Financial Due Diligence in Social Care

Financial models are quite often key documents for many growing businesses, but what do they bring to a business and who can prepare one when you need one?

The benefits of using a part time Finance Director

Social Care in a post covid world

A brief overview of social care and what the Covid19 crisis will do to it in the short and the longer term, the challenges are the same but at a higher level and with a greater profile

Good business plans are built around credible business forecasts which reflect the insight and experience of the business managers and the professional skills of a business modeller with a good commercial understanding.

I must admit I do fear for Artificial Intelligence in the world of Social Care, and yet what it can do is impressive. For some it will be a godsend and will bring life changing aspects to their quality of life, but alas I believe that this will be for the fortunate few and not the many.

Despite the hype it reminds me a little of England’s Golden Generation of footballers. The abundance of potential talent looked like it would be the answer to all England supporters’ dreams, all those years of hurt etc. but in fact it never quite worked, and no one ever really could explain why. I guess that players got injured, they never worked together as expected and the challenges that they faced (the other teams) also changed. In a similar way the potential of AI looks impressive, but I fear other forces will overwhelm it as the silver bullet that will solve the Social Care puzzle. I genuinely hope I am wrong and do believe that it will help but the scale of the challenge feels insurmountable when you look at the current problems.

The examples that you see on social media are in some instances fantastic, but they are not a magic wand, and will they solve the problems that they are up against. The AI may well be a strong swimmer but the tide it is swimming against would seem to be of a far greater force.

The Knowns – Demand going up and the number of trained carers going down

The facts are quite simple as there is an unprecedented growth in the percentage of aging population throughout the world, particularly in growing economies such as Europe, Japan and China, something that we in the UK rarely give any thought to.

I read last week that from 2000 to 2050, the percentage of the world’s population who is 60 years of age and older is estimated to approximately double from about 12% to 22% (from 605 million to 2 billion).

This rapid aging demographic will directly affect social, economic and health outcomes for these growing economies. How will such demands be met, keeping in mind the prevalence of chronic diseases and the requirements of the elderly and geriatric patients. Geriatric diseases such as osteoporosis, cardiovascular diseases, obesity, diabetes, dementia and osteoarthritis require quick diagnosis and continuous supervision by a professional caregiver.

This is coupled with the fact that we are not training enough Doctors and carers to account for the increased demands of healthcare. The problems are obvious, but the solutions are not.

Given the situation, healthcare providers are starting to offload certain parts of the care-pathways to artificial intelligence (AI). AI can now be found in healthcare, starting from intelligent tracking of biometric information to early diagnosis of diseases. AI is helping patients and their families understand the treatment pathways. AI is also helping clinicians to treat the conditions more efficiently.

Artificial intelligence is a key component of the future of healthcare. Indeed, the era of the AI doctor seems to be unavoidable. Today, we see AI in hospitals helping clinicians identify medical risks; predict when to provide targeted, life-saving interventions; form treatment plans for patients with rare diseases; and deliver precision medicine.

However, this is AI being used mainly in a medical environment and by professional staff, where it is fully resourced and professionally managed, however the care at home scenario is somewhat different, where to a certain degree much of it will be managed remotely, which in itself will bring many challenges. The other challenge faced is that the elderly cared for at this point in time are not “IT friendly”. This is a fact that cannot really be changed but will hopefully reduce as an issue as the IT generation become the users.

My cynicism is unfortunately born out of experience and knowledge of the sector. The quality and available resources for administrative support for most businesses is generally poor and therefore the chances of the theory becoming reality are somewhat limited as implementation and ongoing maintenance will create challenges that will be very difficult to maintain. In addition to this the question of potential liability may become an issue for providers, as if you have systems with alerts and warnings and these are not acted upon then there may be a potential liability due to the inaction. If this was to be the case then what funding would be needed to fully support such a system with adequately trained staff 24 hours a day, 7 days a week.

The historical underfunding of the sector pervades throughout the businesses, from the inability to recruit carers at or around minimum pay levels to the resources available to administer and support the day to day business. Funding has been and will remain the key issue to the Care crisis.

At one of the National Care Shows several months ago I bumped into a former colleague who now is the CEO of one of the Care Sectors largest providers of Care Management software. Whilst I appreciate that Care Management software is not AI the conversation that we had painted a picture of the challenge to be faced by introducing change into the care system. Following a brief chat about how we managed 25 years ago he gave me a great insight into where the Care Home Management systems market is today and what the modern cloud-based solutions can offer. I was impressed, and it all made sense. Easy to use, safe, GDPR compliant and appeared to be affordable. The solutions are on a single platform and are integrated and relatively easy to use, and in a care home environment can be controlled well.

