Understanding the Business

A key aspect of the role of the nominated individual is to address Regulation 13. This requires you to monitor the financial viability of the service that you represent 

This section is broken down into eight topics that are aimed at enabling you to support your organisation from a business perspective as the nominated individual. This information is also relevant to those who hold the dual role of nominated individual and registered manager, or if you are the registered manager but not the nominated individual of your service. 

■ Commercial awareness 

■ Balancing the books 

■ Planning for the future 

■ Budgeting 

■ Managing expenditure 

■ Accessing funding 

■ Future-proofing the business 

■ Marketing the business 

Commercial awareness 

It is not uncommon for registered managers to have achieved their position by progressing their career, often from a care background. The opportunity to progress and have varied career pathways is a major benefit to working in the social care sector. Developing managers internally means that they have a deep understanding of social care and are committed to providing high-quality, person-centred care. However, they may not have been exposed to the commercial aspects of running a service as a business until becoming registered manager. If the registered manager is in a dual role as nominated individual, and does not have commercial experience, it may be helpful to engage with other professionals, for example the company accountant, who may be able to offer practical support. Commercial awareness may not give us all the answers, but it will help managers to make informed decisions, manage cashflow and minimise waste to deliver high-quality care and support with the resources available. When supporting a registered manager to become more commercially aware, it can be helpful to understand the maturity of the systems and leadership within your organisation. If the business is relatively new, it is possible it will go through a degree of turbulence while processes are developed and embedded. This degree of turbulence can vary depending on the type of setting your service is, for example, many home care agencies are franchises, which means that systems and processes will be in place, but there is still likely to be a steep learning curve for new owners and their teams. Larger, well-established organisations are more likely to have mature systems and a strong working culture. It is easier to make good commercial decisions when quality information is available 

Balancing the books 

As with any business, the service must remain financially viable. It will have money flowing in (e.g., from fees paid for care) and money flowing out (e.g., wages, premises costs, catering, laundry, fees and taxes, etc.). 

■ Financial viability The financial viability of any business relies upon the total revenue flowing into the business being greater than the total expenses flowing out. 

■ Break-even point The break-even point is the figure that represents all the costs involved in running the business. If sufficient income is generated to cover costs, the business will “break-even”. If surplus income is generated, the business will make a profit, or create a “surplus” in the case of a charity. If the income generated is insufficient to cover costs, the business will make a loss. 

■ Bottom line The bottom line is the final figure after all the sales have been accounted for and the running costs of the business have been deducted from the sales. It is the final figure on the bottom of your profit and loss account. It can be positive – the business is in profit, or negative – the business has made a loss. 

Planning for the future 

Where “balancing the books” is a straightforward financial calculation on the performance of the service, “planning for the future” requires both a good understanding of the financial operation of the service and a clear view of the external pressures that may impact the service in the future. Understanding the financial operation of the service The nominated individual should ensure that they have a clear financial view of the performance of the service, as well as the authority to conduct (or have conducted on their behalf) financial audits to underpin the accuracy of the information to which they have access. By understanding the past financial performance of the service in terms of the year-on-year changes to expenses as well as income, a future prediction should be possible. 

It is also important that as nominated individual, you are connected to your local community to keep informed of plans for new services or changes in current services. What are your local authority priorities? How is your local hospital performing? Does this create opportunities for you to offer a service that meets local needs? The social care sector is subject to more external forces than many businesses. For example, a change of government policy or CQC regulations can have a major impact upon the cashflow or profitability of a business. It could even put the business at risk of closure. It is against this view of the financial future of the service that the nominated individual should provide a ‘critical friend’ role to the registered manager and the rest of the leadership team, supporting a cost/risk/performance assessment in any proposed changes to the service. As outlined below, planning for growth is an approach that can be useful when assessing such potential changes 

Diversification. The final quadrant is the most risky and is about selling new products or services to new customers. Developing new services can be costly and should be carefully considered before going ahead. It is wise to carry out market research before investing in a new service to assess whether it would be well received by current and potential customers. Whilst diversification is a high risk, it is likely to have the most impact on the business, if it is successful. 

