Some of our customers are already involved in the NDIS and others are preparing for it. However, there are probably lessons for many Not-for-Profits (and even businesses) in how others have managed the transition. Calxa can help with the transition to becoming an NDIS Service Provider.
Working with NDIS Service Providers
We’ve been working closely with a small group of organisations in NSW. For instance, we’ve been helping them review their existing systems and looking at what needs to be changed or improved with the change to their future funding model.
The transition from block grants to what is essentially a fee-for-service model poses many challenges. In line with this, they are manageable challenges with the right preparation, systems and people.
Identifying Activities
The first challenge is often to identify just what it is you need to measure. What are the services you provide and what’s the best way to track the costs and income associated with them. For some organisations who provide a simple service to individual clients, the client is often the best unit to measure against. For those who provide group-based services it’s generally better to work on the activity itself (whether that’s an outing or a school holiday program).
These activities then need to be managed firstly in your accounting software – using Jobs in MYOB, Tracking Categories in Xero or Classes in Reckon Accounts. Calxa will then pick up this information allowing you to budget and report in multiple ways.
Unit Costing for NDIS
Understanding the cost per unit and being able to compare that with the revenue will be vital for decision-making under the NDIS to ensure your financial stability. You need to be at least recovering your costs on each activity (including an allowance for overheads) and ideally accumulating something to cover contingencies.
If an activity is not profitable you will need to make decisions on whether you can increase the price or if it makes sense to stop providing that service at all. This could be a problem for the NDIS plan generally if no-one is willing to provide the harder, higher-cost services – but that’s a discussion for another day.
Have a look here on how to use Calxa KPIs and Account Trees to get Unit Cost information easily (and I’d like to acknowledge the input of Michael Graham of Cutcher and Neale in Newcastle for thinking outside the box for the core of this).
How much detail do you need?
Take care when deciding the appropriate level of detail. Can you actually identify and allocate the major costs involved at a micro level? What is the cost of collecting very detailed data and does it give you useful information to make decisions?
Consider for example a service where you take groups of people on outings every weekend. You’ve done some estimates of the number who will want the service and decided on a price. Whether every weekend is profitable isn’t the core issue – it’s more important to know that the service is profitable in the long term, so it makes more sense to have one MYOB Job for Weekend Outings and review that each month. There will be some weekends where you don’t get as many participants as expected and make a loss but as long as you are generally making enough to cover this, the service itself is sustainable.
We will all continue to learn as we go along the NDIS journey. We will share what tips we can to make it easier for you to manage the NDIS transition.