Clearly one of the key signals will be your CQC/CCSIW assessment and that of the Environment Health report regarding the kitchen. These are important key performance indicators (KPI’s) and are helpful for telling prospective clients how you perform.
There are many other measures and ratios which help to show you how your care home is operating, as a business. Knowing your key performance indicators may not show the full picture; you need to be able to compare your KPI’s against KPI’s for previous years, your budget and just as importantly against the sector standard.
So what should I be measuring and how do I measure it?
A good place to start is the Net Profit Percentage, this is your net profit divided by your sales, and this shows your profitability. However, when you compare against other operators you need to look at how they operate, are they operating a Freehold or Leasehold property for example. So a better comparison would be to look at earnings before interest, tax, depreciation and amortisation. This eliminates many of the variables between operating models.
Other operating ratios are staff costs as percentage of turnover. This will depend on the type of care home you are operating and the number of staff, and the pay level of the staff. That is to say that a nursing home may have a higher staff costs than a personal care home, but the nursing home will have a higher income per room than the personal care home to offset the higher staff costs. This can either be reported as a percentage of turnover, or be broken down to a cost per resident day.
Another KPI is the individual cost of items of expenditure or groups of items of expenditure; this can show how efficient you are at purchasing and controlling waste. Examples would be the cost of food per resident per day, or the cost of cleaning per resident per day. To calculate this information you need to record detail occupancy, which should be available, and the actual cost of items used. The actual cost of items used may not be the same as the expenditure in the month, if stock levels have changed, or items have been used but not yet paid for.
These are just a couple of examples of KPI’s; there are many more.
Post written by Peter Stamps of FD Business Accountancy Services
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