Keeping a little more in the tank.

Marathon runners know the importance of sticking to a race plan and how to keep a little something in reserve should they ‘hit the wall’ or need that little extra to make a winning pass. The same thing applies in business and even more so for service providers transitioning to the NDIS.

 

Profit is not a Dirty Word

The proliferation of charities and NFP organisations in modern times has drawn much scrutiny from the public eye in terms of financial security and ethicacy. Combined with the traditionally held view that Not-for-Profits are not in the business of making surplus, it is not a surprise when the National Disability Service (NDS) produces statistics to show that 16% of surveyed organisations had a net current asset ratio of less than 1.0 , indicating a higher risk of financial difficulty, should income decline or expenses increase rapidly!

This should ring alarm bells and is a prime reason why the traditional concept of financial frugality and lack of reserve planning should be left by the wayside. Profitability needs to be looked upon as a financial surplus and encouraged to ensure ongoing sustainability (especially under the NDIS) as well as driving expansion and growth.

 

(Not so) Unplanned Situations

To find solid evidence to back the need for reserve planning, you only need to look at the recent debacle following the introduction of the new online NDIA portal and the subsequent shutdown and related operational issues. With some organisations having to wait for up to 8 weeks to recover payment for services rendered, the effects on organisational cashflow have been devastating.

This alone goes to show that even though many organisations produce budgets to support their expected income and expenditure, not many would have built in the contingency for the failure of such a vital piece of infrastructure.

 

Plan to Expand

Putting aside the effects of disasters on an organisations’ cashflow, the requirement to generate profit is also necessary when working to take advantage of the opportunities offered under the NDIS. The new customer focused marketplace has provided many organisations a chance to expand their services and increase revenue accordingly. Such a level of expansion requires additional investment and unless there are still existing revenue streams capable of financing such expansion, the only other way is from a (hopefully budgeted) surplus.

Building a cash reserve takes more than just vision and hope. Essential processes include accurate cashflow forecasting along with strategic budget analysis. A thorough knowledge of organisational capability and an understanding of the true cost of service delivery is also necessary to generate true financial and operational growth.

 

Crossing the Finishing Line

Getting it right and putting the systems in place to achieve a financial surplus is not easy and something that can seem daunting from the outset. With the correct tools to plan and implement development strategies, it is certainly possible to move ahead despite the challenges.

Check out this video about pushing ahead and equipping yourself to climb over obstacles while being free to seize any and all opportunities presented.