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CHARTER EDtalk: Charter School Budget Best Practices

Charter School Capital

June 15, 2018



charter school budgetCHARTER EDtalk: Charter School Budget Best Practices

Check out this CHARTER EDtalk for tips and tricks on charter school budget best practices! Janet Johnson sits down with Matt Percin, both from Charter School Capital, to learn about the importance of being flexible and adaptable as a startup school and the increased budget-planning power you have as a more mature school. You’ll also get key insights on vendor management as you work through budget ebbs and flows. See the short video below.

Read the complete transcript here:
Janet Johnson (JJ): Welcome everyone to our next CHARTER EDtalk with Matt Percin, who is the manager of Charter School Capital’s financial analysis and risk. Can you tell me a little bit about what you do?
Matt Percin (MP): Sure. Simply put, what our team is responsible for is mainly understanding how much funding our clients could need and then trying to actually map out a plan of what they need or what we can provide so it’s a cohesive relationship for us. And then the other thing we’re doing is actually valuing what we’re going to buy. So we’re valuing the future revenue streams. We’re looking at purchasing for the school for financing as well as for real estate business. Figuring out what schools can afford … helping schools map that out.
JJ: So, you do actually work with the schools a little bit. Oh, that’s cool. Because I have a feeling a lot of schools don’t have people with your experience on staff. Is that correct?
MP: Sometimes it’s nice if they have some kind of back-office provider (BOP) who has someone we can dialogue with. But sometimes we take a more active approach with our schools that don’t [have a BOP]. So, it’s helpful.
JJ: There’s a couple of different types of schools that we work with here: startup schools, and then a little bit more mature – or growth-oriented – schools. Can you tell me a little bit about the differences between the approach for financial support for each?
MP: For sure. I would say probably the three things that we could emphasize for a startup school versus a growth or mature school is flexibility, variability, and then the power and efficiency you have as a school.
JJ: So can you tell me a little bit about what is flexibility versus variability?
MP: So, if we say variability for a startup school, you’re actually a lot more variable in the sense of you don’t have any history yet, so you have no backlog to figure out how last year worked out. You have to be a lot more adaptive to what happens … because you might say, hey, we think on our petition budget, we’re going to open up with 100 kids. But you may open up with 125 or 75. So then figuring out how to quickly adapt to your budget and adjust accordingly, you just have to be a lot more reactive as a startup school.
JJ: So all the planning in the world, you still have to kind of be nimble and you help with that.
MP: Exactly. You know, if you’re a growing school or a school that’s been mature or been around for five years, three years, somewhere in that realm, you have a baseline and you knew how things happened last year and you have less variability in your student count because you’ve established yourself in the market. You have, the students that already come to your school. And they may continue on in your school so you have a lot more understanding of what your baseline is going to look like for future years.
JJ: So you’re more predictable.
MP: Yes. So, then the other, the other thing I talked about was the flexibility. So the flexibility or sometimes you can think of it as the power you have as a school, if we can use that word.
JJ: I like that word!
MP: So, if you’re a startup school, once again, you just have to be more flexible. You aren’t flexible yourself yet, [but] you just have to become more flexible. So, that could mean adjustments up front, changes down the line. It’s really all about reaction like we said before.
JJ: So are we managing expenses more than we’re managing revenues at this point?
MP: It’s definitely both, but I think everything starts with your student count, which is what leads to your revenue, and then you have to adjust expenses accordingly.
JJ: So it’s as important to keep happy students and as it is to bring them in.
MP: Exactly. Then, obviously, if you’re mature or growing school, the power you have is that you have established relationships with your vendors: the people that supply your technology, or your books or your landlord. You have a relationship with them. If you have any challenging months or times of the year, you have the ability to use that relationship and utilize it for your advantage and maybe say, “Hey, in the first three months of the year, my revenue and my cash is tight, can I push out maybe some expenses to later in the year?” Then, you have that type of power upfront for your vendor management.
JJ: Love that idea of power around vendor management. Do you find that vendors oftentimes will respond to that?
MP: Definitely. I think the key is always communication upfront. It’s like anything in life, right? If you give someone the forewarning with enough time, the relationship is a lot easier to maintain and establish.
