'Cash sales' means all income from your main business activity which is received at the time of sale. In a care home, this means all income received from residents who pay their weekly, monthly or quarterly fees in advance. It also includes any payments you receive at the time you provide any 'extras' for residents, for example special outings and so on.
Your fee income will probably come from two main sources:
- private funds (residents who pay for some or all of their own care - or have it paid for by someone else)
- state funds (residents who are paid for in part or in full by their local authority, or sometimes by the NHS)
In some cases, it might be the privately-funded resident's family who actually pays you, or possibly a charity or insurance company.
It is up to you to decide whether residents will be required to pay in advance or in arrear. It is usual to ask for fees to be paid in advance. Although many local authorities will stick to your payment terms, some prefer to use their own payment schedules whether you like it or not. This might mean that some of the fees you receive from them are paid in arrears - this is treated as 'Cash from debtors'.
It would be unusual to receive much payment in cash. Most of your residents will pay you in one of the following ways:
- standing order, direct debit or bank transfer
- debit or credit card, if you accept these
To prepare your cash flow, you will need to estimate how much fee income you will receive over the next twelve months, and when you will receive it. To do this you will have to decide what your fee rate will be and how many residents you will be able to accommodate at any one time. You will then need to make an estimate of how many of your places will actually be full at any given time - this is your average occupancy level.
When setting your fees and making your estimates, bear in mind the following:
- you should decide at an early stage how many residents you will be able to accommodate. About 20 places would be fairly typical for a privately owned residential home, about double this for a private nursing home, although of course this varies
- in some parts of the UK there are standards for new care homes governing minimum room size and setting limits on the number of shared rooms - contact your local authority for guidance
- it's important to set your fees at a fair and realistic level. The care home sector is highly competitive and you will need to be sure that your fees are comparable with those charged by other homes in the area which offer a similar level of care and quality
- local authorities set their own maximum amounts that they will pay towards supported residents' fees in particular situations. Many residents will not be able to afford to top this up. If local authority rates are lower than your fees, you must decide whether you will accept residents with no top-up
- local authority funded residents might typically make up around 50% to 75% of your total, but this could easily rise much higher if you are not located in an affluent area
- occupancy levels can be affected by very many different factors, such as the number of other homes in your area and the types of service that you offer. If your cash flow is not viable at a projected 85% average occupancy level then you may well need to re-think
Doing some market research will help you to make your estimates as accurate as possible.
To help with your decisions, click on the checkpoints for guidance. Once you have worked out a Cash sales figure add it to the relevant field in your cash flow forecast.