The importance of giving your finances a health check
Care providers run essential services. Whilst the quality of care, service operating levels and staff resourcing are key components of those services, it is as important as ever to check the health of your business finances in view of rising costs for businesses in the current economic climate.
A full review of all finances is a good starting point from which the future growth and success of your business can be planned, managed and implemented. With the economy uncertain and short, medium and long-term financial predictions ever-changing, it is vital that your financials are monitored and move with the times.
Issues faced by care providers are varied and wide-ranging, but in the situation may include cash flow and balance sheet concerns along with ownership of assets, investment in technology and the recent increase in energy prices.
Your finances
Directors and care managers must understand the financials of their business, which includes cash flow and balance sheets. One of the key guides to follow for understanding financials fully are the short, medium, and long term goals. This will highlight any areas of concern as well as any areas for potential growth.
Another aspect to consider is the voice of the customer. The pricing strategies, marketing campaigns and overall service offered by your business need to meet the needs and requirements of existing and potential clients.
Retention of customers is more important than ever with the influx of private equity-backed corporates into the market, making it increasingly difficult for private practices to compete with their prices and product offering.
In an ongoing financial crisis there can be no complacency. As ever, the importance of gaining new service users and retaining existing ones is key. The care market is increasingly competitive, so monitoring your financial commitments, as well as staff pay and funding streams is of central importance
Debtor and creditor management
The management of the creditors and debtors of your business will still be required to ensure its financial stability and success. Developing a strong line of open communication with stakeholders including lenders, debtors, HMRC and employees will be needed to quickly resolve any issues. There are options available to those struggling with this, for example invoice factoring, which releases cash from debtors through the purchase of their outstanding invoices.
The investment into premises are likely to be some of the largest purchases or ongoing overheads. In recent years, technological advancements and investment in new technology have assisted care providers in developing their offering. However, this comes at a significant cost.
If your care business needs an injection of cash, sale and lease back of the premises and or assets is an option. It ensures the practice does not lose its service offering or identity while bolstering the levels of cash within the practice.
A review of the assets held by the business is a method of identifying any machinery or equipment that is rarely used and could be sold or leased back. Embracing technology can widen your offering and improve value to the clients, so improving client retention.
A major issue everyone is currently facing is the rising costs of energy and an investment in greener energy practices can help to reduce costs. Smart actions such as starting with a review of previous utility bills from the last 24 months can highlight areas where costs could be reduced. Some examples of this include investing in solar power and using LED sensor lighting.
CQC
Ensuring that you care home(s) is well placed to secure strong CQC ratings is key – the impact of poor or falling ratings is well known in the care sector and a difficult economic climate makes the ripples ever more significant. CQC engagement is encouraged and taking positive steps to try and get the best results are both prudent measures.
Care providers are legally obliged to make sure they take all reasonable steps to ensure the financial viability of business. Failure to do so can jeopardise registration with the Care Quality Commission
How to deal with any financial issues faced
Finally, if your business starts to experience financial distress, open lines of communication will be key in helping to resolve any issues. Professionals such as legal advisors should be engaged quickly to advise on the next best steps.
For more information, please contact Sam Payne, Head of Restructuring and Insolvency, or Ruth Sheret, Legal Director, Investigation, Regulation and Tax.
07725 914 791
01905 746 473
07890 625 156
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