JJ: So, flexibility when you start, then you become more dependable and your variable expenses are more predictable, and you establish yourself as a reliable partner to others, and you have more power as you grow up. And the key to all that is your student revenue should exceed your expenses.
MP: Exactly. Awesome. Very well said.
JJ: Thank you. I know cashflow planning is a big consideration for a lot of schools. Can you talk about how that affects your budget? You talked a little bit about it before, but can you dig into a little bit about what should charter leaders look out for when they’re planning their cash flow?
MP: I think the key is that sometimes cashflow planning gets overlooked. Everyone knows that for any business—which a charter school is—you have to have a budget, right? But sometimes people forget to look at things from the actual “ins and outs” perspective, which is what a cash flow is. A cash flow is essentially your budget, but it’s broken out usually looking 12 months ahead. So, you can figure out how everything looks monthly or sometimes even weekly. So then you can start to figure out really the questions you want to ask yourself are … What are my challenging times of the year? Because if you figure out where you’re challenging times the years are, then you can use everything we just spoke about – your vendor management and all your accounts payable management – and you can forecast that upfront. And then it starts the conversations with your vendors. And if you have to look for financing, you know when you might need it. So basically, thecash floww is helpful because it gets you looking and becoming more proactive in the future.
JJ: And tools for managing cashflow or or resources for managing cash flow. Those are people like your back office provider?
MP: Yes.
JJ: But what if you don’t have one? Does that mean Charter School Capital helps you, if you’re working with us?
MP: Yes, we do that all the time. Even if they do have a back office provider, sometimes it’s a relationship we work in tandem with the back office. It’s usually a partnership is how we always work on that type of thing.
JJ: Yeah, because I don’t know that a lot of schools have [one]. Maybe they do, but it’s been our experience, I think, that they don’t have as much visibility as they should into cashflow.
MP: I agree. Sometimes it just gets overlooked, but the fact is that it’s a very important tool for many reasons. It’s important to look at.
JJ: Good. So if a charter leader is looking for new financial support for a school, what should they be looking at? Who should they be looking at? What are the steps that they should be taking?
MP: That’s a good question. I think what you want to start with, is figuring out how much you need. Right? So, in order to do that, I would say you probably need the same document we just referred to, which is the cashflow. Because then you can start to figure out if there’s some type of gap in your cash flow or you don’t have enough actual cash in the system to pay something important, rent or some big bill that’s coming up. Then you actually know. So, I would say you first want to establish how much you need and then with that, when you need it.
JJ: And, do we help with that? Is Charter school capital help with that? Even if you’re not doing business with us yet?
MP: We do. I think schools generally know if they think they’re going to have problems with cash, but they might not be as honed in on exactly how much they need and when—and then in the future, how whatever financing they do get is going to affect them. So, we try and help show them the path. Always, in advance. We like to look at things, pretty far in advance – six months, 12 months – to help schools map out where they can go, and what they want to achieve.
JJ: Any, any last recommendations or advice for charter leaders from where you sit?
MP: That’s a good question. I would say if it kind of relates to what we just spoke about, but it can be applied to anything. I think the biggest baseline driver for everything is the student count. But it’s very easy to know student count and how much you get paid for the year. But it’s more important to understand—when those students come on board—when does the actual receipt of the revenue come for those students. Because, oftentimes (and all across the United States where there are charters) there’s some lag from when new students come versus when the actual payment for them comes. It could be three months, it could be nine months. So, then you have to figure out as you add new students, how you pay all the onboarding costs for new teachers and new books for those students. So, if you have that mapped out, it sets everything else off much better.
JJ: Matt, thank you so much. We really appreciate your help today. And for more information on charter school budget planning and tips, Charter School Capital has a whole bunch of resources on the website at . So, come visit us and find out more. And if you have a real question about budgets, Matt might help you out.

Charter School Capital is committed to the success of charter schools and has solely focused on funding charter schools since the company’s inception in 2007. Our depth of experience working with charter school leaders and our knowledge of how to address charter school financial and operational needs have allowed us to provide over $1.6 billion in support of 600 charter schools that educate 800,000 students across the country. For more information on how we can support your charter school, contact us!

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