The roll-out started on 1 July – now we need an ongoing plan.

After months of evaluating systems, discussing strategies and implementing procedures, July 1st has come and gone and the NDIS is finally upon us, things are suddenly very REAL!

Good management practice now dictates some monitoring of performance and evaluation of data is the next step. Going forward will involve establishing a reporting regime to ensure awareness of costs, how they relate to organisational financial health and ensuring that there are resources available to support ongoing sustainability.

Early Diagnosis is Important

The human body operates at an optimum temperature of around 36.5°. Any deviation from this generally indicates some form of issue and normally leads to a need for medical attention. This is much the same with any business. While the unit of measurement might be different, utilising KPIs to indicate baseline financial health should be considered. As an example, reporting should regularly consider:

  • Working Capital Ratio (current assets to current liabilities)
  • Possibly something such as Cash Reserves in Days (compares your cash assets to your average daily expenditure).

Correctly calculated and applied, these two business ratios can provide a quick snapshot of an organisation’s financial ‘health’. Many tend to focus on monitoring revenue, however, it can be just as important to consider how long an organisation could continue to operate if any (or all) revenue streams ceased. This preventative method is something that belongs in today’s challenging financial environment.

Ongoing regular reporting of essential KPIs can provide breathing space and allow for changes before small things escalate into big issues.

The REAL Cost

Engaging in cost analysis involves more than just checking invoices against cost centres. Costing data is an important resource and needs to be actively monitored to evaluate trends and processes. Set up well, costing capability can provide a vital edge in a competitive environment. Utilising tools to calculate, maintain and report on Unit Costing figures and movements should be an intrinsic part of any reporting regime. It’s quite a simple process:

  • Monitor costs on a regular basis to ensure there are no unplanned trends or spikes beginning to appear.
  • Add comparisons of actual against budgeted costs to your reports. This ensure departments stay in touch with strategic goals.

Putting it all Together

In order to gain a true understanding of an organisation’s financial direction, there is no substitute for an accurate cashflow forecast. The combination of using indicators such as KPI’s to provide a snapshot, plus the added impact of a reliable cashflow projection will see boards and management being able to make long term decisions which can be based on quantifiable data leading to true accountability. Here are some ideas:

  • Utilise multiple budget versions as the basis of these reports which will allow for scenarios to be worked through based on performance estimates or potential changes to the operating environment such as new asset purchases or changes in staffing levels.
  • Run an organisational cashflow to manage the long-term sustainability of your organisation.

If you are interested in hearing more about the use of Cashflow forecasts and their benefits, check out our help note Step-by-Step Cashflow Forecast.