When it comes to financial reporting within the school / academy environment, it can be an incredibly comprehensive and lengthy process and is a distinct requirement for academies as set out in the Academies Handbook and for schools in reporting back to their respective Local Authorities. Whilst you may already know the importance of financial reporting, it is also beneficial to know the impact it can have on the overall financial management process; from day-to-day operational tasks, to strategic assignments such as budgets and medium-term financial plans.
What is financial reporting?
Financial reporting is used to communicate the financial position of your school / academy to key stakeholders such as governors and trustees. Typical techniques of illustrating this information would be financial analysis, usually computed from the financial statements i.e. Statement of Financial Position and Statement of Profit or Loss. Essentially, it is a tool used to monitor financial health.
Why is financial reporting important?
- Managing a deficit position:
Deficits can damage the growth and progression of your school / academy. Managing cash flow effectively is crucial to ensure that the school operations run successfully. Financial reporting is extremely valuable when it comes to identifying and minimising a deficit as it provides an easier and quicker method to track budget holder activity which aids the financial management of the establishments cash flow.
- Decision Making:
With regards to decision making, financial reporting is a necessity. Accurate financial information is required in order to make any major decisions, allowing the trustees / key decision makers to make these decisions in a timely and informed manner. Accurate financial reporting can aid the identification of any positive and negative financial trends, which can aid in making business-critical decisions with regards to addressing any financial weaknesses but also allowing you to develop and maintain the strengths of your school / academy. The use of a strong financial reporting system will unquestionably support decision-making and prevent any regretful decisions that could jeopardise the school’s financial health, as well as potentially opening the gates for new opportunities.
- Mitigate Errors:
Of course, inherent risks will automatically arise in any financial activity. However accurate and reliable financial reports can aid in identifying potentially costly mistakes created by various factors such as human inaccuracy or operational inefficiencies in the early stages of the reporting process. An effective financial reporting system will easily identify these errors and will provide an opportunity to improve financial efficiency and avert any chances of exploitation of potential weakness in your school / academy.
Financial reporting is certainly a tool that schools / academies should take advantage of, it can make a significant impact on the current and future success both operationally and financially, ensuring that any potential errors are avoided.
SAAF Education's team of Finance Consultants work with a range of schools, academies, free schools and multi-academy trusts across the country to support them with financial management. Click below to find out how we can support you too.