Why cash flow management and forecasting important

As we all look at the future of care and work with the new normal I thought that I would address some pressing points around cash flow and forecasting. There is additional emphasis on cash flow issues due to the pandemic but with some foresight, these can be aided by good cashflow forecasts.

There are a variety of steps you can take now to get yourself in the best possible financial shape ahead of a possible second wave this Winter.

Steps to prepare

The main step is to ensure that any cash flow forecasts you have are fit for purpose.  Some areas you may like to consider are:

PPE pricing and availability

PPE pricing and availability. Champions within the organisation may now be needed for PPE procurement and other equipment for the medium term securing reliable supply chains and considering the impact of Brexit on these chains.

Staffing costs

The next few months will continue to bring increased staffing costs in care homes and domiciliary care. Providers should ensure that they have worked such costs into any forecasts, with examples being:

    • Shift bubbles.
    • Cover for people isolating and shielding.
    • The administration of testing.
    • Enhanced human resource costs. The situation makes it important that you keep in regular touch with your teams. You could consider doing this remotely, obtaining well-being training, or some kind of online support.
    • Recruitment and retention. Whilst current euphoria has resulted in increased applications for staff vacancies, this may change as Winter sets in. You could consider values-based recruitment to lower recruitment costs, reduce staff turnover and target a positive return on business investment. There is a hidden time and cost of recruiting, so consider recruiting in-house or outsourcing, in addition to utilising the Care Friends app.
    • Staff burnout in case of a second wave could have serious implications – have you thought about how additional staff could be procured? This may be permanent, bank and voluntary staff.

Real-time reporting

Has your organisation decided the time is right to move the care service into real time care reporting using technology and EMar packages?

The CQC is starting pilots for virtual care at home inspections and all indications are that care homes will be next. If you are looking to move this way, have you considered remote monitoring?

It is also anticipated that commissioning will move away from time and task to better outcomes for care in the community. How will this impact your business?

Occupancy and cash flow

If you are relying on occupancy remaining high, have you considered new measures to ensure that people are still attracted to your organisation?

This is likely to involve considering your visitor policy and demonstrating a robust Pandemic policy to service users, relatives and friends.

Find out what is important to a potential service user, recent examples being:

    • Do you have a café/bar?
    • Can I still see my own hairdresser?
    • Can I see my relatives?
    • Will I be able to see my relatives and friends remotely?
    • What will happen to my care if there is a second wave or local spike?
    • What is your Covid policy?

Clearly if occupancy does not remain at budgeted levels this is going to have a significant impact on the cash flow of the organisation. Business agility and innovation is key alongside forward looking business acumen.

    • Ask yourself if there are sufficient cash reserves to weather a storm
    • Lending is still available on CBILS and Bounce Back Loans but there are deadlines to funding applications approaching.

Post pandemic business model

Does your business model need to evolve post pandemic? What has been learnt from the first wave that you can consider the implications of now and include these within your forecasts?

After taking into account the above, design cash flow reports supporting crucial business decisions. This will help you establish if there is a temporary or more permanent funding shortfall.

Reliable forecasting can make a case for short term lending and/or more long term. They are also essential for demonstrating your organisations viability should you require external funding.

Sensitivity reporting within the cash flow to follow through the ‘what if’ scenario and cash flow impact is always advised.

It is important that you keep any forecasts you do as a living document – compare it to actuals, set up regular income and expense meetings with those who have the insight into predicted cash movements and discuss requirements with any in-house budget holders.

You should also ensure that there are clear lines of cash flow reporting throughout the organisation.  People feel valued when they champion a cause.

The underlying message is clear – the care sector is here to stay and with careful planning and resilience businesses will be sustainable for the long term.

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