How Specialist Disability Accommodation Providers can manage financial risk.
With the release of the Specialist Disability Accommodation (SDA) Policy Framework earlier this year, the NDIA clearly set the parameters for these services.
While the sector welcomes this provision, one risk in particular, has become apparent. The release of the housing policy paper states that providers will only be paid if an NDIS participant with an SDA (Specialist Disability Accommodation) payment is actually residing in their dwelling. Of course, this presents a huge financial risk for the provider who has constructed or leased the property.
If Only I Had More Time
The serious nature of this issue brings into focus the need for a robust and systematic approach to financial risk underpinned by the need for accurate cashflow forecasting.
Organisations providing such specialist services within an NDIS environment are going to have to take a serious look at their ongoing cashflow position and ensure they build contingencies around the possibility of vacancies. The practice of scenario planning should be considered. Look to prepare a number of best, worst and alternative type budgets and insert these into your forecasting engine. The outputs can provide a valuable perspective when considering ‘what if?” How often do you hear the pained comment “if only I had more time…”- well accurate projections of your cash position can give you MORE TIME.
Successful operations are often measured by the amount of turnover and cashflow generated. However, ongoing sustainability demands more than just mere profit. The ability to build and maintain reserves is something that is important to many great success stories. Be it on the sporting field or the board-room, having the necessary resources to turn to when things get tough are often the main reason for survival. For organisations to maintain their operations within an NDIS-funded environment, at least 3 months of cash reserves are needed.
Consumer Directed Funding is now seeing the emergence of a new marketplace where participants have control over the quality and location of the accommodation they wish to live in. No longer can specialised housing be banished to the outer suburbs. Customers are now demanding housing to be located close to amenities and entertainment.
Again, this is at the risk of providers. The high capital cost of constructing specialised buildings puts greater pressure on the need to ensure vacancies are kept at a minimum. Holding costs for empty beds puts pressure on cashflow and severely restricts ongoing development and investment. Regular reporting and tracking of KPIs becomes imperative and should be part of any business plan. Trend analysis can produce early warnings which allows time for contingencies to be made and realised.
Mitigating risk is all about having a clear understanding of your financial position. Invariably the board room is where the decisions are made around this risk and then adequate measures are put in place to avert negative outcomes, or at least minimised. Establishing a reporting system which can process the data and present it in an organised manner is a must for specialist accommodation providers. Using these reports and practising good cashflow management will provide the necessary breathing space.
If you are interested in learning how to put it all together, check out this recording of this webinar Step-by-Step Cashflow Forecasting.