Challenges and solutions for NDIS providers in the current environment

For the non-profit sector, 2020 was certainly a year to remember.

In addition to the threat of a global pandemic and unprecedented lockdowns, many non-profits also faced the end of the transition to the National Disability Insurance Scheme (NDIS). 

Legislated in 2013, the scheme took 7 years to reach full operation – giving non-profits much needed time to overhaul their entire operating models to align with the radically different approach to funding. 

Touted for its potential to increase the quality and availability of disability support services for Australians, the scheme saw the abolishment of the annual block funding model and the introduction of a claims system underpinned by consumer choice. 

Non-profits that had been supported by government grants since inception were suddenly required to undertake an enormous shift towards a more commercialised and competitive way of working. And while it’s clear some non-profits are thriving in the new environment, others are not. 

In this article, we look at some of the challenges we’re seeing in NDIS organisations that were perhaps unprepared for such significant change, as well as strategies their leadership teams can employ to address them.

Challenges facing NDIS providers in the current landscape

Inexperienced boards: A non-profit board exists to provide leadership and direction to its organisation. Board members are legally responsible for what goes on in the business and so typically take a keen interest in financial, operational and compliance matters. 

Especially for smaller non-profits, the ability to secure experienced board members with strong business acumen can be difficult. In our experience, these boards are often “parent led” boards, with substantial good will and positive intent, and prioritises benevolent purpose over expertise and business acumen. This then becomes a higher risk to the organisation if it leads to a lack of guidance or oversight, which is particularly vital in periods of change. 

The transition to the NDIS funding model necessitates a strategic or corporate mindset that results in clear and effective strategies. Board members must also be skilled in engaging with their organisation’s C-Suite and Treasurer, to ensure alignment and constructive relationships that lay the foundation for a positive culture across the business. 

Poor financial management: For a non-profit to survive under the new NDIS model, effective financial management is critical. Leaders must know:

• Exactly what it costs to deliver a service
• What is needed to break even
• The impact of inflation

Once the numbers are clear, leadership can then investigate opportunities to drive efficiencies to retain their cost margin. This is a pivotal activity for non-profits that are hurrying to clear customer backlogs following COVID, as they may not realise they are running at a loss until it’s too late.  In our experience, a fee for service business requires more frequent budgetary and performance monitoring compared to block funded business.

Marketing strategies and skills: Under the NDIS, your clients have become your customers and, like any business, you will need strategies to attract and retain them. This means delivering a high quality service that sees your non-profit build a reputation as a preferred service provider, as well as identifying ways to create results-driven and cost effective marketing campaigns.  In the current environment, we are seeing demand for good quality NDIS services, and businesses who are delivering high quality services cannot meet these demands, resulting in having to turn away customers. 

Cashflow: Where before a non-profit would receive funds and then deliver a service, the NDIS model is the complete opposite – with organisations required to carry debt until NDIS payments come through. This shift demands that finance teams understand cashflow and debt, and remain vigilant to avoid cashflow problems arising in the future. 

Ability to scale: Post COVID, the non-profit sector has seen a huge uptake in demand. For a non-profit struggling to manage cashflow, the ability to grow and meet increased demand is greatly impeded. Solid strategies are needed to balance cashflow with growth opportunities to take advantage of the current state and be able to take on more customers.  Without good financial and growth management, it's a common pitfall for clients to grow their losses. Growth plans have to ensure the prioritisation of maintaining and improving business efficiency, which can be very challenging in a fixed fee environment.

Change management and cultural issues: Periods of stress fuel toxic workplace cultures. If your non-profit was already experiencing cultural issues, the events of the past few years would have done little to help them. A toxic culture that is allowed to spiral out of control ultimately ends up affecting customers and jeopardising the future of your business. Leaders must prioritise cultivating a positive workplace culture, particularly as it becomes more difficult to secure talented workers.

Waitlists and staff shortages: Some non-profits are struggling with extensive waitlists for services, due in part to the impact of COVID and in part to Australia’s serious skills shortage.  Businesses are prioritising retention strategies, which is challenging when fees are price limited.  Managing these waitlists and shortages requires more than pinning your hopes on a recruitment campaign and waiting for an influx of applicants. Leaders must find innovative ways to do more with less so they can weather the storm until solutions (such as immigration) start to have a tangible impact. 

Compliance, quality and security: Effective governance should be baked into the fabric of every non-profit, particularly as relevant government bodies ramp up in compliance activities. For NDIS providers, the stress and uncertainty of the current environment has taken focus away from compliance which is leaving some at risk of penalties or security breaches. Impact on reputation for a breach is significant.  Regulator bans and removes NDIS registration for both individual workers and providers. Hence, even when your workforce is stretched, it’s critical to maintain oversight by having effective systems, controls, auditable data trails, clear documentation, regular staff training, and protocols that protect against such breaches. 

