“So, tell me how are you going to get the best value for money for our school? How are you going to ensure we get the best impact from our budget?”

Sweating in my smartest suit and my shiniest shoes, I bluffed my way to a response, answering the question really badly. The interview panel looked suitably unimpressed by my meagre understanding of school budgets. As I left the interview, it was all I could think about: I thought I had completely messed it up.

Now, three years on, having miraculously got the job as headteacher, my answer would certainly be very different. But back then, the response I gave was the only one I was capable of giving at the time.

Leading a school has become just as much about running a business as it has about educating children. But you never know quite what that means for the role of headteacher until you actually do the job. As a first-time school leader, I’d done my preparation. I’d been governor at my children’s primary school, sat on the finance committee, went to financial management training, ran budgets for projects. But none of it was enough: finding myself in charge of a school budget was a daunting thing, as many new headteachers will no doubt testify.

Breathing space

Let’s be clear: I was lucky - I didn’t step into a deficit budget. We had a little bit of funding to carry forward, which, in reality, meant we had a little bit of breathing space.

I was also lucky that I had a Fiona. If you’re lucky, you will also have a Fiona. Fiona is our school business manager. She knows the cost of everything, she asks the important questions and she sometimes bursts my bubbles. She brings realism to my dreams but, sometimes, she makes them happen.

Still, even under relatively favourable circumstances, dealing with the numbers as a new headteacher can give you sleepless nights. The biggest challenge you’ll encounter is the fact that you have so little wiggle room. You may have grand schemes but you’ll quickly find that most of the money is already allocated - the majority of it on staff salaries. At my school, which, in Ofsted terms, “required improvement”, the lack of additional funds sometimes made it feel like I was having to dig an escape tunnel with a teaspoon.

The first thing that struck me, and made me genuinely terrified, was that being in charge of a budget was about being in charge of people’s lives. The decisions you make impact on lives - the children’s and the staff’s - so it’s vital that you know why you’re making a decision. You should always ask yourself “how does this improve the outcomes for the children?” Part of your job as a headteacher is to do the best with the money you have. If that sounds stark, it’s because it is.

In my first year, I carried out a support-staff restructure: it was necessary, it was fair and it made me the most hated person in the school. All teaching assistants were paid a TA rate with a special educational needs bonus. Some did that job, others did more than that job, some did less. All, however, were paid the same. Financially, it was unsustainable and meant that there was no money to spend on other things. Doing what needed doing was the hardest thing I’ve ever done. It caused upset, tears, anger and had a massive impact on morale, but it also meant that we have not faced redundancies even though costs, such as national insurance and pension contributions, have impacted severely on our budget.

Two years on, it means that we have the right people doing the right job and being rewarded accordingly. The impact on pupils has been huge.

Out of my comfort zone

There is a big lesson here: there will be times when you have to be cold, hard and clinical. Carrying out such a review took me completely out of my comfort zone.

You constantly need to look forward - not just at the next year but as far into the future as you possibly can. The decisions you make now will have long-term repercussions. We are constantly being asked to do more with less. Everything costs now and nothing is free. Services have been stripped away and, as a school, we have to look at how we replace them. Every decision is hard and choosing one thing means another has to be neglected - speech and language support versus counselling, for example.

Understanding the impact of how you spend the money helps you to make informed decisions. A good headteacher knows the educational impact of everything but, by knowing the cost as well, you can truly judge the impact of your school improvements. Put the kids at the centre and you won’t go too far wrong.

Simon Smith is headteacher of East Whitby Academy