What is educational budgeting? A comprehensive guide to managing school finances

Educational budgeting is the process of allocating funds to cover the costs of running a school, college or other educational facility. Budgeting requires a thorough understanding of essential outgoings, plus oversight of objectives and the funds needed to achieve them – with this information, schools can approach finances strategically.  

Budgeting is of high importance in the education sector where funds are finite and there are many competing priorities. There will always be the need for flexibility in a fast-paced, changeable environment, but building a budget is no less important: in fact, it’s more important, providing a solid foundation for all financial planning. All in all, creating a thorough, credible budget is an essential part of delivering a quality education. 

To create an effective budget, you will need to list out:

1. Income sources. Typical income sources for schools include:

• Government funding. This likely makes up the largest proportion of income for maintained schools and academies.
• Grants. Schools can apply for grants to fund particular projects, facilities or initiatives.
• Donations. Charities, companies and other donors may contribute funds to schools.
• Student fees. Independent schools should record the expected sum of fees as an income source.
• Facilities. Schools may generate income from renting out spaces such as sports facilities, conference rooms, classrooms or car parks.

2. Expenditures. Account for these overheads in your budget:

• Salaries. This will likely be the largest overhead – record all known salary expenses, pay increases and costings for new members of staff.
• Facilities maintenance. Costs can be less predictable year over year so add in known expenses and make estimates for others based on previous years.
• Educational materials. Account for the cost of school laptops, textbooks and other materials required in the classroom by teachers and pupils.
• Extracurricular activities. Build in the costs of running sports clubs, activities, orchestras, breakfast clubs and anything else offered to pupils outside of the school day. Note that the school may be able to make charges for these as “optional extras” in some circumstances, which should also be accounted for in the budget.
• Office and administration costs. These might include IT infrastructure, office supplies and other costs for everyday operations.
• Utilities. Account for any regular bills the school pays, including insurance.

3. Budget categories. Expenditure can be grouped into different categories that help with planning and analysis, such as:

• Operational costs – utilities, office supplies and other costs associated with running a school.
• Capital expenses – maintenance and upgrades to buildings, IT, land and other assets owned or paid for by the school.
• Contingency funds – costs of maintaining a contingency fund to cover additional expenditure.
• “Back-office” functions – HR, administration, finance and other operational departments that keep schools running.

These are all examples based on typical school income and expenditure, so you should adjust as necessary for your school. Consult with headteachers, finance professionals, HR, facilities management and other relevant staff to ensure there are no omissions and you have a clear overview of upcoming plans that could affect budgeting. 

The budgeting process can be roughly split into three distinct steps:

1. Planning

• Review last year’s budget: Assess where it aligned with the plan, identify increased expenditures, and determine necessary adjustments.
• Forecast income and expenditure: Based on the previous year’s categories, project income and expenses for the upcoming school year. Consider changes such as:
  o    The number of pupils, including those with special educational needs and disabilities (SEND)
  o    Updates to government funding and local authority plans
  o    Staff pay increases and new staff salaries
  o    Price increases for goods, services, contracts, and new services
  o    Specific site improvements or building projects
• Set financial goals: Establish goals and targets that align with the school’s broader aims. Ensure forecasts are as accurate as possible but remain flexible for inevitable deviations.

2. Implementation

• Put the budget into practice: Regularly consult your budget throughout the year to make informed financial decisions.
• Track income and expenditure: Monitor all financial transactions in real time to adhere to good budgeting practices.

3. Review and Reconciliation

• Account for changes: Adjust the budget to reflect any rapid or unexpected changes in circumstances.
• Re-review and update: Compare actual income and expenditure with forecasts to identify cash flow challenges.
• Make adjustments: If expenditure is lower than expected, find opportunities for cost savings and reallocate funds as necessary.

When considering what is educational budgeting, it's clear that effective planning offers numerous advantages for schools. Let’s take a closer look at these benefits:

• Avoiding deficits. Essential resources can all be accounted for, helping schools avoid shortfalls and deficits.
• Resource optimisation. Budgeting is a balancing process, accounting for necessary resources and prioritising others based on their importance. Is the school’s focus on technology to support education? Does the school need new facilities? Perhaps in-school catering needs to be rethought? Budgeting helps you think through all these competing priorities and many more.
• Strategic planning. Budgets should be aligned with the school’s overall strategy, actively supporting its mission and values and helping bring them to life.

Understanding what is educational budgeting goes beyond knowing how to allocate resources - it's also about navigating the challenges that come with it.

• Unpredictable sources of income. Government funding can fluctuate, grants can be amended and donations may change from year to year. When government funding changes, you will also need to stay up to date with what it means for your school, adding extra work. Lean on other experts to help you and ensure you get the right input from grants officers, HR staff and others.
• Prioritisation challenges. When budgets are limited, you will often have to prioritise between different resources that are all deemed essential. It’s one of the most challenging parts of creating a budget in the education sector, but going through several rounds of edits will help you prioritise effectively.
• Compliance. It’s important to know key dates when budgets will need to be completed, reviewed, and submitted to headteachers, governors, local authorities and other relevant parties.  

Many schools employ manual methods of budgeting, using spreadsheets to track and manage income, expenditure and reconciliation. This might seem like a simple, low-cost option, but problems and inefficiencies can include:

• Increased risk of human error. Even with an experienced team employing the necessary due diligence, errors can easily creep in when manually managing large datasets.
• Time-consuming processes. Maintaining spreadsheets accurately can be a full time job, often for more than one person.
• A lack of reporting. It can be time consuming and challenging to calculate key metrics that show the success of a budget, in particular return on investment. There may be little time for more than the basics.
• Inflexible processes. Spreadsheets can limit functionality and make it more difficult to adapt processes as needed.
• Time delays. Finance teams need to be agile, responding to income and expenditure changes in real time. Manual processes can cause hold-ups.

The alternative consideration is automatic school budgeting software that can complete forecasting, budget tracking and reporting tasks quickly and accurately with minimal manual input. Software can:

• Produce accurate forecasts based on up-to-date salary bands, national insurance rates, pension contributions and more
• Automatically track and update budgets, preventing human error and saving hours of time
• Model changes and scenarios to simplify financial forecasting
• Produce reports for a range of system users and stakeholders

Key considerations include data security, initial costs, ongoing expenses and the process of onboarding new education software – these should be considered when scoping out options. 

Educational budgeting in action: how George Green School transformed their processes

Introducing budgeting software can transform processes and empower staff to do more meaningful analyses and forecasts.

This is exactly what happened for George Green School in the London Borough of Tower Hamlets when they onboarded Access Education Finance and Budgets. David Roome, Head of Finance and Operations at the school, says the system can do much of the work for his team, saving hours of time. 

Read full customer story

Grasping what is educational budgeting helps in implementing effective strategies for managing your school’s finances. Here are some quick budgeting tips to help you think through the process for your school:

1. Ensure your budget is transparent and involve the right stakeholders in the process, particularly when working to understand expenditure across departments
2. Remain flexible – budgets will never be an exact science and will require ongoing alterations
3. Assign a budget holder who is ultimately responsible for completing, maintaining and reviewing the budget
4. Ensure you understand the school’s aims and priorities for the year so you can align your budget to them
5. Be realistic and don’t try to make a budget go too far – resources are finite and compromises will always need to be made
6. Have a contingency fund that can be allocated to unexpected essential expenses when they arise

Learn more about effective educational budgeting

Educational budgeting is all about appropriate resource allocation, for now and for the future. The right software can cut down workloads and make your funds go further. Access Education software is designed specifically for schools, and we work with one in two academies and one in three maintained schools across the UK.