Finance force

New technologies are transforming finance and administration departments throughout the education sector. Nick Valentine reports

A ‘killer app’ is a piece of software that is so powerful that people buy the computer just to get their hands on the program. For the PC, the original killer app was not word processing but the spreadsheet.

Dan Bricklin and Bob Frankston’s VisiCalc, developed in 1979, was largely responsible for the runaway success of that year’s Apple II personal computer. Similarly, sales of the 1981 IBM PCs were sluggish until Lotus 1-2-3 came along a year later, revolutionising the way people could use their PCs to automate management and accounting tasks.

Then Excel, first introduced by Microsoft in the late 1990s, paradoxically, as an Apple program and later ported through to Windows, helped reinforce the Wintel dominance of personal computing. All of which underlines the importance of accounting and financially oriented programs in the onward march of information technology.

For the education sector, the help that IT can provide in handling money and financial management has never been more important. The relentless pressures on educational institutions to become efficient and sustainable businesses has placed ever-increasing emphasis on the coherence and efficacy of the their accounting and management systems.

At the same time, their search for new revenue streams and more efficient ways of interacting with students, has brought schools, colleges and universities face-to-face with the complexities and the opportunities of card-based and other cashless payment systems. In both areas, there are opportunities for educational establishments to harness technology to revolutionise their operations and make huge savings.

Cash costs

The real costs of handling cash are frequently underestimated. Keeping it secure, moving it on and off site and bank handling all eat up valuable funds and time. The European Commission has calculated that the total cost to society of all payments handling add up to some 3% of GDP across Europe – more than the entire agricultural sector – with cash accounting for at least 65% of the total. 

According to Paul Smee, CEO of the Payments Council, “There are many more efficient ways of making payments than by paper in the 21st century and the time is right for the economy as a whole to reap the benefits of its replacement.”

In the commercial world, most cashless payment systems operate with credit or debit cards. According to the European Central Bank in 2008, €1.6trn was spent on cards and has increased by 12% every year since then. But card transactions are also expensive, with each individual transaction commanding a fee to the bank or card issuer, averaging 0.2% for debit cards and almost 1% for credit cards.

Social benefits

However, technology offers a different and cheaper way, with the growth of cashless payment systems that use ‘electronic purse’ cards (think Oyster) that can be topped up online or at terminals. Now the transaction charge is only levied on the top up, not every individual transaction.

There are other advantages, especially in schools, in making payments ‘invisible.’ In a recent study on the economics of education and health in the Borough of Greenwich, Dr Jonathan James for the University of Essex, found that cashless payment systems could play powerful roles in combating the stigma associated with take-up of free school meals as well as providing valuable data sources on children’s diet choices.

Schools and colleges alike are discovering benefits in freeing young people from having to carry cash in their purses and pockets. “Creating cashless schools can also reduce the social stigmas linked with free school meals, support the healthy eating agenda, help reduce bullying and anti-social behaviour and assist in reducing crime amongst young people,” said Clint Wilson, CEO of ParentPay.

“It can also help with school administration, take pressure off finance staff and allow schools to redirect resources, giving clear, concise reporting on income streams,” Wilson said.

Market leaders

Many schools now use the systems developed by ParentPay, the business founded by working parent and ex-teacher Lynne Taylor in 2002 as a bid to help her local school and make life easier for other parents.

The organisation is now a privately owned software company that offers a unique web-based application that allows parents to make secure online payments by credit and debit card or pay cash at local stores through the PayPoint network. ParentPay now provides services to over 2,000 schools across 165 local authorities and now helps schools collect and manage more than £100m in annual parent payments. 

When it comes to cashless technologies for further and higher education, significant names include Capita SIMS, which offers a wide range of payment solutions, integrated into the company’s management information systems.

The company says many schools and colleges are still not taking full advantage of the possibilities offered by credit and debit card payments – not only to pay significant amounts like fees but also to pay for smaller services like car parking, food in the cafeteria or course materials.