Now that all made sense to me, however he then told me that only in the region of 10% to 12% of all care homes use such systems and the rest still rely on antiquated or in many cases paper-based systems with historical processes that are not integrated. Being honest I was initially shocked but having time to think about it afterwards I thought that I should not really be shocked. If you then bear in mind that Domiciliary care businesses are more difficult to manage due to the remote nature of the client base and the workforce, then introducing change will be even more difficult.

In the last 6 months I have spent a great deal of time looking at the Care Management solutions for  Domiciliary, Complexed and Supported Living care, and whilst as ever in the wake of the Care Home sector, the products are developing quickly. However, the greatest hurdle is not financial, as the solutions are now affordable, but it is the reluctance to change and the lack of resources to enable successful implementation, a message clearly echoed from the Care Home sector.

If you then consider the introduction of a new generation of technology into social care, then it is not all about robots I’m afraid because somewhere in the process there are still going to be a lot of humans.

 

Phil Talbot is a Chartered Accountant and Business Consultant, specialising in the provision of business and accounting advice for small business offering part-time FD services.

With over 26 years in Senior Finance roles including 16 years as Finance Director in one of the UK’s largest and most successful Social Care Business he has specialist knowledge and experience of the Health and Social Care Sector. Any businesses interested in Non-Executive Director Support, advice with regards to Care Management systems or part time FD Support then please contact.

email : phil.talbot@pjtconsultancy.co.uk

Phone : 07967 640082

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In 16 years as a Finance Director of a growing dynamic business, despite what the stereotype may suggest, the life of an accountant was not always a dull and boring one. Of course, it did have its moments, but no more than any other job and on reflection when speaking with friends in other jobs, it would at times be positively dynamic.  To be successful it is more about people than numbers, you can understand numbers most of the time, but understanding and managing people is not quite so easy and yet it is so key to overall success. I firmly believe that the box of tissues stationed on the corner of my desk as a means of listening and consoling upset staff were equally as important as the loyal calculator sat next to it.

Business is ultimately simple and tends to be complicated by people, and my philosophy was always, set up processes that are simple and logical, and delegate them down the team with the appropriate level of support. The finance process I always likened to that of the old circus spinning plates scenario, as soon as you addressed one problem area, something different would pop up elsewhere. That in my view was not necessarily a weak system, it simply was just what happens. The business world is a dynamic process and therefore the challenges will change on a daily basis, but the challenge of managing staff will always be there.

There are several key features which in my view underpin this

·         Understanding the basics of a business should never be lost , it gives a good understanding of the business dynamics but also an appreciation of the day to day issues faced by members of your team. If the processes are robust and the team is good, the levels of risk are low and ultimately the financial integrity of the business is maintained. Even when working at a senior level never lose sight of the basics and do not take them for granted.

·        Such an understanding builds credibility and respect with the team and spending time with young and new members of staff should not be underestimated. Treat your staff as you would like to be treated, look after good, hardworking loyal staff and address those that don’t fit in to the team as early as possible not to upset the balance. This not only helps the FD, but builds respect amongst the team, and respect should not just be a given as it must be earned.

 

So, bearing this in mind what does the FD of a SME need to concentrate on in order to be successful, and what is success?

1.      Don’t forget the basics and know where the dangers lie.

My old boss used to say to me on a regular basis “Do not underestimate the power of analytical review young Philip”. He was right, in fact he was nearly always right, he understood the numbers and he understood the risks. As a result of this his experience homed in to the key areas and he always had the ability to ask the right challenging questions at the right time. This was not luck, as I used to suggest, it was experience born out of a good understanding of the business.

 

2.    An FD needs to be able to do the basics, such as accurate cashflows & management accounts and understand what is in the company balance sheet. They always need a good appreciation of the working capital requirements of the business, businesses do not fail due to a short-term fall in profitability, but they do fail if there is a shortfall in cash. An FD does not need to be a tax or a legal expert but should know enough so that they realise when additional knowledge is required, whether that is from their network, research or tax expert.

 

3.    An MD/CEO always requires an impartial sounding board to discuss various matters, such as staffing and strategy/tactics as well as someone who they trust to have the business’s best interests at heart. The person who should have the best oversight of the company is the FD, who not only knows the numbers and the business inside out, but also has an appreciation of the wider business community and the environment in which the company operates.

 

4.    With reference to a wider appreciation of the business the FD needs to be a Jack of all trades, but a master of none (other than the company finances of course). The FD needs to be able to take an objective and common-sense view of the strategy that the company is employing to achieve its goals, and in order to do this has to have a proper understanding of the challenges faced by Sales, Operations, Recruitment, IT and any other of the significant departments from within the business.

 

5.    SMEs frequently seem to work on the basis that the MD, Sales and Operations Directors have clearly defined roles, so any tasks outside these areas fall, by default, to the FD. Having IT issues or employment tribunals is not what any business wants and having a major contract go wrong and then finding that there are holes in the terms and conditions could prove fatal, such issues tend to fall on the desk of the FD and this simply comes with the territory.

