Changes to the handling of physical currency, paper-based invoicing and unpaid fees could just be key to financial survival as FE colleges look for savings in every area of business, explains Holger Bollman.

The government has taken every opportunity to affirm and reaffirm its overriding economic goal — to eliminate the nation’s budgetary deficit.

Whether this is a worthy or unworthy cause is ultimately a matter of opinion, but as those working in FE know all too well, that it has caused some collateral damage is not.

There are certain areas in which FE colleges can make significant savings without compromising academic integrity

In 2015, FE colleges have to contend with some brutal realities. They face a 20 per cent decrease to overall spending, and the Skills Funding Agency has stated that, in-year, public sector financing will diminish by 3.9 per cent.

Already, the damage has been felt in educational institutions across the country, and as the Conservatives are only a few months into a five-year parliament, there is every possibility that there will be more to come.

Barring a sudden and inexplicable change of heart, the only option available is to adapt to these new circumstances. Happily enough, there are certain areas in which FE colleges can make significant savings without compromising academic integrity.

Firstly, physical currency. In the UK, using cash for payments is no longer the norm — not only is ‘plastic’ ubiquitous, but with the advent of contactless technology and increasingly seamless authentication methods, it’s more convenient to use than ever.

Despite this, cash offices are still prominent in FE colleges throughout the country, and even in smaller organisations, they can still accumulate around £1m per year.

Handling this cash always proves burdensome in the extreme. Firstly, it has to be counted more than once to ensure there are no discrepancies — and if the cash is present in quantities exceeding a certain amount you’ll often need at least two staff members available to avoid any potential loss. And the money needs to be protected — this involves either investing in on-site safes (which need to be monitored), or organising secure collections.

It’s a time and labour-intensive process, but it can be avoided. If you remove your college’s cash office and instead take payments online you could save up to £30,000 per year.

Secondly, paper-based invoicing. Paper invoices are a pain for educational institutions in many different respects. They always require a substantial amount of effort to process.

In many cases, time expended in their pursuit can exceed the value of money owed in the first place; it’s estimated that the average paper invoice costs £37 to pursue, so when it comes to lower-value transactions, colleges are almost always losing money.

Because they cannot charge students for these administration costs, paper invoices put colleges in an uncomfortable position — they can either enjoy the insignificant victory of recouping these minor debts, or not pursue them at all — and therefore encourage this behaviour (and possible further losses). By ditching paper invoices in favour of real-time online payments, colleges will save time and money. It’s as simple as that.

Third, unpaid fees. While these minor sums are certainly an inconvenience, they pale in comparison to the cost of outstanding debt on graduation. This is something of an epidemic across further and higher education. It is rarely purposeful — students tend to compartmentalise their time in education, and once they move on, they tend to move on in all respects.

That said, whether it occurs because of forgetfulness or intentional non-payment, it causes problems for FE colleges. Again they are presented with an awkward choice — to assume a giant administrative burden chasing debtors, or to allow them to default. There are ways to automate both the process of payment and its pursuit — and FE colleges would be well-advised to take advantage of them.

The current political climate means that financial pressure will be a part of colleges’ reality for at least the next few years. But where they may not be able to influence policy, they can influence processes.

By increasing efficiency (whether that comes in the form of reducing paper invoices, getting rid of cash payments or automating debt collection), FE colleges are not just mitigating the damage of cuts that have already happened — they’re insuring themselves against the cuts of the future.