In this episode of Executive with a Cause, host Tammy Ven Dange chats with David Hubbard, Founding Director of CINCH Transform. Does your Not for Profit provide front-line services to the community, particularly under NDIS? Then you won’t want to miss this episode as we chat about staff costs, utilisation rates and financial sustainability.
Financial Operations may not be the most exciting component of running a Not for Profit, but it’s undeniably critical for an organisation’s sustainability and growth. In this episode, David explains how staff utilisation rates and pricing can impact your bottom line. Related to this, we also hear how staff are an organisation’s largest liability on the balance sheet, but their greatest asset, and the importance for leaders managing this. Finally, David stresses the need for reporting to provide the right information to reflect all areas of the organisation and support executive decision-making.
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IT in Plain English
What’s the difference between a data warehouse and a data lake, and which option should you choose? In this week’s segment, Tammy explains the pros and cons of each when choosing your approach.
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Topics from this Episode:
- 00.00 | Introduction
- 01.20 | Starting Cinch Transform
- 04.05 | Clientele
- 8.40 | Managing variable cash-flow
- 11.40 | Efficiency in staff
- 19.50 | Unit cost
- 22.50 | Technology recommendations
- 27.15 | Forecasting cash-flows
- 32.45 | Analysing utilisation
- 37.00 | Ideal utilisation rates
- 40.50 | Checking what you’re reporting
- 43.27 | IT in Plain English
Quotes from David in this Episode:
“I’ve seen instances where the Not for Profits have not been sustainable and have gone through a voluntary liquidation process and the impact not just on the staff there and their families, but also on the community and the participants. It’s not where these organisations want to be. So, we go into these organisations and understand how they’re run so that they are viable and sustainable for the long-term.”
“Now, those sorts of considerations need to be factored into your cash flow. Now, how we factor them in is your risks, but when you’re doing your budget, it’s also looking at the different versions of that budget. One of the things that organisations need to look at is the biggest cost, but also the biggest asset, which is people. You won’t find them as an asset on the balance sheet, though; you’ll find them as a liability on the balance sheet as employee entitlements. But what organisations had to do was really look at their people and understand how efficient their workforce was because, under this model, we have to operate within a certain cost framework to be able to make a profit out of what we were claiming. So, it’s really important to understand what it costs us to deliver these services, given those variables and the efficiency of our workforce and the price point that we have to deliver these in. And then modelling and translating that back to your cash flow. So, in effect, it’s almost like you’re running a fee-for-service type of organisation, whereas previously, under the grants model, you had a steady cash flow no matter how many hours of service you were delivering”
“Once you understand the menu, the services that you’re offering and the demand, then we need to know that we’ve got enough staff to deliver those services and meet that demand. If we’ve got too many resources or not enough demand, then that’s a cost. So, the organisation has to either increase the demand or reduce the capacity of staff somehow. To make that decision, we need to understand how well we’re utilising our workforce and if there are growth opportunities.”
“What I find in some organisations is you get people who come in and put in new software, but then no one adopts it. It’s either too hard and what I find is they’ve spent lots and lots of money on new software, and then you get the law of diminishing value, and after 2 or 3 years, people stop using it, and you’re not getting the most value out of it.”
“The lower the price-point, the higher the utilisation of that person needs to be. Now I don’t believe that anyone’s going to be 100%. Even casuals need training, so I wouldn’t model anything on 100%. But in the one’s where the price point is higher, there’s more leeway. Like in the therapy area, their price point is closer to $200 an hour, so I see they’re not operating at 95% utilisation; they’re operating at 70%, which seems to be a good rate to be operating.”
Links & Resources
Credits
Thanks to our Producer, Nick Whatman, and the entire team at Lonsdale St. Studio. Thanks also to our Digital Content Creator, Laura Kleinrahm.
Tammy Ven Dange is a former charity CEO, Not for Profit Board Member and IT Executive. Today she helps NFPs with strategic IT and data decisions with her business, Roundbox Consulting.