 

6.    An FD needs to be able to communicate effectively with not only financial staff, but also non-financial staff; from directors down to junior staff. They need to be both persuasive and diplomatic. There will be times when an FD disagrees with another director or the MD and needs to be able to get their message across in such a way that it does not alienate the other individual but will result in them changing what they currently do. This may take some period of time, so patience is essential.

 

7.    Business quite often assume that anyone over 50 is counting the days until retirement and has no drive or energy. This may be true for some people, but the majority still have a lot to offer any company and remain motivated to help businesses grow. Of course, on the plus side, older FDs bring experience. An FD who has worked in business for 25+ years has probably seen many of the issues that SMEs encounter and knows what does and does not work and bring a measured approach to the problem. They will have worked with many other directors and picked their brains for what works, and what does not work in their own areas of expertise.

 

 

The FD is not just a number cruncher. An experienced FD is someone who has an all-round approach to the business and so should be involved in the commercial and strategic areas, using their knowledge of the financials and their experiences within other businesses to shape their views all with the aim to improve the business performance.

Success is ultimately keeping everybody happy and that can be difficult. There are shareholders, customers, suppliers, banks, employees and other authorities. In some ways the skill is to convince each and every one of them when you deal with them, that they are the most important.

That is fine but just don’t encourage them all to be in the same room at the same time!

Phil Talbot a Chartered Accountant and Business Consultant. He specialises in the provision of business and accounting advice for small business offering part-time FD services. With over 25 years in Senior Finance and Director roles he also has specialist knowledge and experience of the Health and Social Care Sector. Any businesses interested please contact phil.talbot@pjtconsultancy.co.uk

Why should a small business give the idea some consideration?

 

Its sound obvious that businesses need directing, but not necessarily all of the time in all areas, quite often they need a little bit of guidance in putting the systems and people in place and empower them to use resources and processes in the best possible ways. Once this has been established from that point in time onwards they may only require periodic or part time support, which in many cases can be done remotely. This help would be on a part-time basis but would have the flexibility to be tailored to the needs of the business. The idea of a part time FD solution may not really have been something that many businesses have given consideration however it is a growing area giving businesses flexibility in their staff resourcing. For many businesses the concept may be new and not one they immediately think of, but it could well prove to be a positive alternative for many companies.

 

What are the benefits of hiring a Part-Time Finance Director:

• We can’t afford one.

Cost:  hiring an FD on a part-time basis can be an affordable alternative for a growing business. A small business may see the cost of appointing a full time Finance Director as a cost that cannot be justified, however a part time alternative may be a viable proposition.

• We don’t need one all of the time

Flexibility:  you can set out how much time you need them to work with you and you may be able to agree that times worked may change from one month to the next.

• Developing and utilising existing resources:  

Many finance teams suffer from two inherent faults.

1.      Processes tend not to be challenged and the primary reason for carrying out many day to day tasks are simply that they are done that way as that is the way they have always done.

2.      Staff quite often have potential skills that are not currently being utilised

A fresh pair of experienced eyes can quite often review and improve processes as well as train and mentor staff that can make them more productive and allow them to develop, rather than simply process work without an understanding of the wider business. This is a Director directing.

 

• Helping support specific projects:

An additional resource that may be used to look at the evaluation of potential acquisitions as well as supporting preparations for business sales. This may include financial modelling skills to support the overall process, a key tool in the negotiating process. It is highly unlikely that such resources will be available in house, and to have control over this is a strong and important factor in any proposed transaction.

• Focus and Planning for growth:

A Part-Time Finance Director may be to raise finance and be involved in support or preparation for an investment; develop finance strategies; demonstrate forward thinking; and ensure that your business is financially controlled as it moves into growth. One of the key benefits is that such involvement will free up time for key individuals to do what they do best, grow and develop the business.

 

• Provide a sounding board to business owners:   Many small businesses are run by individuals who are natural entrepreneurs, they are always looking for opportunities, but such enthusiasm doesn’t not necessarily mean that they will be successful. Sometimes a voice of reason is needed. Owner Managers quite often make decisions unilaterally but having a voice to challenge and play devils advocate can be an important, giving an alternative view or support can be both re assuring or thought provoking.

 

Phil Talbot is a Chartered Accountant and a Director of PJT Consultancy Services Ltd based in Shrewsbury in the West Midlands. He previously was the CFO for one of the largest providers of Social Care in the UK. He is now available to help and support businesses who require a part time Finance Director or a Non-Executive Director . 

If you are interested in any way please contact  phil.talbot@pjtconsultancy.co.uk

Health and Social Care Green Paper but who pays and how will it be administered