Coping with Sudden Changes in Cash Needs and Availability

BHCOE was recently joined by Fritz Foley, Ph.D., Senior Associate Dean for Strategic Financial Planning at Harvard Business School, Richard Fish, MBA, CEO of Autism Learning Partners, and Ned Carlson, CEO of Trumpet Behavioral Health

As we’re still in the midst of COVID-19, ABA organization leaders are forecasting their funding needs and adjusting cash flow opportunities. Common questions are, “How do we identify appropriate strategies to respond to fluctuating cash flow?” and “How do we remain solvent during a time of financial unknowns?” Fritz, Richard and Ned address these areas and provide the following insight: 

Financial and Liquidity Challenges: 

It’s become clear that COVID-19, a health crisis, is turning into an economic crisis. And there’s potential that it could very well evolve into a financial crisis for most industries. What’s going to be tricky is that we’re coming into this crisis with a lot of debt that is rated BBB, which represents 58% of the total investment-grade debt set to mature up until 2023. This could potentially make downturn very difficult for many organizations. 

For ABA organizations specifically, many leaders in early March began to look at whether or not their services were necessary upon learning of stay-at-home restrictions. Reevaluating one’s business plan, determining what centers to close, deciding whether or not to provide services in-home, etc., were all quickly dire topics that needed to be addressed. Fortunately, many families that were previously involved in ABA services have expressed their desire to continue care – even if it has meant completely transitioning to telehealth.

The question leaders are receiving now is, “What happens when we come out of this?”

Revenue Utilization

Revenue fluctuations for ABA providers have varied from region to region. For some, the need for services has actually increased with the addition of telehealth. BCBAs have been hired and parent engagement is up. Even so, the unnerving unknowns of what lie ahead in upcoming months has organization leaders asking similar revenue questions. Of 250 surveyed ABA organizations, 41% are forecasting that revenue will be down 50% by the end of May. 

In an unprecedented crisis, there are no pre-cooked answers. Being a leader during this time presents unique challenges, so it’s important to remind yourself that the situation is continuously changing and the next step is to activate the best process possible for your organization. 

Some activities that happened prior to COVID-19 may not survive the “new normal.” Even so, opportunities to create value over a longer time horizon may appear. 

Staffing

Depending where you’re located, staffing is going to be impacted quite differently. For many, the initial reaction for how to handle staffing has since evolved as unfortunately the pandemic is not going to have a short-term impact. Most ABA organizations have two employment buckets: corporate staff and the clinical field staff. At the beginning of March, many companies implemented salary reductions, furloughs, and made efforts toward expense reduction initiatives. When making these decisions, organizations didn’t know how long the pandemic would last. When surveyed, 31% of  business owners anticipate that the quarantine will last until May 30th, 2020.

As leaders’ perspectives continued to evolve with the onset of news updates, other steps were taken. Organizations have begun reducing office staff through furloughs and terminations. Human resources staff have proven to be vital in regard to being a resource for various forms of government assistance programs for those staff that are laid off or furloughed. 

The end goal is to navigate this to the best of everyone’s abilities – understanding that many services will come back completely and that will mean that more staffing needs will once again present itself. For both Trumpet Behavioral Health and Autism Learning Partners, careful thought and consideration has been enacted for every individual that was employed prior to COVID-19.

Poll Results

During the webinar, we offered a few poll opportunities to our attendees, consisting of ABA business owners, and the results are shared below.

How do you anticipate COVID-19 will impact your revenue next month?
Down by 100%6%
Down by 75%29%
Down by 50%41%
Down by 25%19%
No Change 3%
Up by 25%2%

(n=219)

How long do you think the quarantine will last?
May 1510%
May 3031%
June 1513%
June 3017%
End of Summer25%
End of the Year5%

(n=158)

Is your organization open, operating at a reduced capacity, or closed as result of COVID-19?
Company is open w/ reduced hours of operation59%
Company is open w/ regular hours of operation30%
Company is closed8%
Company is open with added hours of operation2%

(n=233)

Need Financial Assistance? 

We understand that many of you are looking, or will be looking, for financial relief due to COVID-19. Please fill out this survey.

To Watch the Video: Coping with Cash Flow, Click Here

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