Why accounting should be a priority for your school?
Accounting is the process of summarizing, reporting and analyzing the business transactions to keep track of its expenses and income. Being a part of the management as well as the administration team, the school heads are most often cornered with financial management activities. Bookkeeping, budgeting, payroll, the financial jargons just go on and on for them, sparing them no time to focus on the activities related to providing quality education to the students. At the same time, they are also answerable to the Board, about the money and grants that come in and how they are spent.
In an educational institution, the major sources of revenue are fees and grants and the innumerable expenses include staff salaries, transportation and electricity expenses, repairs and maintenance charges, purchasing supplies etc.
So why is it important to keep track of all the incomes and expenses? Why should schools give importance to accounting?
Here, we give you an overall idea and the benefits on why you need to start prioritizing accounting.
• Crucial to managing the school and decision makingManaging the finances well is a good sign for any institution or business entity. It helps to understand your business better and make vital decisions. Moreover, a school would be in a position to identify its areas of strength and weakness. It will also enable you to have a clear picture about the future, how to allocate resources and how to plan ahead.
• To monitor the progress and enable growthIf you don’t keep records, how will you know if you are making losses or profits, how will you know if you are ready for expansion or the fact that if you have reserves to cover any impending or unforeseen events, if you need additional funding etc. Planning is key when it comes to thinking about growth and expansion. When a school is in a position to anticipate its incomes (fees, grants) and expenses, then they will be able to set goals and objectives and put in place expansion strategies.
• To stay organizedIt helps you create order from chaos. A school will have several suppliers and vendors, and if the financial data is efficiently organized, in the event of any disputes, it will be very easy to retrieve documentation to rectify the situation. Or in some cases you need financial information quickly such as profits for the last quarter, you would know where to looksince you have your financial data in place.
• To help in financial management, budgeting, easy to get loansWhen you know your incomes and expenses clearly, you are in a position to do financial planning and thereby financial management. Also, accurate and real time data is the key to forecasting as well helps in better reporting. Most importantly, schools can have steady budgeting.
In the event of planning for additional funds, it is always easier to apply for grants or bank loans when your financial documents are in order.
• To keep track of the various sources of income and any unnecessary expensesWhen a school maintains proper accounting records it becomes clear where the money is going and how much is being spent on various areas of operation. This can help in tracking the spending pattern and make you more accountable. On the other hand, if you are not tracking the money then you may find that you’re spending too much in one area and that you don’t have enough money left over to cover major expenses.
• To keep the Board informedFinancial statements are the basis for preparing management accounts. And management accounts are prepared for the Board, who is the immediate governing body for any educational institution. They are the crucial decision makers. Thus, to make informed decisions, they need to be made aware of the financial position of the school.
• To comply with the lawMaintaining several records and financial statements are a legal requirement under the rules of assessment as well as per the rules of the concerned governing authorities and acts. It is also a requirement for auditing purposes.
To ease the burden and to make accounting more accurate and reliable, it is best to employ accounting software, to aid in bookkeeping financial management. There are several affordable software available on the market today.
If you would like to know more about better accounting practices, don’t wait. Talk to us