One area of the business mix that can sometimes be overlooked is estate management. The school’s real estate is one of its most valuable assets, but few schools are cognisant of the opportunities to save money in this area. There are many categories of spend that relate to your property and ensuring cost control in these areas is vital.
Here we set out five top tips that could improve your school’s bottom line through better analysis and management of the schools premises and assets:
Planned Preventative Maintenance
As with a residential property, maintenance is a necessary evil for independent schools, not least as many count historic buildings within their estate. The trick is getting ahead and ensuring a strategy is in place for preventative works before remedial works become critical. A continual maintenance plan allows budgets to be set aside for more regular but less costly works, ensuring the school is not landed with an unexpected vast bill, which will almost certainly have an adverse effect on cash-flow.
The net spend will probably be reduced as fewer unplanned works allow for the time to properly review service contracts and underlying labour and parts costs to get the best value for money. The key to keeping your providers competitive is making sure they realise you have a robust plan in place.
It is well worth getting an energy assessment of the estate done. Assessors can advise where money can be saved and the recommendations are not all frighteningly large; it’s not all about 10 acre solar arrays and ground source heat pumps, the answer may be better light bulbs! Invest in getting an audit undertaken by an independent energy advisor, not by someone who is selling a solution; that way you can form a strategic plan of what to tackle and when, giving a structure for both quick wins and longer term projects.
Ultimately, the energy efficiency of property is becoming more important. The Energy Act, which comes into full effect in April 2018, will require property to be of a certain energy efficient grading if it is to be let. Whilst letting may not be on the agenda, lenders and investors will consider the saleability of buildings as part of its consideration as to whether or not to grant funding for any development or improvement work the school requires in the future. Thus, aside from the immediate cost savings from more energy efficient premises, a more environmentally friendly building should put the school on a firmer future financial footing too.
Buildings insurance is a ‘must’ and despite popular belief there are more than a couple of insurers out there who have the specialist knowledge and competitive premiums to serve the independent school sector. One important thing to consider, particularly if you want to save money, is whether your broker is working on scale commission or a flat fee. If it is the former, then their remuneration will be based on your premium and so they may be conflicted with offering you an option which lowers that. A flat fee is much more likely to get you a lower premium.
Whilst most independent schools are registered charities and enjoy generous rates relief (up to 80%), you should put some thought to business rates. When was the last time your surveyor looked in detail at the Valuation Office Agency’s understanding of your estate? Given that pressure is rising from both the media and some Labour MPs for the charitable relief for schools to be looked at, there is a risk of future reduction or even eradication of the benefit.
Given the breadth of this area we could produce a War and Peace-esque ream of advice covering areas such as building management, grounds maintenance, health and safety, cleaning, catering, security and so on. It goes without saying that these are essential services to ensure an efficient and safe environment for pupils and staff. Where we see real value being added, and money saved, is when these areas are fully audited and this is crux of our advice; have a regular pattern of audit and review to ensure that contracts are meeting your needs (not what the supplier wants to offer) and that you are taking advantage of the competition between providers.
An independent school’s estate may remain unchanged for decades but regular review of where funds can be saved is a continual process and can save money, increase reserves and as a result, boost the school’s value and future prospects.
Tom Robinson, ES Group, firstname.lastname@example.org
Lorraine Ashover, Minerva PCS, email@example.com