The Role of Treasury Management in Shaping School Success
Treasury management in schools involves planning, organizing, and controlling financial resources to ensure efficient fund utilization. It includes cash flow management, investment planning, risk management, and financial reporting. The objective is to balance short-term liquidity needs with long-term financial sustainability.
Effective treasury management enables schools to maintain stability, optimize resource allocation, and achieve financial goals. Schools face financial challenges such as high operating costs and capital investment needs. A structured treasury management framework helps navigate these complexities.
There are 3 important aspects of treasury management for schools — (1) Management of Inflows, (2) Management of Outflows, and (3) Managing Investments
Strengthening Inflows: Accelerating Collections for Financial Stability
Managing inflows efficiently ensures schools can meet operational costs without disruptions. However, inefficient collection practices and delayed payments often lead to liquidity constraints, forcing reliance on short-term borrowing.
Current Practices in Fee Collection
Most schools use in-house ERP systems, with term-wise and quarterly payment models being the most common. While these schedules provide predictability, payment delays disrupt financial planning. Schools may impose late fees, but enforcement is inconsistent. Manual follow-ups and limited payment flexibility further impact compliance.
Challenges Faced in the Current System
Many schools struggle with uncertain cash flows, as less than 50% achieve full, on-time collections, affecting budget planning. The dominance of quarterly payments limits flexibility for parents who may prefer smaller monthly installments. Schools relying solely on in-house ERPs miss out on automation and ease-of-payment solutions offered by FinTech integrations.
Additionally, the absence of a formal SOP for fee collection results in unpredictable cash flows, as parents often pay at their convenience. Late payments further impact the customer experience and create financial planning challenges.
Best Practices to Improve Collection Efficiency
To strengthen cash inflows and ensure higher on-time collections, institutions can adopt several proven strategies:
- FinTech Integration: Partnering with solutions like Grayquest enhances collections and reduces defaults.
- Automated Reminders: Regular notifications via SMS, WhatsApp, and email improve compliance.
- Multiple Payment Modes: Offering UPI, credit/debit cards, EMIs, and auto-debit increases convenience.
- Incentivizing Early Payments: Discounts or loyalty incentives encourage timely payments.
- Consistent Late Fee Policies: Structured penalties discourage delays.
- Flexible Payment Plans: Customized installment options ease financial burdens for parents.
By adopting a proactive, tech-driven approach, institutions can ensure greater financial predictability, reduced dependency on working capital buffers, and a smoother operational experience for both administrators and parents.
Managing Outflows: Ensuring Prudent Expense Management
Prudent expense management ensures liquidity and aligns spending with long-term goals. Schools must balance fee collection efficiency with structured, predictable outflows.
Current Approaches to Managing Outflows
Most schools follow historical budgeting trends rather than real-time financial analysis. Salaries, infrastructure, and administrative costs form major expenses. Limited treasury oversight often results in unplanned expenditures and suboptimal working capital management.
Best Practices for Outflow Management
A treasury-driven approach to managing outflows requires real-time cash flow monitoring, ensuring that funds are available when needed without unnecessary idle reserves. Schools should integrate automated payment scheduling and structured vendor management to optimize working capital and prevent liquidity crunches.
Implementing dynamic fund allocation strategies — such as segregating operational expenses, capital expenditures, and contingency reserves — can help schools balance short-term obligations with long-term financial goals. Additionally, leveraging strategic financial partnerships, such as pre-negotiated vendor contracts and institutional banking solutions, can improve cash flow efficiency while reducing financial risk.
Investment Strategies: Balancing Liquidity and Growth
Effective treasury management involves strategic investment to ensure both liquidity and financial growth. Schools must balance operational fund accessibility while maximizing returns on surplus cash.
Current Approaches to Investments
Most schools prioritize safety over aggressive growth, relying on fixed deposits and savings accounts. While this provides stability, relying solely on low-yield instruments may limit financial growth.
Challenges in Current Investment Practices
Schools often avoid diversified investments due to risk aversion, limiting their exposure to higher-yield options. Unpredictable cash flow, largely driven by delayed fee collections, further constrains investment potential. Additionally, poor cash flow forecasting results in either excess idle funds that are not earning optimal returns or operational cash shortages that necessitate last-minute borrowing.
Best Practices for a Balanced Investment Strategy
Schools can enhance financial sustainability by structuring investments based on liquidity needs — allocating funds into short-term (operational), medium-term (planned expenses), and long-term (growth) categories. Diversifying beyond traditional savings into low-risk instruments can improve returns while ensuring security. Digital treasury tools aid in cash flow forecasting, preventing idle funds or shortfalls.
Optimizing fee collection cycles and working capital management ensures a steady flow of investable funds. Seeking professional financial guidance aligns investments with institutional goals while maintaining flexibility.
Schools can use various financial instruments to maximize returns without compromising safety:
- Fixed Deposits: Low risk, guaranteed returns, but limited liquidity.
- Liquid Mutual Funds: Higher returns than savings accounts, with easy access.
- Government Securities: Risk-free but lower returns.
- Money Market Instruments: Short-term, moderate returns, with some credit risk.
- Sweep Accounts: Automated fund transfers for higher yields while retaining liquidity.
- Corporate Bonds: Higher returns but with credit risks.
A well-defined framework should consider regulatory requirements, liquidity needs, risk tolerance, administrative capacity, and cost-benefit analysis. A diversified approach with periodic reviews ensures financial objectives are met efficiently.
The Profitability Impact: How Effective Treasury Management Drives Financial Success
Strong treasury management drives financial health, ensuring stability while enabling sustainable growth. Optimizing fee collection, managing outflows, and implementing balanced investment strategies enhance cash flow predictability, reducing financial stress.
A well-managed institution can reinvest surplus funds into infrastructure, faculty development, and student programs, strengthening its overall value proposition. With a structured treasury framework, schools can ensure long-term financial resilience, allowing them to focus on academic excellence and institutional growth.
LoEstro Advisors is an investment banking firm specializing in sell-side fundraising and M&A advisory, along with a strong consulting arm. Recognized as the #1 financial advisor in education in India, we are the advisor of choice to India’s blue-chip education businesses.
Over the last four years, we have grown to be one of India’s largest (in terms of M&A transactions) homegrown boutique investment banks, with $1.2bn+ worth of combined deals closed across education, healthcare, consumer, and technology sectors.
