Auditel Franchise

Outsourcing – an alternative strategy

19th August 2010

Managing procurement of your energy and other business utilities

According to the ISBA’s website, a bursar’s responsibilities consist of twenty aspects within ‘Finance and Accountancy’, nineteen in ‘General Management and Administration’ and a further nine under ‘School Buildings’ and ‘ School Grounds’ - a total of forty-eight.

However many of these duties encompass a much wider brief, and the total is more likely to be closer to one hundred! Thus the role of bursar requires considerable experience within these different areas including finance, administration, purchasing and legal matters, building maintenance, repairs and energy, personnel and health and safety. This is why the ISBA states, “Nobody can be expert in all these topics and one of the secrets of success is to know when to ask for advice and where to obtain that advice”.

In March this year, the press featured many articles on the situation in private schools throughout the U.K.

  • The London Evening Standard reported: “One in four private girls’ schools has seen a fall in demand for places this year as parents struggle to pay fees in the recession. A survey of 117 schools found 26 per cent of those admitting girls aged 11 recorded a decrease in the number of parents taking up places and paying a deposit. Analysts said head teachers should be worried as demand for private schools is likely to fall further”
  • announced: “Nine out of ten private school head teachers say that increasing numbers of parents are asking for financial help with fees, according to a new survey. The Tom Brown Internet guide to independent schools survey found that 20 per cent of heads confirmed that parents are struggling to pay – and almost half admitted that they are planning to put up fees in August. Independent schools in Scotland are cutting staff and delaying building projects, as they brace themselves for cash-strapped parents to remove children as the credit crunch bites”.
  • Walesonline stated: “Record numbers of parents are seeking help to pay fees as the recession hits the private education sector. Although most of the country’s 28 independent schools have yet to announce their fees for 2009-10, several have said that their budgets have come under major scrutiny in a bid to limit fee increases”.
  • Last but not least, reported: “Leading independent schools including Eton, have effectively frozen their fees as the economic downturn hits parents’ hip-pockets”.

Clearly, more and more schools are finding it necessary to manage their costs in the most effective way – not subordinating quality and/or service, but ensuring the best value for money. So perhaps at this critical time in the economy, the topic where bursars most require advice is in the field of cost and purchase management.

Schools, like all other organisations, have to spend money to carry out their work. Premises costs, communications, energy, water, waste management, business consumables, finance and insurance are just some of the essential operational overheads incurred, without which they cannot function.

Traditional cost reduction programmes focus on headline prices and short-term savings, but this approach overlooks many of the issues that affect the real cost of purchasing business overheads. Just because a supplier offers you a low price it doesn’t mean that you will maintain quality and make meaningful, long-term savings. After all, how do you know if it’s the best price? What if their prices go up next month and you’re tied into a long-term contract? Will they apply minimum charges that push your costs up rather than down? Do you have time to monitor your prices constantly and check your bills? And so on.

Even bursars who are aware of the need to control their costs, struggle to achieve meaningful savings because they lack the time and resources to drive cost reduction programmes. In a recent surveyª accountants KPMG concluded, “Businesses are under constant pressure to reduce cost, yet many find it hard to do so in a sustainable fashion. Nine out of ten cost reduction programmes fail to achieve their targets, and the gains that are achieved appear to be short-lived”.

All schools want to meet their aims and really need to focus on managing their costs consistently and diligently rather than making on one-off savings. This is the true function of cost and purchase management. According to one of the leading consultancies in this field, many schools are turning to providers of this service to give them access to the latest developments.

Take one very expensive item – insurance. Anecdotal evidence suggests that many organisations tend to rely on their current broker for the lowest premium. However, it pays to research the marketplace thoroughly, especially in the light of the latest trends in the marketplace. A leading broker reveals, “There has been a soft market for the last five years, but now many insurers are in trouble and rates are increasing”. One school turned for advice to an independent cost management consultant who had reviewed their energy bills. The result was a saving of some £30,000.

A smaller matter perhaps? What about schools with foreign students and their cheques from a variety of banks? Well, they normally take seven weeks to process with all the ancillary costs. However, your consultant can introduce you to a foreign exchange company who can reduce these costs by up to 80% and shorten the processing time by more than four weeks.

However, as in any other profession, there is best practice in cost management. Bursars should always check exactly what they are going to get! For example, one of the most important things to consider when employing an outsourced expert is their auditing procedure. Best practice review processes should include the following:

  • A comprehensive, in-depth review of current essential services expenditure;
  • A thorough analysis to determine where savings can be made;
  • A detailed report of recommendations including information about how the consultancy will earn their fees, e.g., on a contingency basis or a set fee;
  • The consultant will take full responsibility for managing relationships with existing, or new suppliers.

Achieving the projected savings (and rebates for overcharges in the past) should be just the beginning of the job. The consultant should continue to assess current expenditure against new tariffs and services as they become available, to ensure that benefits continue at optimum cost efficiency across all essential business outgoings.

Most schools would naturally prefer ethical business solutions (often referred to as Corporate Social Responsibility), as they recognise the need to be accountable for the impact of their activities on the environment and society. So choose someone with the same ideals!

Whilst reducing costs is vital, there are several other advantages for a bursar. With a firm handle on costs within the school, bursars are more able to:

  • Produce budgetary estimates, reports, cash flow and financial and statistical summaries;
  • Prepare annual estimates of income and expenditure to include the preparation of departmental budgets within the school;
  • Monitor income and expenditure in relation to budget and present regular management reports to the Governing Body;
  • Keep analyses of costs and other statistical records.

By choosing the right consultant, many bursars have found a trusted and valued adviser who will provide them with all the support they require to help keep their ship afloat during its many voyages!

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20 years
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