The primary role of an independent school’s board is to provide financial oversight to ensure the financial health and sustainability of the school. This includes overseeing and approving an annual budget, which serves as the financial guide for the head of school to implement in the day-to-day operations, as well as ensuring all financial decisions are aligned with the institution’s mission and vision with the goal of enhancing the educational experience for students.

Other areas of fiscal responsibility include oversight and review of financial reports to ensure all income, expenses and budgets are on track; protecting the school’s financial stability; deciding on faculty compensation and benefits; consideration of capital investments; and program funding for all mission-aligned educational programs.

Key analyses for making effective and efficient financial decisions

There are several analytical tools available to the board that will help with its financial oversight responsibilities. The board should always seek to make financial decisions based on the premise of enhancing the educational experience of the students. Some of the key analytics include:

• Reverse tuition analysis. Reverse tuition analysis strategically identifies optimal desired programs offered, desired salary offerings compared to state/local public school teacher/administrative pay and the facilities necessary to accomplish the school’s mission and vision. Once the financial requirements are determined, then tuition can be set based on accomplishing these strategically identified areas that maximize the student educational experience over a one-, three-, five- and 10-year period.

• Net tuition dollar analysis. Analyzing net tuition dollars provides the board with valuable insights for increasing both enrollment and tuition revenue. Some of the benefits for adopting a net tuition revenue model include:
  • Increased cash flow: Utilizing a net tuition revenue strategy provides the school with tuition dollars sooner and improves cash flow. When a school accepts only full-pay students, there may be empty seats that are generating no tuition revenue. Adopting a net tuition revenue model fills those empty seats with partial-paying students and can generate anywhere from 20% to 80% of the full tuition amount.
  • Increased enrollment numbers: A net tuition strategy can help private schools fill empty seats until capacity is reached. This offers families who may not be able to afford full tuition to attend the school and increase student enrollment.
  • Increased diversity: Offering increased financial assistance leads to a more diverse student population. Providing increased support to families, irrespective of their financial capacity, contributes to a student population that is socioeconomically, ethnically and racially diverse. Ultimately, this approach leads to a more inclusive and accepting school community.

• Profit/loss analysis. A profit/loss analysis should be accomplished for every revenue stream and all programs including literary, art shows, fundraisers, annual fund, all individual sports (helps control expenses and set fees and admission prices to be profitable) and all clubs. Once an analysis is completed for all programs, the viability and sustainability of each program can be determined.

• Monthly cash flow analysis. Preparing a monthly cash flow analysis allows administrators to forecast monthly cash flow deficits and surpluses to identify and prepare for months when the expenditure of expenses exceeds revenues received. This is particularly important and evident during the summer months when schools prepare for the upcoming school year and have considerable cash outflows at a time when tuition payments are at monthly lows. 

Expenses such as faculty/administrative salaries remain constant and due during these months with often little revenue being received from tuition payments and program revenue. Schools normally require parents to complete their tuition payments before the school year ends (usually in late May/early June), but parents often don’t begin paying their payments for the upcoming school year until school officially begins in August.

Many schools, in particular smaller and start-up schools, are most sensitive to their cash flow as they often are required to expand their tuition pay options for parents. Schools often give incentives to parents for paying tuition up front during reenrollment season (normally in March or April for the upcoming school year), but rising economic and inflationary pressures are forcing parents to spread out payments over the upcoming school year. This often puts tremendous strain on the school’s cash flow needs during several months of the year. Therefore, as we navigate these economic uncertainties, it’s crucial to consider the well-being of families and students as they prepare for the approaching school year.

• Yearly tuition increase analysis. Private school boards normally set tuition for the upcoming school year during the winter months preceding the new school year in order to prepare the budget for the new year. Quite often many boards consist of current parents who sometimes struggle with raising tuition enough to cover increased inflation and the expansion of needed and desired programs and initiatives when their friends and themselves struggle to budget private school tuition with other family expenses. This conflict of interest may cloud their judgement when emotional decisions are made instead of decisions based on a business analysis and program needs.

Strategies to keep the board’s focus on the big picture

There are several strategies the head of school or director of advancement can employ to help the board focus on the strategic mission and vision of the school rather than the day-to-day operations, which is outside their purview. 

• Keep communication open. Communication with the board is one of the most important ways a head of school or director of advancement can help the board keep its focus on the big picture. Working collaboratively with the advancement office and offering data analysis equips the board with valuable insights related to donor relations, fundraising campaigns and community engagement. This collaborative effort ensures that the board can make informed decisions and enhance its strategic approach to advancing the organization’s goals.

• Create a culture of giving. The annual fund can contribute significantly to the financial health of the school. An established annual fund often can provide an additional 5% to 25% of the total revenue received from all revenue sources. This extra funding directly impacts and can expand program offerings that enhance the student’s educational experience. Generous giving is an effective measure of constituent loyalty and support.

The least expensive and most effective strategy for creating a culture of giving is to cultivate a team of talented, energized and engaged advancement professionals who are passionate about the mission of the school, behaviorally aligned and enjoy engaging with stakeholders at every opportunity.