Ongoing changes in the sector: In addition to ongoing changes to NDIS processes and procedures, some sectors are facing sweeping changes to the way they operate as a result of recent royal commissions. These changes are causing significant distress to some participants who are unsure how they will adapt and sustain their organisation into the future. 

Strategies to help NDIS providers overcome challenges

There is an increasing divide between NDIS providers that have made structural changes and are performing well in the new environment, and those that can’t and have continued to compound losses. 

If your non-profit falls into the latter, all is not lost. There are steps you can take to resolve core issues and put your organisation back on track to success. 

Having worked with countless NDIS providers and other non-profits, we have seen remarkable turnarounds happen in organisations that were facing what they believed to be insurmountable challenges.  

Here are 7 strategies your non-profit can employ now to improve performance and preparedness for the future...

Come back to basics: There may be a lot of uncertainty and volatility in the non-profit sector right now, but the fundamentals of a good business never change. Make it your highest priority to gather financial and operational data from across your organisation, and scrutinise it until you have absolute clarity of:

• Your financial position
• Cost to deliver services
• Wasted time or resources
• Opportunities to drive efficiency

This will also enable you to run different scenarios so you can pressure test the business against potential future risks (such as further increasing energy, fuel or staffing costs – including those associated with royal commission outcomes). 

Don’t be afraid to make the difficult decisions - You may have a service that is highly valued, but not funded appropriately and is a "loss leader". Addressing these issues earlier gives time to manage these challenges and seek responsible solutions. 

Maintain vigilance: If you find your non-profit is lacking the processes and procedures for proper oversight, you will need to increase vigilance until these are put in place. This includes vigilance over cashflow, compliance, quality and security which you could achieve through immediate upskilling of appropriate staff. Over time, this should be supported by longer term plans to upgrade internal systems and processes in ways that allow automation to manage much of the due diligence for you. 

Make the best of what you have: Trying to hire new staff when you have a toxic culture that’s causing people to resign is a vicious cycle doomed to repeat itself. A great workplace culture starts at the top and sets the tone for what is and is not acceptable in the organisation. Prioritising the wellbeing of existing staff will also help to reshape culture – be it through thoughtful acts of kindness, recognition of effort, improved working arrangements, better training and support, and so on. 

In addition, consider upskilling board members so they feel confident that they’re contributing valuable financial and strategic insights. If necessary, seek new board members who can bring their business acumen to the table, or build a relationship with a consultant or adviser who is willing to sit in on board discussions and provide guidance where needed. 

Proactively manage change: Change can be difficult for an individual, let alone an established organisation with hundreds of staff and deeply entrenched practices. The changes brought about by the NDIS are extensive, and should be treated as such. This means investing in robust change management plans that provide a roadmap for exactly how the business will respond and guide its people through associated periods of adjustment. 

Harness the power of technology: Adopting new technologies doesn’t necessarily require a huge budget, yet the advantages can be enormous. As we saw with telehealth during COVID, what seemed impossible just a year prior quickly became a preferred method of engaging with health providers. Consider applying this same mindset across your organisation as you actively seek ways to use technology to be more efficient, reduce needless costs, and free up people’s time to focus on higher value tasks. 

If you do have a reasonable budget to work with, be sure to prioritise solutions that enable robust and integrated data analytics. Organisation should consider investing in systems that provide real time data and/or dashboards. These are critical to monitor business performance, efficiency and effective decision making, and could make all the difference when undertaking strategic planning. 

Think outside the box: Be it a new service line, a merger, or an acquisition of a complementary non-profit, don’t let the stress of the current situation stop you from thinking creatively and strategically about the future. You simply never know if today’s “crazy” idea could end up taking your non-profit to the next level. 

Don’t be afraid to ask for help: Smaller non-profits have a history of overlooking the value of consultancy services, especially when they fear the cost of engagement will be too high. This is unfortunate as people can be misguided about the cost of services, and this leads them to miss out on leveraging a consultant’s valuable skillsets such as:

• Risk management
• Cashflow analysis and projections
• Scenario planning
• Strategy development

If your non-profit is still struggling with its transition to the NDIS model, or is grappling with skills shortages, inflation, cashflow issues and so on, working with a consultant could be the best decision you make this year. 

FOR MORE INFORMATION

To learn more about NDIS consulting services from RSM, or to hear success stories from our work with other NDIS providers, please contact our Risk Advisory – Healthcare and Community division – on (03) 9286 8273.