How you answer questions like these can make the difference between a year of dodging unanticipated expenses and a budget that maximizes efficiency and lets you grow to your next level!
By Susan Saldibar
Why are budgets such a hassle? Because the planning is tedious. Because it’s time consuming and energy draining. Because it always ends up getting chopped. Whatever the reason, it’s no wonder it’s so hard to resist the temptation to retread last year’s budget — with a nip and tuck here and there.
But don’t do it! Not in today’s changing senior living markets.
“This industry has some changes that are slowly creeping up on everyone and are ready to really hit hard,” says Doug Fullaway, VP of Senior Living Business Development for RealPage. “The tendency is to just do what you did last year. But our world moves fast in many directions. If your budget can’t keep pace, you could have a big problem,” he adds.
He’s right. Think about the added pressure on labor costs from the Affordable Care Act, as well as pressure to increase the minimum wage. And, there is also a growing shortage of staff, which puts upward pressures on labor costs. Doug sat down with us recently to share his insight and some nuts and bolts advice for senior living providers getting ready to put together a new budget for the next fiscal year. Doug suggests they start by answering some key questions in context with both current and changing conditions. Get this part right, says Doug, and the budget numbers will flow out of it. Here is the check list, complete with Doug’s insight on each. Roll up your sleeves!
Do our labor hours flex at least weekly, based upon changing census and changing acuity?
You may recall not that long ago, a large operator in California was splashed across the TV screens by ProPublica for not having adequate staff on duty at all times. How do you know you have the proper amount of staffing in place? Last year’s budget may seem like a nice place to start, but be careful. If the census changes, staffing needs to change. Don’t fall into the habit of staffing only as the census changes; it needs to change as the acuity of your residents change. Assisted living software, many at very reasonable costs, can help take some of the risk out of this.
What are we doing to make life more convenient and home-like for our residents?
A recent study conducted by Margaret Wylde, of Promatura, asked senior living residents what makes them happiest. The most popular answer? Making their apartments feel more like home. What are you doing to help your residents create a home? As an example, are you leaving paper notices when packages are available for pick up, or are you delivering them right to their doorsteps? Making their lives convenient also provides seniors with a sense of happiness. For instance, do you allow residents to use credit cards? You may not, because you don’t want to pay the 2% or 3% fees. But there are solutions that make it possible to use a credit card without incurring the costs. There is technology out there that makes all of this possible and actually saves staff time! Make sure you’re aware of it.
Are we creating the right “first impressions” with prospects?
Chances are you have already spent a fair amount of money on your website. But does it show 3D floor plans? Does it support real-time chat? Do you have a number a prospect can call to speak with a real person, not just a message taker? If you don’t have all of these, you are falling behind the market. You need to plan for them.
Are we spending too much or too little on our IT infrastructure?
This isn’t hard to determine. First, calculate what you are spending now, including cost of staff, overhead, software licenses, etc. Now calculate what percentage of revenue that total represents. Deustche Bank conducted a cross-industry study that showed an industry average of 3.7%. So if your average resident is paying you $4,000 per month, then spending 3% of that would be $120/resident/month. Does that work for you? What about in-house servers; are you still using them? You can cut costs dramatically by using cloud-based solutions. And, providers are making it more secure than ever. Are you using business intelligence tools to mine you own data? Consider taking the money you save moving to the cloud and invest it in a solid business intelligence solution.
What is our staff turnover and what targets are we setting by job title for turnover?
There are plenty of articles out there on how to reduce staff turnover. The assumption that they should be lower and lower each year may be the wrong one. Think about some of the top-tier consulting and accounting firms. Think of the military. Their strategy is to have a high level of recruiting and inflow of staff at the bottom of the organization, knowing that some will move up and others will fall out. Apply that to your community. How many caregivers do you need? If your turnover is 60%, then how many do you need to recruit each month? What is the size of the pipeline needed to support that? By the way, make sure you are properly supporting your staff using tools, such as online training to save money and provide more flexibility. In short, build a model that fits your business. The budget numbers will come out of this.
How are we ensuring that are vendors are compliant with HIPAA?
This probably does not feel like a budget question, but given the potential hit to your reputation, and costs associated with failing to comply, it needs to be asked. What training do you provide for your employees? Do you have a procedure in place to handle a data breach? Does it comply with state and federal laws? Have you asked your vendors for a report that shows who accessed personal health information, when they accessed it and what they did to it? They may tell you they are compliant, but some “Trust and Verify” makes sense, especially when it comes to HIPAA.
How are we confirming that vendors are licensed, bonded and insured?
Are you delegating this to individual communities? Do they have the proof of insurance from each contractor and vendor? This function can be outsourced, often at little cost.
What projects are we doing to fix things that are inefficient or broken and at what cost?
Do you need an energy management solution? Could you automate the process of signing paperwork for move-ins and move-outs with eSignature tools? How much time are you spending at each site each month assembling reports that could be automated? Ask your team, “What little things take up your time?” and you will get a good list. Then give that list to your suppliers and partners and ask how they can help.
Which sources of new prospects are producing move-ins and at what costs?
Spending money to market your community is necessary, but do you know what works, and what doesn’t? For example, simple newspaper ads targeted at seniors may seem “old school,” but are they getting results? Or, do you need to engage in online marketing? What does your data tell you? Do you have systems that allow you to monitor this continuously as trends and conditions change?
What are we planning to do next year to seek out innovative ideas?
Innovation doesn’t just happen; it needs to be encouraged. Include in your budget enough money to send people to conferences. Ask people to come up with one idea per month. Innovation can be encouraged if you set aside some money to try some new things and get people thinking outside the box.
“Yes, there are lots of questions that need to go into the budgeting process,” says Doug. “But answering them forces you to think about changes to the systems, people and environment that make up your community, and what you plan to do to meet them. Your budget should come out of that plan, not the other way around.”
The bottom line? “How you answer questions like these can make the difference between a year of dodging unanticipated expenses and a budget that maximizes efficiency and lets you grow to your next level,” says Doug. “I think most people would prefer the latter.”