they should budget to cover whatever rise is agreed.
What we don’t know: It remains to be seen how the National Employers for local government will respond to the claim. We don’t even know timescales: this year’s rise was not agreed until October 2024 and had to be backdated to April.
What we know: The schools bill going through Parliament has implications for salaries as well as academy governance. The legislation originally tied academies to local government pay scales for teaching staff. However, the government has amended it so that academies will be able to pay more if they wish to.
What we don’t know: The bill is still in its committee stage, with plenty of scope for discussion and amendment, although a government with a landslide majority is in a strong position to get its way. It should become law much later this year.
What we know: Core funding per pupil is due to rise by 1.2% year-on-year in 2025-26 once inflation is taken into account, according to DfE figures.
What we don’t know: We can’t tell how that figure will compare with the budget pressures on schools. However, analysts expect costs to outstrip that 1.2% rise, while the government has acknowledged many schools will have to find “efficiencies” to cover the teachers’ pay award. And, of course, we don’t know what government funding will look like in subsequent years.
What we know: The Bank of England is expecting headline inflation to reach 3.7% in the third quarter of this year, although the figure is expected to fall back to its 2% target after that. These figures feed through to MATs in the bills they pay every day, of course – not to mention those pay claims.
What we don’t know: This is the biggest unknown of them all, of course. Even national governments can be knocked drastically off course by world events that have a big impact on the cost of living.
With so much lying outside the control of MATs – and in some cases, outside the control of government – even short-term budget setting is going to involve some educated guesswork at best.
Short of adding soothsayers to the finance team, there’s no way to entirely take the uncertainty out of financial planning for MATs. But there are strategies that can reduce that uncertainty and better inform your projections.
Scrutinising your expected and actual spending is a fundamental financial requirement. The more you can be in control of this area, the better. Where exactly are those overspends and underspends happening? Are they one-off discrepancies or are they likely to recur?
Likely areas of overspend include:
Agency staff costs, which have risen 28% in the past year according to a recent report by BESA
SEND requirements
Building maintenance and repairs
Energy costs – up 60% in two years according to BESA
In all honesty, do you have the data you need in your monitoring reports to scrutinise spending as you would want? Or do you lack access to detailed financial information in real-time?
Sometimes, the answers are not in the spreadsheets.
Talking to people as much as possible can provide a better picture of the future.
What plans does the headteacher have that you might not be aware of – not just this year and next, but however far ahead she or he is looking? What are the implications for staffing? From what you know about the senior leadership, how realistic are they when assessing whether their plans are affordable?
Try to get people to think about financial years as well as academic years and see how that informs your own thinking.
It’s easy to become demoralised about cost control. It can feel futile when the vast majority of the trust’s spending is on salaries, over which your influence is limited. But a lot of overspending happens through lack of scrutiny.
If you haven’t recently reviewed all your contracts and service level agreements, it’s important to do so. What agreements have expired? What is coming up for review and could be renegotiated? Don’t fall victim to the automatic three-year renewal.
Are there costs that could be fixed, for example by negotiation with staffing agencies?
Is there duplication in your trust, with different schools paying the same provider, or multiple providers for the same service? Are you paying for multiple instances of the same software? These areas could be ripe for rationalisation and renegotiation.
We all know efficiency is important and that every available pound should be directed at teaching and resources. But have you had the time and headspace for a thorough review of your processes?
How much time is being spent on data entry and other repetitive work in your finance and administration teams? What could be automated or made more efficient? What opportunities are there for digital transformation?
In finance specifically, how long is it taking to produce month-end reports? If you can’t see how a month has gone until you’re most of the way through the next one, you’re never going to be working with the best available information.
Areas such as these might require some up-front spending, but it’s worth researching how quickly you would see a return on investment.
The more you can get above the day-to-day processes and see the bigger picture, the better your budgeting and planning will be.
We all know that’s easier said than done. But you’ll benefit from blocking out some time to hold back the everyday world and try to view things from a higher level.
The unknowns will always be a big part of the process. But you can bring your vision of the future into slightly sharper focus.