planning

Article Dean Dorton

Well, I checked again today and normal is still missing from the dictionary for most of us. Post-COVID-19 pandemic has taken its place and in the space for definition, there’s a big, bold question mark! A lot is still in flux. Nonprofit organizations continue to deal with upheaval in staffing, accessibility, and resources. Federal and state funding assistance related to the pandemic has dried up and mandatory loan repayments are upon us. Economic uncertainty and rising costs seem to be significantly spooking the small to mid-sized donor pool.

The current economic situation is creating a cash crunch for many nonprofits, with the potential of a future cash crunch to impact many more. The time to prepare is now!

Gain control of the situation and better position your organization with the following action steps:

Secure a line of credit that will cover 2-3 months of payroll & benefits

Providing service is what you do, so providing employees with stability is essential to a speedy recovery from slumps in cash receipts. If you have an established and positive banking relationship, start by contacting your relationship manager to understand that institution’s application process and associated fees. All banks and financial institutions are not created equal when it comes to lines of credit for nonprofit organizations. Some require collateral or a personal guarantee. Some will charge an annual maintenance fee or a fee for failing to use the line periodically. Therefore, research options at other financial institutions even when you have a strong local relationship and consider the relationship as just one variable in your final decision. Leverage the influence of your board. Ask board members for referrals to their financial institutions. Reach out to state and national organizations that support nonprofits, like KNN, for referrals to resources known to be generous and fair to organizations your size. Established nonprofits can generally qualify for an unsecured line of credit that is sufficient to cover 2-3 months of payroll and benefit expenses. If denied in a first pass, ask why and continue to shop around while you work on eliminating the barriers to your success.AMA – 2023 Code changes and descriptors

Monitor working cash reserves each week

Determine what the monthly average total cash out is for the organization. This doesn’t need to be precise or require a sophisticated accounting system. If your payments are issued from one primary operating checkbook, just see how much went out of the checking account for the past year and divide it by 12. Apply common sense to the result. If it seems too high, make sure there wasn’t an unusual transaction or a bank transfer/adjustment that was mistakenly captured in your numerator and rework the math. If it seems too low, perhaps you have a second bank account used for payroll or other primary expense and the same exercise needs to be applied to that account to get a final result. Once you have confidence in the monthly average spend of the organization, determining working cash reserves is a quick calculation. Begin with cash in the bank. Add any investment that you can cash out within a week (in the event of an emergency) and subtract the bills you currently owe. Divide the result by monthly spend. If the organization has less than 3 months of working cash reserves, measures should be taken to move the needle.

Vet expenses before they occur

Budgeting is an important part of long-term sustainability. A cash crunch, however, is not the time to fall back on “it’s in the budget” as justification for incurring a cost. Each commitment should be laid up against the simple outcome of short-term mission sustainability. Invest in paying the bills that keep the organization open and aligned with its core commitment to the community it serves. Nonprofits depend on public trust. Breaking that trust by failing to deliver on the mission will only jeopardize future cash flow and could create a negative cycle that can’t be remedied. Now is the time though to delay expenditures that go above and beyond the core commitment and those that are intended to create organizational growth. The investment in those expenses will result in better returns when they can be initiated from a place of cash stability. Be patient and focused in expense management until the organization is beyond its cash crunch.

Become a master of timing

Know when bills are due and what the consequences are for late payment. Avoid incurring interest and late payment penalties but also don’t be tempted to pay anything early because it’s small or there is money in the bank at the time bills are being paid. Having the cash available right now is of greater value than a minimal discount or the slight goodwill gained by early payment. Take the time to know your recurring vendors and negotiate for better terms or payment plans whenever you can. If you cannot pay all your bills by their due date, pay in full those that cannot be delayed without penalty and then negotiate a plan to pay those that remain within a reasonable period of time. Try to avoid drawing on the line of credit for accounts payable so that you have confidence in the organization’s ability to manage payroll.

Examine your cycle of cash receipts. Are there any gifts, grants or sales that you can encourage an earlier payment on with prompt or accelerated reminders, invoices or phone calls? Take that action. If you need to draw on the line of credit, repay that balance as quickly as you can to maintain its availability and mitigate finance charges.

Do the deep thinking and act

Is this cash crunch a timing issue or a systematic one? Consider revenue sources and their sufficiency to generate the cash needed to cover cover investment in the expansion of your mission beyond current payroll and operating expenses. Expanding the mission may mean service to a wider base or diversification of services currently offered. It may mean developing the infrastructure to pivot more quickly to the changing needs of your specific community. Regardless of what it means to your organization, just enough isn’t a healthy long-term vision for cash management. Review receipts and expenses for the past several years and determine if your post-pandemic receipts can realistically outpace the organization’s basic cost of operations. If not, consider promptly engaging the board in strategic planning to sustainably reframe the organization.

