Higher Education

What schools and universities can do to understand what they’re spending and what they could be saving

6 September 2022   |   13 Minute Read
Teacher in classroom

 

With universities and schools looking to protect staffing budgets as prices and interest rates rise, non-staffing costs are now firmly in the spotlight as a key area for savings. Despite this, our recent survey revealed that many institutions are still relying on time-consuming manual processes that don’t give them full visibility over their current spending and possible savings.

Non-staffing costs: an overview

Non-staffing costs run at about £10b a year for British schools, which is approximately 30% of each school’s budget. In universities and higher-education colleges, non-staffing costs account for about half of expenditure. These costs include everything from school trips to IT equipment, stationery, catering, libraries, and subscriptions. Schools, for example, spend about 13% of their entire budget on supplies and services, and 6% of premises-related costs.

Our recent survey revealed that individuals from across departments were making purchases in a variety of areas. That makes this variable spending more difficult to track and control as lots of small to medium-sized transactions are being made at the discretion of individuals or departments. And, as non-staffing costs have risen 68% in real terms since 2002 vs. 33% on staffing costs in UK schools, it’s vital that schools and institutions get full visibility over every one of these purchases so they can make the most of their budgets.

How schools and institutions are managing this spend

We surveyed 250 people in the education sector to understand more about what they’re currently spending on and how they’re managing this process. Those in teaching and those in office-based roles like Finance, HR, and Operations spent in a wide variety of areas, including travel and entertainment (41%), facilities (42%), and catering (32%). These are all areas where rising prices and operational costs are being felt particularly acutely, so understanding exactly what’s being spent here is becoming increasingly critical.

But we discovered that only 21% of those working in primary or secondary education, and 35% of those working in higher education use a spend management platform. That leaves nearly three-quarters relying on manual processes to manage company spending and employee expenses.

Manual processes include systems like petty cash, corporate credit cards, and asking staff to pay out of pocket. And many institutions use a combination of different methods. 52.4% of those we spoke to used reimbursements and 52% used credit cards to cover spending, while 40% of those in teaching roles used petty cash. Although these systems are used by many institutions and businesses, they don’t provide full visibility of spending. Petty cash leaves many small transactions uncategorised and undocumented, while asking staff to pay out of pocket can lead to unexpected reimbursements at the end of the month. And all these approaches generate mountains of paperwork, as finance teams need to manually enter data into spreadsheets, transfer it between incompatible systems, and check purchases one by one when it comes to reconciliation. This means data can be incomplete or incorrect, so it can’t give an accurate view of spend. And some of the higher-education institutions we spoke to had more than 1000 staff, which means spend chaos could be multiplied.

The importance of communication

Of the people that said they used a spend management system, about a third weren’t sure what system they used or referenced internal systems, online banking, and travel booking sites. This suggests that there’s some confusion around how institutions are managing their spending, or that spending practices need to be better communicated to all staff. This is key if spending strategies are to succeed. Without the entire team on board, as well as students, those trying to save money may find day-to-day behaviours undermine their attempts to find savings. That could be something as simple as switching off lights and computers when they’re not needed, to making sure that VAT is correctly captured after a school trip. They’re small changes, but they can add up over the academic year.

The difference automation can make

When spending and expense management is automated, teachers and office-based staff make purchases with pre-paid or virtual cards. They add purchase information like VAT and spending categories at the time of purchase with a user app. Then finance teams use a web console to approve funding requests and tracking spending, before syncing with their accounting software to reconcile spend without the manual admin.

This reduces admin for everyone, ensures that every purchase is captured, and no unauthorised spending can happen. And it means that finance teams have full visibility over spending, which is the first step to making savings. Only by understanding exactly where money is going, can finance teams cut unnecessary or duplicate spending, identify contracts that don’t offer good value for money, and see where they may be paying too much for multiple deliveries of repeat orders.

Let’s take subscriptions as an example. 30% of the non-teaching we surveyed regularly manage them – many with credit cards. When subscriptions are managed in silo, it can be difficult and labour-intensive to track down exactly who is buying what. This leaves schools and universities wasting money every month. With an automated system, subscriptions are managed centrally so finance teams get a complete view of every payment in one place. That makes it easier to remove duplicate or outdated orders and make the most of bulk discounts from suppliers. In the same way, automation also helps educators monitor where supply contracts need to be renegotiated, where services could be brought in-house or outsourced, or even where they are underspending and not reaping benefits – like investing in more energy-efficient boilers or lightbulbs.

The scope for savings

With prices and operational costs rising, and the government asking schools and institutions to find additional savings in their budgets, getting a grip on non-staffing spend is essential. But our survey showed that three quarters of those we spoke to were using manual processes to manage spending and expenses. Relying on petty cash, credit cards, and reimbursements makes it almost impossible to get a complete view of spending without creating unmanageable amounts of paperwork.

 

If you are interested to find out how you can get a more transparent view of your spending check out our education page.

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