What is financial reporting and why is it important in care

Effective financial reporting is a crucial function in care organisations, being key for providing real-time financial insights that help you manage your immediate challenges and long-term goals.

Yet many providers are grappling with insufficient finance processes. In our own Care Trends Report 2024, almost a quarter (23%) of CFOs told us their number one priority for the coming year is reducing the time they spend producing reports and analytics, with 39% stating their main priority is to spend less time amending errors.

In this article, we're looking at the importance of effective financial reporting in care and how your organisation can get the most out of this critical process.

What is financial reporting?

Financial reporting displays an up-to-date view of your organisation's finances including income, expenses, profits and cash flow activity.

These records provide crucial oversight to both your internal and external stakeholders so you can track, analyse and report on the financial health of your organisation.

The benefits of effective financial reporting in care

So, what are the key benefits of improving financial reporting in care? Here are some key advantages for your finance team and your service:

• Enhanced decision-making

Quality financial reports provide valuable insights into your organisation's health. This visibility can help guide you through important decisions, perhaps around investments in care innovations or even for acquisitions of other services. And because of this, it's important that your financial reports always show the most up to date data, allowing you to work from fact instead of assumptions.

• More financial control

Effective financial reporting helps you see exactly where your resources are being spent and where your bottlenecks are. You can easily track your cashflow, such as where your biggest aged debt may be laying, or where you may need to control agency spend. Being able to spot these blockers early means you can better react to your service's needs and continue providing high quality care whilst being mindful of your budget.

Check out our blog 'How can social care providers better control their spend?' for more information.

• Improved compliance

Accurate reporting can support you when complying with regulatory and financial reporting standards. Plus, it can help you spot and respond to risks within your financial processes, so you can mitigate these issues before they become serious problems. And while all this helps protect your finances, it can also help protect your organisation's reputation and ability to provide safe and effective care.

The Care Quality Commission (Registration) Regulations 2009: Regulation 13 states that providers must 'take all reasonable steps to meets the financial demands of providing safe and appropriate services.' And while the CQC cannot prosecute for failure to comply with this regulation, they will refuse registration of providers who are unable to evidence that they can and will continue to comply with it.

• Efficient planning and forecasting

With detailed financial reports, your service can better predict future needs and plan for them. Let's say you're expecting a rise in demand for care and need to react now to be prepared for it. Using financial reporting, you may be able to plan the budget for that horizon based on your data from previous years.

Plus, with cloud-based financial management software, you have all your accounting processes and reporting tools in one place, allowing for seamless and efficient financial reporting and forecasting no matter where you are or how many sites you have.

How to improve financial reporting in social care

So, we know accurate financial reporting is crucial to maintain a clear understanding of your organisational performance. But as demand for care increases, so does the volume of data your finance team manages every single day. That's why it's essential to employ best practices to ensure your financial reporting remains a reliable tool for decision-making in the long run.

Here are some tips we've put together that you may find useful:

1. Ensure data consistency

Data consistency is key for reliable financial reporting with inconsistent data leading to errors and misinterpretation. These complications can bring a host of hidden costs which can be particularly disruptive in bustling service like social care. Not only do these costs affect your bottom line, but financial struggles caused by data inaccuracies can ultimately impact the quality of care you're able to offer. Yet, by standardising data formats, storage and access across all departments, you can maintain a single version of the truth and reduce the likelihood of these inconsistencies.

For example, all financial records, including income statements and balance sheets, can be stored in a centralised solution with standardised formats. This helps to ensure that things like revenues, expenses, net income, and other critical financial metrics are consistently reported, reducing the risk of human error across multiple care sites or teams.

2. Automate reporting

Automation can be a significant benefit in financial reporting, helping to reduce human error and manual data entry whilst boosting productivity. By utilising financial software to automate tasks like data reconciliation and report generation, you streamline this vital process.

Plus, automated systems can group data into relevant categories for you, ensuring that your essential information is organised correctly. And by reducing the burden that can come with manual reporting, you can boost satisfaction and employee retention in your finance team as they have more time to focus on other critical priorities rather than time-consuming admin.

3. Prioritise accuracy

You know just how important it is to have accurate financial data for making informed decisions and for maintaining the integrity of your financial reports. And as we've already mentioned, implementing robust internal controls can prevent errors and ensure accuracy.

Regular monitoring and consistency checks are vital to ensure your financial data is accurate. It's important to train your teams on the significance of accurate financial reporting, providing them with the necessary tools and resources so they can frequently and confidently ensure your organisation's financial data is correct.

Plus, by utilising accounting software and data visualisation tools such as dashboards, you can further reduce human error and improve accuracy, giving you a clear breakdown of your financial data in real-time.

Financial management in social care

We know that saving time is an absolute must for finance teams in the care sector. And with over 25 years of sector knowledge, we understand the key drivers and challenges care providers face.

That's why our financial management software, Financials, is designed to give you instant overview of all your accounting needs in a single solution, drilling down into granular detail when you need to.

Plus, Financials has been built to ensure efficient and robust reporting, ensuring your teams can automate real-time reporting and drive strategic initiates for your whole organisation, all while cutting the time they spend on manual work.

See the software in action in our on-demand webinar: The impact of financial software in the care sector

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