Since the introduction of NDIS since 2016, disability service providers struggle with cash flow & transitional business models from block-funding for standardised services to participant led-care.
To survive in the NDIS space there needs to be a restructuring in strategy around the role of a CFO in the business.
Current conditions in the NDIS pricing model, specifically its price controls, red tape & resulting cash flow issues are proving very hard on disability providers, with many unable to function at the same level before the introduction of the scheme.
Reports suggest that the capped service fees and delay in re-payments from NDIS, has seen a lowering of quality in services. Increased pressure in the NDIS market could result in under supplied markets mostly in remote areas.
Participant led care is the devil in the situation, as providers wear the cost of programs and struggle with cash flow issues until receivables are paid.
NDIA’s Response to the situation
The recent response by the NDIA into the pricing review attempted to tackle the above issues on participant led funding.
The new framework seems positive for NDIS providers. It includes temporary support for overheads to help providers with the transition for a period of 12 months. The TSO is only a band aid fix to the overarching trauma.
What’s the solution?
For a CFO operating in the evolving market that is the NDIS, its current state raises serious concerns about their organisation’s competitiveness, as well as how they can manage issues relating to cash flow.
Growing the treasury reserve is key to the organisations strategy to not just survive in the NDIA administered world where delays are common.
The first step for a CFO is to look at changing their traditional ways of managing their organisation’s liquidity to maximise return.
The traditional way of managing reserves has always been term deposits. However you no longer get 6-7% term deposit rates. The cash rates are low and are very likely to be lower for a long period of time.
Organisations need to reconsider how their treasury funds are managed to improve their income overall.
So what are the next steps to come out of this cash flow crisis?
Here’s three strategies a CFO can implement now to build the organisation’s reserves:
- Review your investment policy for treasury reserves and make it work harder, particularly the income yield.
- Consider the monthly operations of your organisation and the cash flow required, then design a strategy to meet the organisation’s overall requirements, whilst increasing its expected return.
- Clearly operational cash should not be held in anything other than cash. However, if an organisation can be more strategic in their thinking, a portion of funds could be put to work focused on building funding for longer-term projects and indeed, the organisation’s reserves. (Probono Australia)
A CFO must be able to create value by changing the way organisations function both financially and strategically. There is no doubt this is a challenging time, however, building an organisation’s strategic reserves is crucial to achieving self-sustainability in the NDIS.
Learn how to strengthen your financial & organisational performance at the NDIS Sustainability Intensive Conference & Financial Sustainability Masterclass, 4-5th December in Sydney and 6th December in Brisbane.