The Art of Forecast Preparation in the 2022/23 Care Sector

The Art of Forecast Preparation in the 2022/23 Care Sector

Whilst the care sector awaits confirmation of Local Authority rates effective from 1 April 2022, the specialist care Home and wider sector Finance Brokers at Chandler & Co, take a look at the cost factors required for consideration when presenting a successful finance funding proposal.

Professional care staff undertake an increasingly complex range of care services, and it is with this in mind that the Brokers address the staffing pressures.  A viable financing proposal, whether this be for a new entrant to the care sector, assisting an existing care business acquire its next care home or supported living premises, or assisting with a development for retirement living or housing for special needs, as examples, the cost of experienced staff needs to be addressed within the narrative of the finance application and the ongoing needs of the business.

The cost of experienced staff may include ‘golden handshakes’ or ‘refer a friend bonuses’ in addition to career development costs of continuous training and upskilling, to ensure that a care business remains viable and sustainable for the long term, and by this we mean a rolling forecast of 2 to 3 years accompanied by a well thought out business plan, demonstrating strong governance and vision.

Current inflationary pressures and the new National Insurance Levy of 1.25% effective from 6 April 2022, will need to be reflected within the forecast projections.  Indeed, minimum wage increases of circa 7% may be needed just to stand still, thus an element of sensitivity analysis is always useful when preparing income and expenditure forecasts, using reliable assumptions to prepare the figures for lender finance applications.

Wage uplifts for staff across different pay grades can be built into the detail of the projections, and increasingly will need to be addressed as the local economies continue to open up with increased competition for staffing already in evidence.

Other costs, reflective of the experience of the pandemic and the future of care, will no doubt include an element of continuous improvement and development costs.  The finance applications tend to include an element of the cost of property refurbishment and increasingly keeping up with the changing demands of people using their services and their families.  Looking at care homes, as an example, residents and families are looking increasingly for a certain bedroom size, wet rooms, good and increasingly innovative ventilation, visiting areas and well being suites as well as communal and private dining areas.

Increases in other costs such as insurance, heating and utility bills and food costs together with increased spend on improving IT systems will also need to be addressed within the forecast figures.  Providers are increasingly looking at ways to combat this and can include investment in heating innovation, smarter ways of working, using a contract caterer in addition to an in house kitchen team, using external experts to advise on nutrition and waste management reduction, targeted marketing spend, such as strengthening the business website to attract search engine optimisation, and investment in video representation to show case the care service and attract a wider audience, and increased take up of the care service at a price that is sustainable.

Addressing the above assists in, for example, a care home maintaining sustainable occupancy levels which is key to a care home’s viability.  Currently occupancy levels are recovering, faster in some areas than others.  With this in mind a care provider can also address any funding shortfall with gap cash flow funding.  This can be in the form of an unsecured loan which can run alongside the incumbent mortgage, and is another area that the Chandler&Co brokers assist in the sustainability of a care provision.

Addressing the above, in the figures and the narrative of a finance application, enables the broker team at Chandler & Co to support an expert finance application to the wider lending market.  The strength of these proposals has been borne out already by the expert independent finance broker team from the start of 2022, with successful finance application completions.

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