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Last month we saw the release of a comprehensive report highlighting financial performance trends in the disability services sector for the previous financial year.
Comprising data from a vast number of disability service providers and over 25,000 NDIS participants in Australia, the report extended to organisations that operate in:
- supported independent living
- daily living services
- allied health
- employment support
- support coordination
- social and community participation
Its findings echo sentiments shared recently in our article on the hardships facing NDIS providers, and the concerning number who are – or might soon become – insolvent.
While the sector as a whole has grown year on year in terms of active providers and total payments, the report found more than half of disability service providers are operating at a loss. Sadly, these losses also increased significantly during the last financial year.
A mere 2% of organisations were able to shift from a negative to positive operating margin, mostly attributable to the reduction in vacancy rates for supported independent living services. When it comes to other organisations, such as those that provide support coordination services, the disparity between financial stability and vulnerability is widening. This is occurring even with the 9% price limit increase introduced in July 2022, which appears to have had little effect.
Increased costs leading to increased losses
Disability services rely heavily on staffing which means a large portion of their revenue is required to cover staff costs. However, the report tells us that this portion is also growing, even though award base rates increased by only 4.6%. For example, support coordination services directed an average 88% of their operating revenue to direct staff costs in the last financial year.
Although CPI increases did provide some relief in terms of a general rise in the cost of services, they were no match for the substantial increase in costs from suppliers – particularly those related to repairs and maintenance, technology, and professional fees.
Balance sheets and cash reserves have now reached a critical point for some NDIS providers, with timely and consistent NDIS payments absolutely essential to their survival.
Pivoting towards financial sustainability
In this challenging environment, it has never been more important for NDIS providers to adopt a commercial mindset when it comes to operational and financial management. Sadly, the option to neglect this approach no longer exists.
The right systems with the right practices, processes, and captured data are all key elements to transforming a business that is incurring unsustainable losses – as we find is the case with too many businesses that provide vital disability services.
RSM’s National Health team specialises in helping organisations, such as NDIS providers, with practical guidance in:
- cashflow and budgeting
- forecasting
- strategic planning
- revenue optimisation
Importantly, we can act as your outsourced CFO – applying our commercial and accounting expertise to help your business achieve financial stability and ensure it is still there to serve the clients who will need you tomorrow.
Together, we must find solutions to the challenging issues affecting disability services in Australia so we can take proactive steps to safeguard its future.
FOR MORE INFORMATION
For a confidential discussion on how we can assist your NDIS organisation, please contact Peter Nicol (National Director of Medical) on (02) 6057 3000.