If timing is the issue, take action to move further away from the cash crunch cliff. Make reserves part of the budget until you’ve reached a cushion equal to 6-12 months of monthly average spend. This reserve and the line of credit should give you the bumper you need to weather typical economic cycles and cost increases while you retool your revenue model. To get there faster, consider a special sustainability campaign or solicitation, a targeted grant or partnership that will displace unrestricted resources so they can be set aside for the future. Share resources with other organizations. Expenses like staffing, fixed assets, and marketing can often be leveraged by partnering with a complimentary organization or a for profit that is looking for a sponsorship opportunity. Engage in solid, legally vetted agreements with clear oversight to keep these relationships healthy and beneficial to both parties. Finally, recognize that every new initiative has an element of overhead and draws resources (time) from core operations. Be sure that new ideas can clearly advance your mission and be funded before going too far into the process of can become planning and implementation. In the absence of feasibility and measurement, great ideas leading drain on cash and are difficult to unwind in a cash crunch.

Remain optimistic

Colin Powell said, “Perpetual optimism is a force multiplier.” Don’t underestimate the power of that math.

A cash crunch is unfortunate, but it’s a risk of doing business. As they say “cash is king!” Pay attention to your organization’s spending. Be good stewards with the resources you control. Pay attention to your organization’s key revenue streams. Be hone st with your board about your organization’s cash situation. Don’t be afraid to ask for help. By managing resources and relationships well, you will be able to successfully outsmart a cash crunch.

Kaydee Ruppert | Associate Director & Nonprofit Industry Advisor
kruppert@deandortonstg.wpenginepowered.com
859.425.7730

Article Dean Dorton

Nearly one year ago, the attention of the healthcare community shifted very quickly to preventing and responding to a new threat called the coronavirus. Hospitals, physician practices, and community health centers faced a challenge like never seen before. Although we’ve learned a great deal in the past twelve months, many of us are just now able to take a deep breath and assess what’s next. We’ve tabled key initiatives, furloughed staff, shifted our priorities, and struggled to keep up with key regulatory changes.

If you’ve had to defer revenue cycle maintenance or eliminate previously budgeted engagements and initiatives, we recommend taking another look at these four areas that can provide meaningful value to your organization – even as you continue to manage ongoing uncertainty and challenges.

1. Address staffing challenges

Has your organization experienced difficulty related to staff recruitment, retention, and engagement during this pandemic?  We regularly hear from clients that staffing challenges during this past year have been very difficult to manage. For many organizations, the patient volumes have returned, but the internal resources required to complete the work is insufficient, untrained, or working remotely, often times less effective and productive. If necessary, align internal processes with what your team does best, and identify partners to help execute the broader strategy. Break the cycle of hire, train, lose employee, advertise position, and repeat.

Additionally, it doesn’t always make sense to promote your best performers. Often times, good “doers” aren’t always effective managers. Be careful not to elevate personnel beyond their level of competence. Understand which skills your local market can provide and which ones make sense to outsource.

2. Improve patient and employee engagement

It is more important now than ever to have meaningful engagement with your patients and internal team members.  So many of our personal relationships have been negatively impacted during the past year.  Take this opportunity to fully engage with your stakeholders and customers to ensure potential improvement opportunities don’t go unnoticed.  For patients, the use of kiosks, portals, telecommunication, and text can help with access to care and staying in touch with your patients.  Consistency within all patient-facing processes is critical.

For internal staff, don’t let telecommuting and alternative work arrangements hinder your ability to receive valuable feedback on what’s working and what can be improved.  Implementing an idea accelerator or automated innovation process can reignite your workforce to be aware of process improvements, cost reductions, and other potential opportunities.  Give them the power to identify and communicate feedback directly to leadership who can implement and impact change quickly and effectively.  Team members appreciate when their voices are heard and good ideas are implemented.

3. Seek out the marginal improvements

When assessing the revenue cycle for improvement opportunities, it doesn’t always require a full-blown overhaul. Review the “margins” for areas of opportunity that are going unrealized. A few recent examples we’ve taken notice of:

  • Are charts consistently taking too long to code or is there an increase in volume at the end of each month? Are A/R “hold” buckets continuing to grow with no real improvement? Is A/R aged greater than 90 days too high? Review these processes to determine potential ways to flatten the workload or accelerate and bring forward certain tasks so as to minimize huge swings in volumes and backlogs. Engage external help as needed – don’t let cash collections suffer in the near term.
  • Are action items being tasked to departments that don’t know how to address and finalize the request? “We’re too busy to keep up,” we often hear. Provide training, hold them accountable and publish the “backlogs”. If its’ important, it should be tracked.
  • Are large dollar priority accounts receiving proactive aggressive follow-up? Remember that 80% of your A/R can typically be managed through just 20% of your account volume. Align your staff accordingly.
  • Introduce exception-based processing. Reduce the inventory of work to be done to those outliers that need more scrutiny or review. Spend time on high priority activities and less on the financially immaterial.
  • Establish goals that your people can rally around. Many times, goals for cash collections or days in A/R are set by leadership, but not fully understood or tracked at the staff level. Give them ownership and provide transparency into achieving and sustaining progress. Incremental department-specific goals can also be introduced to make them more meaningful to smaller groups or departments.

