The current coronavirus pandemic appears to be accelerating and is undermining many organisations’ key trading assumptions. With educational establishments closing to reduce the spread of the virus and key exams cancelled there is significant uncertainty for the sector.
We have looked to summarise the practical steps those in the education and skills sector should be looking to take to mitigate the issues and the measures currently outlined by the Government to support organisations at this time.
Rethink the education delivery model
Many organisations within the education sector are implementing contingency plans to facilitate remote learning using existing IT infrastructure. Most universities and similar organisations have such mechanisms in place, but pressure on the IT infrastructure many need to be actively managed to ensure its stability during this period.
Many colleges, Independent Training Providers, Academies, Universities and other training businesses will never have been presented with a set of events in which day to day cash management is required. In the current environment preparing a daily receipts and payments cashflow combined with a medium-term integrated forecast is a sensible step. It will allow you to manage cash to mitigate any issues and ensure no short-term funding issues.
Where organisations are aiming to remain operational, review and critically appraise your supply chain. Identify who may be most at risk, the potential impact on your business through stress testing, and how you could lessen the impact. Such areas may include outsourced operations (e.g. catering) and childcare provision.
Organisations that are highly dependent on non-profiled income such as research grants should consider the short to medium term impact on key funding steams. Similarly consideration should be given as to the potential impact of the situation on student intake for the 20/21 academic year and what actions may be required to mitigate any adverse consequences.
Stress test your forecasts for a variety of worst-case scenarios, identify what tools you have to manage cashflow and the key timelines.
The Government has clearly stated it will take all steps to address the issues to businesses of coronavirus. They have put in place several practical steps to ensure UK banks and HMRC are supportive in the current environment.
The DfE and OfS have stated that it wishes to support organisations during this period to protect students and the sector generally. Whilst these organisations have clarified certain aspects of ongoing provision of funding the full nature and extent of financial support is not yet clear.
It is important all stakeholders are engaged with appropriately so that organisations avail themselves of the available resources, reliefs and repayment holidays.
Engaging with parents
With so many families facing financial uncertainty over the coming months there is growing expectation for schools to temporarily pass on any cost savings to parents. Parents will have recognised the cost savings being made by independent schools, particularly those with children that are boarding, but also all pupils and their marginal costs of transport, lunch and extra-curricular activities. Schools will also be reducing non-essential spend, such as new capital projects, which will have to be put on hold.
Parent contracts will be an important consideration for schools considering this measure. Schools should consider whether variations can be made to accommodate temporary changes in education provision. Financial reductions that can be passed on, in the form of direct cost savings or tuition fees, are likely to generate goodwill and protect the longer-term commitment from parents. However, schools should be clear that any such reductions are temporary and not permanent changes to fee arrangements.
Summer is a time when independent schools may let out their facilities to generate commercial income. Schools should review these arrangements, especially the finer detail, and their contractual obligations to third parties.
Many schools will also have significant contracts with third party suppliers such as outsourced catering providers. These should be reviewed to consider the school’s obligations and minimising financial exposure.