Give the bursar and governors two clear views

The cash forecast answers when money leaves and returns. The net-cost assessment answers what expense remains after the school’s evidenced VAT recovery. Both matter. A school can prefer an affordable net cost yet struggle with an early payment or a refundable deposit at the wrong point in its fee cycle.

Start with the same meters, dates and demand for each offer. Include unit charges, standing and capacity charges, other supplier items, applicable tax, adviser remuneration and the service actually purchased. Unconfirmed items remain gaps. Do not turn a blank response into an assumed zero.

A completed example: the cheaper unit rate costs more

All figures below are invented teaching assumptions from the programme’s Example Day Preparatory School. They are not quotations, forecasts or a tax classification of teaching, nursery or other activities. The exercise prices one illustrative electricity requirement of 180,000 kWh over 365 days, an assumed 20% VAT on every modelled charge and an assumed 80% recovery. Embedded commission is already included in the rate.

Option A has a 24p/kWh rate, £3 daily standing charge and £600 annual direct adviser fee. Option B has a 23.7p/kWh rate, £4 daily standing charge and £900 direct fee. Although B saves £540 in variable charges, its standing charge and direct fee are £665 higher. Its annual pre-VAT total is therefore £125 higher.

Make the cash difference explicit

In the exercise, cash paid before the modelled VAT recovery, including the separate refundable deposit, is £53,874 for A and £56,524 for B. The deposit increases cash held by the supplier; it is not added to annual energy expense. Record the actual deposit terms before relying on repayment.

The annual net difference is £130 under these tax assumptions. That arithmetic does not select an offer. A is a 24-month proposal and B a 36-month proposal, so the school must also examine the different commitment, service and risk. A common annual view cannot invent the price of A’s later renewal or make the two end dates equivalent.

In the school’s own forecast, place invoice payments, direct fees, deposits and expected VAT recovery in the relevant months. Ask finance to check the recovery timing and any annual adjustment. A recoverable amount should not be treated as cash available before it is received or offset.

Show remuneration without charging it twice

The fictional uplift is 0.2p/kWh in A and 0.3p/kWh in B. At the common annual demand that is £360 and £540 respectively, already within the quoted rates. Together with direct fees, disclosed annual remuneration before any relevant tax treatment is £960 for A and £1,440 for B.

Keep this disclosure beside the comparison, but do not add those embedded amounts to the supply total again. Ask the provider to identify all payment streams, additional work and any consumption-dependent remuneration. Review direct fee invoices separately: their VAT treatment and recoverability need the school’s actual assessment, not a copied assumption from the electricity bill.

Keep tax effects distinct from buying and using less

HMRC’s private-school guidance distinguishes recoverable VAT, exempt-use restrictions and non-business costs. A lower tax charge on an invoice is not automatically an equal reduction in net expense where that VAT was recoverable. Conversely, irrecoverable VAT remains part of the cost borne by the school.

Explain savings in separate lines: tariff or supplier charges; corrected billing; tax treatment; reduced consumption; and implementation or service costs. A billing credit may be a one-off recovery rather than an annual saving. A reduction in energy use may change volume-related commission and taxes as well as the commodity cost. Reconcile those effects instead of counting them as unrelated benefits.

Use the completed comparison to make a decision

Test a credible lower- and higher-demand case, a variable-charge change where relevant, and the timing of cash commitments. Record which inputs came from the school’s data, the written offer, the tax reviewer or a planning assumption. Check that a stated deposit is genuinely refundable and note any guarantee or credit condition.

Ofgem’s security-deposit guide promotes clarity on calculation, alternatives and repayment; it is voluntary best-practice guidance, not a promise that every requested deposit will be waived. The practical question is whether the school understands and can fund the proposed arrangement.

Your output is a dated comparison with an owner, a cash forecast, a remuneration schedule and an uncertainty list. Add the contract and service assessment before recommending an option. Keep the full written offer and the reasons for rejecting alternatives so the final paper can explain the judgement as well as the arithmetic.