4. Assess enterprise risks

The last year has presented numerous challenges for healthcare providers to overcome. We’ve been exposed in areas never imagined. No need to elaborate here as we’ve been living it daily. When the timing is appropriate though, take a step back and look at your organization’s risk profile beyond just the revenue cycle. If you’ve done so, develop a testing and monitoring plan to make sure identified risks are addressed and mitigated to the extent possible. Conversely, if your organization has not conducted a risk assessment, consider executing one. Information technology vulnerabilities, HIPAA security measures, cash controls, accounting processes, revenue integrity, compliance oversight, and so many other areas can present organizational risks that need to be identified quickly and managed aggressively. Risks and challenges are never-ending and persistent – so too should be your assessment and prevention plan.

As we continue to deliver healthcare amidst an ongoing pandemic, take a moment to refocus on the fundamentals of your organization. If the core is strong, it’s easier to maintain confidence in a sea of change. If stability is lacking or processes in need of review, seek guidance. No judgment during a pandemic. Each organization is different and requires unique attention and planning.

Adam Shewmaker, FHFMA
Healthcare Consulting Director
ashewmaker@ddafhealthcare.com • 502.566.1054

Article Dean Dorton

The budgeting process is an important time to carefully analyze the value new technology solutions can provide while balancing long and short-term cost mitigation with bottom line opportunity costs. The advantages far outweigh the risk or pain of technology upgrades, but only if you take time to understand your options, what suits your business size, industry, and functions best. Working with an experienced partner, like Dean Dorton Technology, provides the expertise to deliver the meaningful insights and recommendations that can help guide well-founded decisions.

Below are our recommended considerations for budgeting for collaborative technology in 2021.

Collaborative Meeting Solutions

Using collaborative meeting solutions for workers in meeting spaces, at their desks or when mobile, with integrated voice, video, messaging and content sharing can increase your efficiency dramatically. Is your chosen collaborative meeting solution working for you? Have you discovered things you like or don’t like? Are you not sure how to fix the problems or how to make your solution function best?

Now is the ideal time to take a look at the functionality of all your systems. Is it easy and effective for team members or customers to use? Do you have access to recordings? Is the quality of audio, visual, and screen sharing up-to-par for your standards? Will your solution integrate seamlessly with your technology inside the office? Will it fit into your budget?

Hybrid Workplace Solutions

While it’s exciting that innovative collaboration experiences are changing the way business is done, your main focus is keeping productivity high. Integrating your technology systems together to provide powerful easy-to-use customer experiences can take your team and your organization to new heights. Consider how artificial intelligence will continue to impact the way you work and lay the foundation for the next-gen workplace. Considerations:

  • Do your current systems allow for a consistent experience no matter where you are?
  • Can you effortlessly move between your virtual and physical worlds?
  • Does your technology allow for suppression of background noises?
  • Are your systems secure through encryption and authentication methods?
  • Are you able to take notes and “whiteboard” out ideas in the meeting spaces and have them saved for access anytime for those on the team?

Questions about benefits/cost analysis, budget, best-in-class tools, average costs, timing, or implementation?

David Rice
Senior Infrastructure Engineer
drice@ddaftech.com • 859.425.7735

Article Dean Dorton

Effective June 9, 2017, Revenue Procedure 2017-34 provides a simplified method whereby certain estates can obtain an extension of time to make an estate tax portability election. The simplified method is only available to estates that are not required to file an estate tax return based on the value of the gross assets in the estate.

History
Each individual is permitted a lifetime exemption (currently $5,490,000) from estate and gift taxes. At death, any unused exemption can be transferred to one’s surviving spouse to be added to the spouse’s own exemption. Simply put, this portability election allows a married couple to transfer nearly $11 million of assets without being subject to estate or gift taxes.

In addition to computing the amount of a decedent’s unused exemption available, the basic requirement for the portability election is that an estate tax return be filed within the time prescribed by law (including extensions). Estate tax returns are typically due nine months after the date of death and estates may obtain an automatic six-month extension. In order to elect portability, estate tax returns must be filed by estates that are not otherwise required to file based on the value of the gross assets in the estate.

Since December 31, 2014, the IRS has issued numerous letter rulings granting extensions of time to elect portability in situations where the decedent’s estate was not otherwise required to file an estate tax return. These requests have placed a significant burden on the IRS; therefore, the simplified method was created to ease this strain.

Requirements
In order for the simplified method to apply, the estate needs to meet the following requirements:

  • Decedent was a U.S. citizen or resident who died after December 31, 2010
  • The estate was not required to file an estate tax return based on the value of the gross estate
  • The estate did not file an estate tax return within the time prescribed

If these conditions are met, the estate will now have until either January 2, 2018 or two years from the decedent’s date of death (whichever occurs later) to file an estate tax return and elect portability.

If you have any questions, contact Faith Crump at fcrump@deandortonstg.wpenginepowered.com or Elizabeth Leatherman at eleatherman@deandortonstg.wpenginepowered.com.