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Nursing Home (Budgeting)

The Background
This client is a nursing home based in the Munster region. It was established as a family business many years ago, it has 61 beds. A husband and wife are the main owner managers of the home. There was a loan taken from the banks when the nursing home was constructed.

The Situation
Prior to working with AscenTrust the administrative manager was operating the Big Red Book accounting system with an external accountant who oversaw this work. There were no management accounts, no cashflow reports or forecasts being produced and only a rudimentary budget.

The manager was concerned in early 2009 that the bed rates would decrease due to the stance of the Health Service Executive (HSE) on the Fair Deal. He was also concerned about the upward pressure on the cost of complying with the Health Information and Quality Authority (HIQA). The manager of the nursing home wanted to understand at what levels of occupancy and bed rates the home made a profit and at what level it started losing money. He also wanted to understand what the cash flow implications would be at various bed rates and occupancy. This was of particular concern as loan repayments depended on the earnings from the home.

The Solution
The starting point for AscenTrust was to establish a budget with the manager. The human resources budget was established taking the different categories of staff and their numbers into account. Then the income and expenses budget was established with sections for direct care costs, administrative expenses and director's compensations. In addition, a capital expenses plan was created to project the cash flow.

Outcome
Ascentrust next produced reports for different scenarios according to the manager's requests. Future performance was measured at different levels of occupancy and bed rates. For each scenario the manager could see the breakeven point. The system was able to measure this point and maintain the same care level ratios so that resident care is not compromised. An AscenTrust accountant met with the manager to explain the reports and show different results for different scenarios on a computer.

The client used
the knowledge gained from this to help establish the rate they bid to the NTPF in the Option B scenario.

Since agreeing a satisfactory Option B rate with the NTPF the client decided to contract with AscenTrust to provide a management accounts service. The set up cost of this was very little as the budgeting process covered most of the activities required to set up the management accounts service. At the time of writing this case, it is too early to assess the results of the management accounts service but both the client and AscenTrust are confident that business decision making will be greatly enhanced. 



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