Introduction
Business and financial management in K-12 education are crucial for ensuring that schools operate efficiently and effectively while making the best use of available resources. This includes budgeting, financial planning, procurement, grant management, state/federal reporting, and managing various administrative functions. Proper financial management helps schools maintain their facilities, support educational programs, and achieve long-term sustainability.
The realm of school business and finance involves a variety of specific terms and practices that can be complex and unfamiliar. Key concepts such as fund accounting, fiscal responsibility, and budgetary constraints are integral to managing school finances. Understanding these terms is essential for administrators, school boards, finance staff, and the school community at large to effectively oversee, optimize, and assess the financial health of their school districts.
To help you achieve a better understanding of business and finances in k-12 schools, we have compiled a list of common terms and definitions that are used in this field.
List of Common Terms and Definitions related to Business and Finances
- Accounts Payable: The department responsible for managing and processing bills and payments owed by the school. This includes paying vendors, suppliers, and service providers, ensuring that all financial obligations are met on time.
- Accounts Receivable: The process of managing money that the school is owed, such as fees from students or payments from grants. This involves tracking incoming funds, sending invoices, and ensuring that payments are collected and recorded.
- Budget: A financial plan that outlines expected income and expenditures for a specific period, typically a fiscal year. The budget helps manage resources effectively and supports planning for school activities, programs, and needs.
- Business Office: The department responsible for overseeing and managing the financial and administrative functions of the school. This includes handling budgeting, accounting, payroll, and financial reporting. The Business Office ensures that all financial transactions are accurately recorded and that resources are allocated efficiently to support the school’s operations and goals. A well-managed Business Office ensures that resources are allocated efficiently, financial records are accurate, and the school runs smoothly, ultimately supporting the educational mission.
- Capital Improvement: Investments in physical assets or infrastructure to enhance or maintain the school’s facilities. This can include building repairs, renovations, or upgrades to ensure the school environment supports student learning and safety.
- Financial Reporting: The practice of preparing and presenting financial statements and summaries that reflect the school’s financial status. This includes generating reports on income, expenses, and financial performance to support transparency and informed decision-making.
- Fiscal Year: A 12-month period used for financial planning and reporting. Schools may have a fiscal year that aligns with the calendar year or a different timeframe, such as July 1 to June 30 (most common), depending on their budgeting and reporting needs.
- Grants Management: The process of overseeing and administering funds received from grants. This includes ensuring that grant money is used according to the terms of the grant, tracking expenditures, and reporting on progress and outcomes.
- Internal Controls: Procedures and policies designed to safeguard the school’s assets and ensure the accuracy of financial reporting. Internal controls help prevent errors and fraud by establishing checks and balances within financial processes.
- Payroll: The system used to manage and process employee compensation, including salaries, wages, and benefits. Payroll involves calculating paychecks, deducting taxes and other withholdings, and ensuring timely payments to staff.
- Purchase Orders: Formal documents used to request and authorize the purchase of goods or services. Purchase orders outline the details of the order, including quantities, prices, and delivery instructions, and are used to manage and track spending.
- Reconciliation: The process of ensuring that financial records are accurate and consistent. Reconciliation involves comparing internal records with external statements, such as bank statements, to identify and correct discrepancies.
- Revenue: The income generated by the school, which can come from various sources such as state funding, local taxes, donations, and grants. Managing revenue effectively is crucial for maintaining the school’s financial health and supporting its programs.
- Statement of Cash Flows: A financial report that shows how cash is generated and used over a specific period. This statement provides insights into the school’s cash inflows and outflows, helping to manage liquidity and financial planning.
- Treasurer: The individual that is commonly responsible for overseeing the school’s financial activities, including managing funds, investments, and financial reporting. The treasurer ensures that financial operations align with the school’s budget and policies.
- Vendor Management: The process of selecting, negotiating with, and overseeing vendors who provide goods and services to the school. Effective vendor management ensures that the school receives quality products and services at competitive prices.
- Year-End Closing: The process of finalizing financial records at the end of the fiscal year. Year-end closing involves completing all financial transactions, preparing financial statements, and conducting audits to ensure accuracy and compliance.
In Conclusion
Familiarity with these school business and finance terms can help school staff and administrators navigate the financial and operational aspects of managing a K-12 school effectively, as well as help the community at large in the understanding of these key functions.