“At a time of tighter budgets and increased competition to attract students, a college cannot waste its resources chasing arrears, paying costly bank charges from cash and cheque transactions, or more importantly diverting staff from other tasks to collect cash or re-key payment details in order to update ‘back-office’ systems,” says Capita in its white paper ‘The Winning Card’.

Joined-up thinking

Using cheques and cash for ad-hoc payments for items such as field trips provides distraction for teaching staff with limitless potential for errors, as Douglas Robertson, the finance manager at West Lothian College, noted.

“When you are handling a lot of cash, it can be easy to take a £10 note and count it as £20, for example,” said Robertson. “Then you spend a lot of time investigating exactly where the error has occurred.”

While many schools and colleges have the ability to process card payments over the counter, these payments are not necessarily linked to the student record system or finance system. 

Liana Bartholomew, finance team leader at Dundee College, recalled: “We used a system provided by the bank but the transaction wasn’t recorded in our financial software. We had to record everything manually, which could be very time consuming. We used to write a receipt when we received a payment and then we would have to reconcile everything.”

In addition, there are considerable direct costs for rented Chip and PIN terminals. The better way is a payments system that integrates with the management information and student records databases and also allows payments to be made online. Douglas Robertson said having card payments automatically processed directly through West Lothian’s MIS has been highly beneficial. “It has reduced receipting errors and encouraged payment by card; as a result we have managed to reduce the amount of cash we send to the bank and cut our banking costs. In the past, if we chased a student and they said they had given money to a member of staff it was almost impossible to prove.”

Online savings 

Enabling online payments reduces cost even further, with a 2012 SOCITM report estimating cost per transaction over the web at just 1/20th of the cost of taking payment over the telephone and around 1/40th the cost of face-to-face.

Capita SIM says overhauling payment systems for integration and online access can transform enrolment, ad hoc payments, debt collection and compliance with card security regulations.

It provides a series of management information solutions with its SIMS (School Information Management System) suite of software packages now used by more than 22,000 schools in England, Wales and Northern Ireland.

“SIMS has unique depth and breadth that allows schools to manage student and staff information across all areas of school life including registration, finance and payroll, timetabling, progress tracking and assessment, and whole-school communication,” said Capita’s Tiffany Stromsoe.

SIMS features an integrated double-entry accounting system that provides a comprehensive picture of the school’s finances and is accredited with the Institute of Chartered Accountants in England and Wales (ICAEW).

Academy advantage

One of the most popular products is the SIMS Financial Management System (FMS), adapted to the needs of school academy and college bursars. Ryvers School in Slough chose SIMS FMS to power its financial and management system when the school made that tricky transition to academy status.

Department for Education guidance says schools making the transition need to decide early whether their existing financial systems and staffing arrangements can cope with the more stringent financial management demands involved.

“As well as the day-to-day processing of income and expenditure, they will have to produce management accounts, cash flow reconciliations and balance sheets,” the DfE cautions.

Valerie Haffey, Ryvers’ business manager, explained: “As an academy, we have to submit our financial reports at a different time of year to state schools. There are also a number of new reports that we have to complete, such as for the Education Funding Agency. So we needed to be on top of our finances at all times.”

Ryvers trialled two systems before selecting SIMS FMS, with the system’s ICEAW accreditation and the ability to report quickly and accurately to governors and other stakeholders providing further plus points.

Exchequer Microsoft’s Exchequer suite has also achieved impressive uptake in education, particularly in primary, secondary and further education sectors, promising to revolutionise the way schools and colleges handle their accounts and budgeting.

Exchequer provides a suite of features that help establishments track costs and analyse results by reporting on the individual success of each department, even across multiple sites, helping head of departments manage set budgets, track and control committed costs within a general ledger and provide over-budget checks at order entry stage. 

Exchequer also supports remote invoice authorisation, enabling departmental heads to approve and authorise transactions via email, and provides tailored reports for Board, Trustees or Education Authorities.

The package is also useful for subsidiary educational organisations, like student unions. University of Hull Students’ Union, recently named ‘Students’ Union of the Year,’ uses Exchequer to manage its activities and claims to have reduced annual costs by £30,000 as a direct result of the quality of management information available, with consequent impact on departmental performance
and budgeting.”