It was the sound of pennies dropping. Three colleges, one private training provider and their specialist delivery partner, two industry bodies, and the Skills Funding Agency, all sat round a table last week working through the implications of the new style of funding for apprenticeships this year. It’s stopped being theoretical now. When BIS says “many providers will need to re-work their business model as the current allocations-based approach moves to the new funding system” this is what they mean. The game’s changed.
For one of the core apprenticeships in the maritime sector we’ve jumped, switching from the old ‘framework’ apprenticeship to the new ‘standard’. The main practical difference is that providers only get their hands on the Government’s matching £2 when the Skills Funding Agency sees proof that the employer has paid its £1 to the provider. And SFA only sees that proof through the ILR (which means the next ILR after the employer’s cash reaches them: another inbuilt delay).
Cash flow never much mattered to providers before and now it does. And with tight margins and limited headroom for development, even for the larger colleges cash flow now needs to be on the agenda.
We worked through the implications.
In cash flow terms it’s suddenly really important to know when your partner employer will pay. The SFA pays reliably every month, on demand: it’s a wonderful customer (and providers don’t realise how lucky they are).
But what’s the payment policy of the company which employs the apprentices you’re training? Do they pay on 30 days (as the public sector is required to do)? 60 days? 90 days? Does your contact in HR even know? And what if it’s less predictable than that? In my consultancy business I had client some years ago whose policy was to pay only when chased! Which is manageable if you know – and may be a painful surprise if you don’t.
Not a problem, you cry: we’ve built up good relationships with our employers and we’ll just get them to pay us everything up front! Except that contract negotiation is a game for two players, and your employer partner also has a Finance Director with a keen eye on their self-interest. They might also have more experience of contract negotiation. How ready do you feel?
What about your admin systems? Filling in your ILR correctly is one thing (and quite a skill). But invoicing your partner employer as soon as you legitimately can is something different. The old rule of thumb in business that invoices go out first class and cheques second is very far from being second nature to college finance teams which have had a cushy time with regular payments from the Government. As a consultant I have seen some very relaxed approaches to invoicing by public sector clients. That must change.
The old FE dog is going to have to learn some new tricks. Fast. And with remarkably little room for error because margins are tight. A key skill for college managers and their training provider counterparts has long been to learn each year’s funding rules quickly, so they can make the best of them.
This is different. It’s much more commercial. The same pressing need is there to learn the rules fast, but the skills required are different. It would be wise to learn those new skills quickly.