14. Oct, 2015

NDIS - five fundamental truths about transition



If you have historically been in receipt of block funding, there are a number of fundamental truths you will need to face up to if you are to survive the transition to the NDIS.


Truth number one

Your current worst quarterly cash position, will be your new best cash position - period!

That is the impact of moving from in-advance payments to in-arrears payments.

You will need to factor this in from a working capital perspective and also you won't be earning the kinds of bank interest (not that interest rates are much chop these days) you are used to.

The only way your cash position will get any better is if you make a surplus from providing your services.


Truth number two

Growth is not good in and of itself - only profitable growth is good

Once you start to provide service to a new participant under the NDIS you start spending money. Here is the rub. Unless providing that service is profitable you will lose all the money you spent between day one till you first get paid, forever! Or at least until the person leaves your service.

Don't believe me?

Let's say you start with $100,000 in the bank and before your invoice is paid for providing service you spend $2,000. You now have $98,000 in the bank. If you have 50 new participants - you now have nothing in the bank!

If you are only breaking even (or even worse losing money), the very best case under this scenario is your effective working capital reduces by $2,000 per new participant.

"Ah yes, but don't we go back up to $100,000 when we get paid?" - I hear you ask. True. But you can't spend that money on anything else because you are already committed to providing the next $2,000 worth of service - that you have to pay for again before you can invoice. Hence your available working capital has decreased.

You can only maintain, or grow your working capital by providing profitable services i.e. spend less to provide the service than you charge. And because your margin will never be huge, this is only going to happen slowly.


Truth number three

Your staff are not used to working in a paradigm where they need to understand with crystal clear clarity the cost of every minute of support. Their decisions on spending time now are based on the number of hours provided for by your block grant and the number of people you can employ - not on what you can charge for!


Truth number four

It is also highly likely your frontline staff and outlet managers are not geared up to be able to deal with new and existing participants on agreeing what to provide under the flexible components of their plan.

They are used to offering a service, take it or leave it.

Increasingly, participants are going to want their service, how they want it, where they want it, when they want it - AND they might want it in varying doses from week to week, month to month.

If decisions around these kinds of flexible supports have to go through a higher level of management, your organisation will grind to a halt.

Making these decisions will require staff to understand the financial implications of these decisions.


Truth number 5

The people who use your services and their families generally know less about all of this than your staff. Unless you do it earlier, come transition they are going to require a lot of support and no one is going to pay you for that.

The old adage that the 'truth hurts' may be a bit harsh. But the truth is the truth.

Face up to it!