Driven by Data

Make your school budget work for you throughout the year

All too often school leaders go through the process of making a budget – only to let it collect dust once it’s complete. A budget done well transforms abstract goals into concrete numbers and allows you to track progress towards those goals throughout the year. If you are not coming back to your budget on a regular basis as the year progresses, you can stray from your goals and expose your school to unintended risks.

 Below are four tips to help school leaders stay on track:

Tip 1:  Look Backward 

At the start of the school year, compare past years’ budgets versus actuals to see where your school has over- or underestimated in the past. For the largest discrepancies (e.g., per-pupil funding or teacher salaries), work to understand how your targets were missed.  

Some budget misses are one-offs and unpredictable. But, for issues that repeat themselves, the solution may require operational changes. Doing this analysis at the beginning of the school year allows you to implement improvements to prevent a repeat occurrence.

Tip 2:  Enrollment Targets = Revenue Targets   

School revenue is overwhelmingly driven by per-student funding. To stay on budget, one of the most important things you can do is hit your enrollment targets. For example, the average student brings in $17K-20K in Washington, DC, so a shortfall of five students can be a $100K loss to your budget. Being aware of any possible shifts in your enrollment prospects allows you to make the needed changes as soon as possible.

Tip 3:  Manage Your Roster

Your largest expense is almost always going to be staffing – typically in the range of 50% – 70% of your entire budget. Therefore, the single best tip for staying within your budget is sticking to your roster.  Adding a few unplanned staff hires can erase days of cash from your forecast. In cases where unplanned hires are simply unavoidable, work with your finance team so you can offset the extra cost with cuts elsewhere.

Tip 4:  Reassess Monthly

Set time aside on a monthly basis to determine how well your budget continues to reflect your reality. Use this time to:

  • Revisit key assumptions underlying your budget numbers.
  • Review spending to date and assess remaining planned spending.
  • Create contingency plans as soon as you become aware of a budget stressor on the horizon. The bigger the financial impact, the sooner you should start planning to mitigate the impact. 

Staying within a reasonable budget is the single best thing you can do to ensure the long-term financial health of your school. While changes to a budget may be out of your control, you can minimize the impact on your school by focusing on the four items above.

[This post contributed by Phan Huynh, Finance Specialist.]