24 Sep Making a profit under Support at Home…even if you are a NFP.
At the INVOX Support at Home conference back in April we learnt about financial viability under the new Support at Home program.
What did the experts say?
Stuart Hutcheon from StewartBrown who are specialist accountants in Aged Care-was first up.
Stuart had no Support at Home data, at that time, to show the audience. However, he was clear about the sector being squeezed and exactly who would survive the reforms –
Providers who can get their back-room costs to be less than about 20% of their revenue will survive with the best providers sitting at 17.7%.
Many providers in the struggling bottom third of results are spending over 32% of their revenue on administration. They are simply bogged down with endless cross-checking, manual workarounds and double data entry using systems not designed to manage.
StewartBrown has since released data on the first 5 months of Support at Home and it is dire reading with profits plunging while admin costs rise.
Stuart recommended providers need to have a strong financial system in place which allows – daily, weekly and monthly checks on –
- Package utilisation – optimise use of client funds, if they agree to the corresponding client contribution
- Staff productivity – ensure most staff hours are in revenue-raising activity and not in back-room admin
- Service cancellations – having a policy and mostly sticking to it – the Support at Home manual allows for cancellations within 2 business days to be claimed – with case-by case exceptions
- Service prices – each service needs to have a profit margin
Then came Darrell Price from Grant Thornton Accountants and Advisory .
Darrell asked for a show of hands “Who thinks it’s OK to be making a profit in a care organisation?”. Only one or two hands in the room of about 400 people were raised.
Profit seems to be a dirty word in the sector.
Yet it is the only way provider organisations are going to survive.
Darrell was clear that providers – even those noted as Not for Profit need to make a surplus. And be profitable at around 10-14% to be investable.
Why is it OK to make a profit in a care organisation?
Making a profit allows providers to –
- pay for discretionary items for clients when the system is rejecting them – like a gift for clients just when they need it most!
- Properly pay staff and retain talent
- Continue to provide quality services to your client base
Why is it so tricky?
Providers cannot cut corners on client safety to reduce costs. But they can look at package and staff utilisation, reducing administrative overheads and setting profitable prices alongside building a reputation for quality care.
The trouble is that many providers are so burdened by the complexity of Support at Home, with the extra admin tasks required. They have no time to look at the big picture, analyse poor data or plan for the future.
Their current systems do not give them the information they need to run according to the advice of either Stuart or Darrell.
They don’t know what is left in a client’s package, what their staff utilisation is nor what they aren’t getting paid by Services Australia from a claim several thousand lines long.
One business manager at a new VIPS Care provider client advised she was spending 3 weeks out of every 4 on claiming and client statements. There was simply no time for the “big picture” as they struggled along with their previous IT.
We hear from across the sector that organisations are looking to –
- Ease the workload of their admin teams
- Reduce administrative costs to match the best-performing providers
- Allow key staff to take leave
- Better understand their financial position
- Make a profit under Support at Home
- Survive if they can
Why not get in touch and see how VIPS Care clients are saving days of admin every month with our purpose-built system.
So your organisation can survive and then thrive.