Financial reporting and COVID
For those companies required to report on areas impacting company performance in addition to investor updates, the Finance Reporting Council (FRC) has indicated that its current review of financial statements with a March 2020 and post period end date should look to enhanced reporting.
The user of financial reports needs to be able to understand the impact of Covid-19 upon the business. There is no doubt that, particularly interim reports, whether for internal or external use, could benefit from more extensive disclosures.
Significant judgments and estimates should be fully explained and businesses of any size will benefit from meaningful sensitivity/scenario analysis. From a care provider perspective, a scenario using live data to forecast forward assists the business from a funding perspective and demonstrates in real time the viability and sustainability of the business.
Forecasting cashflow, expenditure and income
Using forecasting cashflow and income & expenditure financial models will become increasingly important when a provider is seeking to maintain and/or grow the service offering, whether this is for extending a care home, purchasing and/or building a care home, renovating a care property in order to offer increased social distancing and visitor hubs, greater infection control in the environment, and increased supported living capabilities.
Sensitivity analysis reporting is an area that is likely to increase as a result of Covid-19, looking at how the pandemic has affected company performance and how it may affect a company’s future results with agile policies to counteract any downside.
Readily accessible data management information helps a care provider operate within banking and investor covenants and is evidence to the CQC of the financial sustainability of a business. Forecasting income and expenditure, as prepared by an expert accountant, can also assist with new care provider registrations with the CQC.
Four considerations when recording financial information
As part of the ongoing top tips from Albert Goodman, I have listed four key areas to consider when recording real time financial information:
- Real time data: live data will enable the provider to accurately monitor the performance of the business, which will allow rapid identification of any risks and opportunities as they arise
- Improved cashflow monitoring: good management information will enhance your cashflow forecasts by integrating live data to keep them up to date. This will give peace of mind to care sector investors and lenders, knowing that there are adequate cash reserves to weather dips in occupancy in care homes and changes in the supportive living sector.
- Support finance applications: robust management information can assist in the raising of finance and the restructure of a business. It can also reduce the burden of ongoing reporting requirements.
- Time & cost savings: with the continual improvements in accounting software, it is now possible to design automated and tailored reports that refresh each month at the ‘click of a button.’ Automation increases efficiency by reducing processing time and results in increased financial reporting in order to help care providers make informed decisions.
If you are interested in automation or enhancing your management information reporting, the Financial Modelling Team at Albert Goodman is there to discuss your options.