Budgeting 

Budgeting is simply a financial plan that documents what the business wants and needs to achieve, and then works out how it can be achieved. This requires good financial housekeeping and controls. There are different types of budgets, but they will include at least – an operating budget, a cash-flow budget, a capital expenditure budget and a master budget. The master budget brings all other budgets together in one place, so that the overall financial position of the organisation can viewed. All the budgets will track income and expenditure and clearly show whether the business is able to meet its commitments within the budgets set. Budgets must be aligned to the business objectives and the ability for those objectives to be delivered. Although budgets can cover any period, these typically cover a full financial year. In order to establish appropriate budgets, the leadership team must take decisions in terms of how to fund the provision of the service to the required standards, without running out of cash. It is incumbent on the nominated individual to oversee and challenge these decisions in the interest of the financial viability of the organisation and as part of your responsibility to meet CQC’s Regulation 13 . 

Budgets as a road map It is further incumbent on the nominated individual to monitor how the business is performing against your budgets throughout the current year. This is an important activity that should be carried out with the registered manager, ideally on a monthly basis, or if you hold the dual role as registered manager, you may wish to engage with someone else in the leadership team or someone external, such as the company accountant. A simple way to monitor performance is to insert actual figures against the budget. This will help you to keep track of how you are doing throughout the year. Having the final column on the budget sheet as a running total for each line will help to assess the cumulative effect of any changes to the budgeted figures. Most common accountancy programmes offer this facility, but if not, a simple spreadsheet will suffice 

Managing expenditure 

When budgets have been prepared and agreed, it is everyone’s responsibility to manage expenditure. Staff may think that because they don’t have the authority to spend company money, they have no control over expenditure, but this is not the case. A great deal of excess expenditure is waste. This means that every staff member and visitor to the service has a responsibility to minimise waste. Common forms of waste in the care sector 

■ not storing PPE correctly, so it becomes contaminated 

■ food wastage 

■ poor use of rotas for staffing 

■ over-reliance on agency staff. 

Setting limits on purchasing authority. It is prudent to set strict financial limits on how much staff can purchase without having to gain approval from senior management. This will vary according to role and responsibility. For example, it may be practical for an administrator to have a pre-paid debit card with a small balance, so that they can pay for postage or small items of stationery from local shops. A registered manager may have greater purchasing power, but still within a strict limit before seeking approval. Setting limits on company funds creates a more thoughtful and responsible financial culture. 

Accessing funding 

It is prudent to utilise government funding streams when they are available. This will support organisations to continue to invest in their business to deliver high-quality care and support. Investing in staff training is essential to retain a highly skilled and committed workforce and funding supports this. The following funding streams are available to the sector, but please note that funding opportunities are frequently updated and may no longer be available 

Future-proofing the business 

Maximising income opportunities can help to balance the books in any business. The primary source of income will be care fees, so it is important that attention is paid to retaining existing customers and attracting new customers through high-quality care and support and effective marketing. Consider whether your service has other facilities that could potentially generate additional income while engaging with the local community. For example: 

■ a meeting room that could be rented out to clubs or for business meetings 

■ running a luncheon club for people in the community to join residents for lunch at a small charge 

■ a care home renting their swimming pool to a children’s swimming group once a week 

■ letting a flat on the premises to staff members from abroad for a small amount

■ inviting local experts to deliver talks about interesting subjects, or local groups performing and charging a small fee for people in the community to attend. 

Marketing the business 

Many larger organisations will have marketing departments who oversee marketing activities, but there is much more to consider than that. Nominated individuals are not expected to be marketing experts; however, it is helpful if they have an understanding of marketing basics. Marketing encompasses everything that you do to promote your organisation, both to potential customers and potential employees. This can be anything from a warm smile and friendly approach when people visit the care home or when you visit someone’s home, to a comprehensive marketing plan