Why financial contingency planning is important for aged care providers
In this post I wanted to highlight one of the many ways providers can build a stronger relationship between how they plan and manage their finances to safeguard the quality and safety of care they deliver. Aged care providers work in a dynamic and sometimes unpredictable environment. They need to prepare for unexpected events such as natural disasters or challenges to your operations. Natural disasters, infectious outbreaks, staffing shortages or power outages can interrupt your operations and put residents at risk.
Most providers have contingency plans and procedures in place to manage these events.
Your financial contingency plan
A good financial contingency plan:
- encourages you to work with healthcare providers, government agencies and community partners
- makes sure you can continue to provide essential care and minimise the disruption to people receiving care
- has clear procedures and roles and responsibilities so staff can be quick and decisive in their actions
- protects your organisation's long-term financial health.
Financial contingency planning also involves building strong relationships with financial institutions to:
- establish lines of credit
- secure other funding sources.
You should also engage in open communication with your financial partners and those that supply you with critical goods and services. This will help to address challenges before they happen.
Your Liquidity Management Strategy
A key part of your financial contingency plan is to review and update your Liquidity Management Strategy (LMS) regularly. This makes sure you have enough liquid assets to handle emergencies. The review should consider:
- increased Refundable Deposit repayments or expected changes to the timings of these payments
- extra or increased staffing costs
- planned investments in your assets
- other one-off expenses.
The regulatory requirement to have an LMS only applies to providers that hold Refundable Deposits. But all well-run organisations should review their liquidity arrangements when business planning and the governance and management layers of the organisation should be regularly monitoring and understanding current and forecast cashflows.
An insurance strategy
A thorough insurance strategy is also important. By undertaking regular reviews of your insurance policies, you can reduce financial losses if something unexpected happens. Particularly for risks like liability, property damage and business interruption.
Contingency planning is not an expense, it's an investment in resilience. It's about embracing the uncertainties of life and building the capacity to weather them. For those of you with Refundable Deposits, you must include financial planning in your contingency planning. But it’s also important for those of you without Refundable Deposits. Financial contingency planning can help you to make better decisions when there is uncertainty. You can also continue to provide high-quality services to the people in your care.
Until next time.
Peter Edwards
Executive Director, Compliance Management Group
