Changing finance systems - know your requirements

As an academy trust you are a company, governed by company law. Part of this key requirement is to maintain financial records, and to retain these for at least 6 years. What happens however when you change finance systems? Here we look at some of the issues that may arise as a result of this.

Why do trusts change systems?
As trusts grow and take on new schools, the finance system that was appropriate with a small number of schools may no longer be appropriate, best value or meeting your needs any more. We have seen many trusts migrate to a new finance system. This often allows for more efficient financial processes, monitoring and reporting of finances, helping to safeguard trust finances and meet your requirements with the Academies Financial Handbook.

What do you need to consider when changing systems?
When will you make the change? The natural time to change will be at the end of the financial year. This has the advantages that there is a natural cut off point, and your finances will all be on the same system for the whole year. Time can be tricky however, as this will coincide with year end and audit processes, when your finance team may already be busy and it may not be practically possible. You may therefore look to change at another point in the year. This may coincide with the end of a fixed term contract, or another key milestone in the year, for example 31 March when financials are required to be reported to the ESFA already. 

If you are changing mid-year, you may consider running the old and the new system in parallel for a period of time to ensure that your new system is working correctly and as you expect it to. This will also give your staff time therefore to learn and adapt to the new system. On the new system you will need to decide how to transfer the first period of the financial year. It will be important to have a full year of balances on the system to be able to run finance reports direct from the system, but whether you input all transactions individually, or just balances for the year to date will depend on the specific software.

Other considerations
Your external auditors will need to be able to access financial records for the whole year, and if this is split across two databases/pieces of software this will add complications to the audit. 

You must also consider company law requirements. You must have access to at least 6 years’ worth of records. Therefore on change over you must make sure that you will be able to meet this legal requirement, either through back ups and data held by the trust, or through negotiating continuing access via your old software provider. This has been highlighted by a recent trust that was unable to respond to a freedom of information request due to changing software - you can read the full article here: https://schoolsweek.co.uk/academy-trust-loses-spending-records-after-finance-system-switch/ 

Whatever system you change to, you will need it to have a strong reporting package that allows you to comply with monthly reporting requirements in the Academies Financial Handbook without requiring significant additional manual work every month

If you would like any advice on changing software or monthly management accounts please contact us.