A large provider of aged care services and disability services to a niche sector of the community has been progressively transitioning to individualised funding models for several years. Revenue had been stagnant for a number of years and a loss was forecast this year due to poor back office processes. With a relatively new leadership team it was a good time to reassess strategic options.
Reasons for change
Near enough is no longer good enough. A series of unwelcome "financial" surprises had impacted profitability and financial risk. Back office costs were rising and overall revenue was stagnating. There was a suspicion nonviable programs were persisting. To make strategic decisions the CEO was unable to obtain a clear understanding of each program's financial viability nor contribution to back office costs.
What was needed
An independent review of program viability along with the efficacy of the overall Financial function was needed. A critical assessment of financial rigour and business decision-making was essential.
How we helped
Our independent review of the Corporate Service function identified the following:
Direct and indirect costs were not accurately being attributed to programs and as such the candid realisation that 30% of programs were non-viable
Identified where programs we cannibalising each other
Weak accountability for budget management by program managers
General lack of financial and administrative controls in the back office
Limited useful management reporting and performance reporting
Little sense of urgency to make change
We re-shaped the role and mindset of Corporate Services to support for the front-of-house teams. We co-developed a new Chart of Accounts to better track revenues and costs, and more accurately allocate back office costs. We implemented a disciplined management accountability framework for budget holders. We worked with the management team to develop realistic budgets and instilled the confidence make their own financial choices.
Nonviable programs are progressively transitioning to other providers. Corporate Services can now work more closely with the front office to ensure both financial accountability and business agility is managed and maintained. Front-of-house teams now have the right information needed to make good decisions and the expertise of a progressive back office to be successful.
HOW TO INSTIL ECONOMIC CLARITY AND EFFECTIVE BUSINESS PARTNERING BETWEEN BACK OFFICE AND FRONT-OF-HOUSE
Learn how a large and diverse organisation was able to address deficiencies in their back office to increase sustainability, understand economic trade-offs and build a Corporate Services culture of business discipline.