Budgeting for education: How schools can avoid these five common mistakes

School budgeting involves calculating costs, allocating resources and carefully managing expenditure to ensure essential educational functions can be delivered. Budgets should be aligned with educational goals, creating detailed plans to help achieve them, as well as promoting financial health by financing essential day-to-day operations.  

Educational budgeting is distinct from budgeting in other organisations and sectors. Government grants form the basis of school funding, and the amount schools receive will depend on a number of factors including pupil numbers, the school’s location and more. Funding is calculated using the National Funding Formula (NFF). For academies, funding comes directly from the Department for Education (DfE) in the form of a General Annual Grant (GAG). 

Key costs that should be built into a school’s budget include:

• Staff costs. These will be the largest expense, usually accounting for more than 70% of total costs. Changes to wages need to be considered each year as pay may be adjusted and teachers will move up the payscale.
• Energy and utilities. The Department for Education indicated a 52.1% increase in energy prices in 2022-23 compared to 2021-22, and a further 6.2% increase between 2023-24 and 2024-25. Energy inflation is putting increasing pressure on schools.
• Maintenance and building costs. Spending on school buildings is deemed to be low in historical terms and compared to levels of need. Schools may also be able to apply for additional funding to cover these costs, from the School Condition Allocation (SCA) or the Condition Improvement Fund (CIF).
• Curriculum resources. This includes anything that teachers will need to deliver their lessons, including textbooks, digital resources, worksheets, classroom displays and more.
• IT and edtech. Schools will need to invest in IT infrastructure for use in classrooms and IT suites, as well as other digital devices such as laptops and tablets where necessary. Students with special educational needs and disabilities (SEND) may require edtech to provide accommodations in lessons. If learning platforms are used that require one-off payments or subscriptions, this should also be accounted for in the budget.
• Continuing professional development and staff training. Schools will need to invest in resources such a digital learning platforms, as well as funding external training that will support teachers’ professional development. They may choose to use internal resources to save money, but this could limit CPD opportunities. CPD budgets may be allocated per teacher or member of staff.
• Unexpected costs and emergency funds. Schools can be faced with unexpected situations like large-scale teacher absences, issues with the premises (such as fire damage or unsafe infrastructure) or rises in costs like energy bills and service contracts. In unforeseen circumstances, a contingency fund will be needed. 

The common mistakes schools make when budgeting

1. Underestimating costs. In particular, schools might underestimate staffing costs as they continue to rise year over year. Staffing costs also include pensions and national insurance, where mistakes can easily be made when processing payroll and forecasting for the future. Staffing costs can become more complicated to track in large multi-academy trusts (MATs), where staff are spread across different sites. Supply teacher costs are also an integral part of a school’s wage bill — these can be inherently difficult to predict accurately, and schools may not set enough of their budget aside.
2. No contingency planning. When budgets are tight, contingency funds may be one of the first areas to take a hit. However, contingency funds are an essential part of any budget and are needed to account for unforeseen circumstances. Without them, schools might simply be unable to balance their budgets and will need to inform their local authorities or the Department for Education that they will be in a deficit for the year.
3. Short-term forecasting. Schools need to provide three-year budget forecasts, which will also help them plan for the future. However, this should be the minimum, not the standard — five-year forecasts will help school finance departments plan ahead and prepare for all eventualities. Forecasts should be calculated to take a range of scenarios into account; when this doesn’t happen, schools can find it much harder to be agile and respond to changing or challenging circumstances.
4. Leaving out key stakeholders. Budgets should be aligned with school or academy goals, which means collaborating across departments to understand where funds need to be channelled. Excluding stakeholders early on in the process can render budgets incomplete, causing delays and making extra work for budget holders. The senior leadership team, HR departments, finance teams and governors are important stakeholders to include when budgeting kicks off.
5. Relying on spreadsheets. Budgets are fluid and changeable — and spreadsheets are not. They rely on manual data input and formulas that are not immune to human error, which can lead to delays in budget calculations as well as inaccuracies. Spreadsheets are not the best choice for handling complex, changeable and highly important data where flexibility and reliability are key. 

To make budgeting a more reliable, streamlined and flexible process, schools can:

• Use integrated finance tools. These can combine data sources from across the school to give one complete financial picture in real time. Although tools cost money, they can help schools make savings in their budgets by providing the accuracy, transparency and flexibility needed to allocate resources with precision and adapt to changing circumstances.
• Run regular forecasts. Schools must run and submit forecasts in advance, but these don’t need to be static. When situations change and budgets need to accommodate this, reforecasting will help to plan effectively and maintain financial stability. This is made much simpler with effective budgeting software.
• Use scenario planning to inform budgets. Analysing and planning for multiple scenarios will support detailed forecasting and budgeting that is practical and usable. It will help schools make budgeting decisions quickly and with confidence, and can help identify opportunities to make cost savings.
• Understand wider goals, aims and concerns. Making stakeholders a central part of the process and consulting with them closely will help finance teams prioritise their budgets effectively. Asking for input in a variety of ways will ensure all relevant voices are heard — consider holding meetings, filling out shared documents and taking note of priorities from school-wide sessions. This will ensure budgets can be aligned with goals and school improvement plans. 

Budgeting software for schools can automate the process and ensure it’s accurate, efficient and can be used to inform crucial decision making. Budgets and forecasts can be automatically calculated and revised, eliminating manual processes and guesswork. Budgeting tools can:

• Produce accurate staffing forecasts
• Allow for multi-year planning
• Integrate with finance and HR software for use across the organisation
• Allow for MAT-wide visibility

How are schools using budgeting software successfully to reduce their workload and improve processes?

Delta Academies Trust has been able to reduce time-consuming, manual processes for its finance teams since introducing budgeting software, helping to make more informed decisions and navigate constraints.

For Bridgelea Primary School, budgeting software has transformed school financial planning and can help adjust budgets swiftly and accurately. The school has been able to get more financial clarity, enhancing reporting and forecasting despite changing funding levels.

Benchill Primary School used to struggle with navigating complex school finances, managing payroll reconciliation for a large number of staff and identifying budget anomalies.

With the right software onboarded, the school mastered budgeting quickly and gained confidence in their reporting, helping to resolve their previous issues. 

Unlock simpler school budgeting

Budgeting is one of the most important aspects of running a school, but it doesn’t have to be stressful. Take away time-consuming manual tasks with smart, intuitive school budgeting software.

Access Education Budgets is an easy-to-use platform that creates accurate, balanced budgets for up to five years, enabling you to model the impact of changes and produce meaningful reports for informed decision making. It can be integrated with finance software to give a joined-up view, revolutionising budgeting and financial management across your school or MAT.