There can’t be many businesses of similar size whose finances get as complicated as a group of care homes. Everyone working in the care sector has seen the industry consolidating, as new entrants to the market buy up smaller businesses and existing providers take over more sites.
But while that might lead to efficiencies, the short-term effect is often to increase complexity even more.
However, there are ways software can help with care home accounting, eliminating many hours of tedious and error-prone work and releasing staff to concentrate on higher-value tasks.
Why care home accounting can get so complicated
If you work in the care sector, you will probably recognise some of the following factors contributing to the complexity of care home accounting.
- Groups often consist of multiple homes with their own accounting systems (often separate versions of the same software), as well as different tools for analysis and different links to third party systems.
- Different homes often manage their own local purchasing processes, invoicing systems, supplier invoicing processes and payment runs.
- Head office will tend to have its own ordering and payments processes on top of what’s going on at individual sites.
- The sector has the unique challenge of having one resident funded from several sources. One resident may have their bills part-funded by the NHS and partly by an insurer, with several relatives contributing towards services from pay TV to physiotherapy.
- The central finance team will receive bills and payments which need to be correctly allocated across multiple homes/legal entities and residents.
- The business will often receive funds restricted for a specified use – for example, when an insurer pays for particular treatments received by a resident, but not for their general care.
All this can leave you with a patchwork of incompatible processes, with information held in local silos while everyday tasks are painfully difficult.
The consequences when care home accounting becomes complex
When a system becomes as complex as the finances of many care home groups, it can be tempting to leave well alone rather than attempt to untangle it.
But doing nothing comes with a host of drawbacks:
- Staff are doing repetitive, frustrating and thankless work, when they could be adding real value to the business.
- The risk of human error is large. When one invoice can require adjustments to be made to a dozen journals, it’s a question of when, rather than if, a mistake will be made.
- Costs are harder to control because you can’t see all the outgoings in one place.
- A lot of time is wasted when manually consolidating the figures for month-end accounts.
- It is hard for those in charge of the finance function to focus on bigger-picture goals because they lack good data and are bogged down in detail.
Software for simplifying care home accounting
Software can remove large amounts of stress and duplication from the work of a care home group’s finance team.
The key is to establish a “single source of truth” – one central system which gives you a view across the business, with no need to worry about contradictory information resting in different parts of the organisation.
Cloud accounting software enables this and a host of other improvements:
- Consolidation and intercompany transactions become simple. When a payment is received from a client or sponsor, it can be automatically and correctly allocated across the multiple accounts and legal entities that might be involved. The same applies to consolidated batch payments across multiple supplier accounts and multiple separate entities.
- The finance team have perfect visibility over the system and are able to switch from a broad overview to detailed records from each site and legal entity.
- Users in one entity or on one particular site can be given easy access to the records and documentation they need to see for their part of the business.
- Each resident can be given a unique identifier in the system, so when their funding comes from multiple sources, it is easy to see all those sources and where the money has been spent.
- Funds paid in for one restricted purpose – insurance payouts, for example – can be easily tracked and reported on when they are spent.
- Cost control becomes much easier. It is easy to see who in the business is ordering which supplies and services, what those will cost and who approved the spending. This is vital to forecasting cash flow.
- The need for external document storage is removed. Instead, the software keeps invoices and orders in the system alongside the relevant line item.
- The finance system can be easily linked with the EpicCare software that handles a service user’s care records and medical information.
Introducing efficiencies like these can eliminate the need for other third-party applications and can save enormous amounts of time – especially when month-end, year-end and audit come around.
It can also free up resources so the business can expand without taking on more staff.
And with leaders in possession of accurate, real-time management reporting information, they can make better decisions for the business and the resident.
WEBINAR: Better management accounting: SPVs & multiple entities
Discover how you can consolidate your entities and SPVs at speed and with confidence, gain better visibility and manage risk with faster consolidation.
With our unlimited dimensions and flexible GL, you can customise and flex the reporting as you need for different stakeholders. And new entities, funds and SPVs can be set up in moments.
This webinar will cover:
- Multicurrency consolidation in real time.
- Intercompany transactions and eliminations.
- Multi-jurisdiction tax handling.
- Multi-dimensional reporting in real time.
- Visualise group data instantly with drill down detail.
When: Wednesday, 27th September, from 11-11.30am BST.