Frequently we see agencies that have a good basic financial system such as QuickBooks or something similar that helps keep their financial data in a manageable format, but most do not go beyond that basic information. You will know your gross income, your net cost of doing business, and hopefully your net income. However there is a lot more information that you will need to really stay on top of your home care business on a weekly basis.
First of all you need to know what your cost of sales is for your home care agency. To accomplish this you will need to know the cost of all advertising, cost of your sales staff, the number of leads from advertising, the number of leads from your sales staff, and the number of leads or referrals from other referral sources. This information will allow you to analyze the data in a way that gives you the information needed to determine where your referrals are coming from, the cost of each of the referral streams, and finally the cost per lead generated. Keeping a good handle on your home care cost of sales is one of the biggest challenges in the home care industry and one that is frequently not quantified in a way that allows the home care owner/manager to really see where their marketing and sales dollars are spent and then be able to determine if that is the best way to spend those dollars.
Second you need to be able to track the number of home care inquiries/referrals and the percent of conversion. You need to target a conversion rate of between 70% and 80%. Additional to that data, on a weekly basis you need to know the number of active home care clients, the number of home care clients that discontinued services, and the net gain or loss of clients for the week. In addition, and probably more important for the bottom line is the number of hours lost and gained for the week and the value of each. It is possible to have gained 5 new clients and still have lost financially. If you experienced one lost client that was a 24/7 case and gained the 5 new clients that totalled hours less that the hours generated by the one lost case, the net to the home care agency is a loss, therefore you need to track both numbers.
Next you need to track your direct costs (caregiver costs). Be sure to include not only their pay and associated taxes, but their mileage and any supplies that you provide on a regular basis like their gloves. In addition to the direct costs, you need to tract recruitment and retention data; total number of caregivers paid for the week, number of caregivers hired, number of caregivers terminated, total number of caregivers in the pool, and the total number that are active. Some home care agencies also track the cost of recruitment and retention activities. By tracking all of this data, the home care management team will have a better idea of what their recruitment and retention activities are really costing the agency and again the ability to make decisions about where the home care agency should be spending their time and money. The final data collected in this section is the ratio of active caregivers to active clients. A good rule of thumb is to have at least 30% more caregiver time available than what your current client case load requires. That way you will always have caregiver time available to take on new clients without making them wait.
You must have good home care financial analytic systems that tell you where your business is and assists in projecting future growth. There must be basic systems in place that help you or your staff determine pricing, pay to employees, gross and net margins by line of business, cost of sales, conversion rates of inquiries, compensation packages for sales and marketing staff, in other words, anything and everything that effects the financial health of your agency. Agencies frequently develop a dashboard to assist with this element of managing your business.
If you feel you could use some assistance with creating financial systems or your dashboard for your home health agency call us at 206-721-5091 or contact us. We are here to help.