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Developing a Cash Management Strategy


Developing a Cash management Strategy. Review of External and ... Cash not entirely within control of Trust. Identify and report problems at an early stage ... – PowerPoint PPT presentation

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Title: Developing a Cash Management Strategy

Developing a Cash Management Strategy
Why A Cash Management Strategy?
  • Severe cash difficulties in the trust
  • PSPP 7 (by volume)
  • Potential cash deficit of 31M
  • Cash/deficit health economy wide
  • Need to give certainty to all partners of the
    trust such as
  • Suppliers
  • Needs to link in with IE strategy and
    developments such as PRB
  • Reduction in flexibilities of NHS regime
  • Cash no longer an in-year fix
  • FMWP (04-05)
  • Public Interest Report so pretty much
  • All NHS organisations now need to do one
    personal view
  • Risk assessment around inflows and outflows

Reduction in Cash Flexibilities the Trend
Example based on PCT financial regime
Developing a Cash Management Strategy Some of
the Factors
Developing a Cash Management Strategy
  • Develop a robust plan for Year 1 as the starting
  • Cash flow planning driven by IE plan
  • Review of internal and external commitments
  • Good Housekeeping
  • Review of Processes
  • Review of Risks and developments
  • Reporting, monitoring and revising
  • Projecting forwards
  • Separating out capital and revenue cash

Developing a Cash management Strategy
  • Cash flow and IE Planning
  • Foundation cash flow forecast will be based on
    the IE plan
  • Forecast NHS and Other Income
  • Forecast NHS and Non NHS Expenditure
  • Provisional profiling e.g. Block contracts
    profiled in twelfths
  • If IE under pressure then so is cash
  • Capital Programme and Timing

Developing a Cash management Strategy
  • Review of External and Internal Commitments
  • Repayment of Brokerage SHA/Bank
  • In year
  • Future years
  • Repayment of PDC
  • EFL/CRL targets
  • Agreement with Suppliers
  • Re-negotiate payment terms/plans
  • Temporary borrowing to meet short term
  • Ability of NHS organisations with health economy
    to pay
  • What are untouchables if any?
  • Cash releasing savings from LDP
  • SHAs own cash management strategy

Developing a Cash management Strategy
  • Good Housekeeping
  • Minimising debtor balances and debtor days
  • Benchmark performance against other trusts
  • Rigorous credit control
  • Review stock levels
  • Are all income streams identified
  • Are all recharge accounts being cleared
  • Are invoice procedures robust
  • PAS system indicating loss of income
  • FMWP (04/05) being followed
  • Is PSPP low because of cash or processes?
  • Ensure financial accounting is robust
  • Better use of charitable funds?

Developing a Cash management Strategy
  • Review of Processes
  • Longer term
  • Procuring/Ordering procedures
  • Best value and payment terms
  • Stock management
  • Invoicing and credit control procedures
  • Ledger system/shared services
  • VAT review

Developing a Cash Management Strategy
  • Risk Assessment
  • Quality of reporting and monitoring
  • Monthly balance sheet to Board
  • Debtor/Creditor balances
  • Performance against EFL
  • Temporary Borrowing
  • Identification of risks
  • Risks associated with income
  • 6M from PBR but is it real?
  • Is new expenditure supported by income streams?

Developing a Cash management Strategy
  • Revisit 05/06 after testing assumptions
  • In year requirements
  • Potential for internally generated funds
  • External funding
  • NHS Bank
  • SHA
  • Suppliers/NHS Partners
  • Revisit plan and review assumptions
  • Monitor cash flow forecast
  • Produce outline plans for year 1 and 2 in line
    with IE recovery plans and 05/06 forecast
  • Implications of PBR

Developing a Cash management Strategy
  • Other Considerations
  • An iterative process
  • Dialogue with partners essential
  • Cash not entirely within control of Trust
  • Identify and report problems at an early stage
  • Avoid optimism! Try for a balanced view
  • Strategy to be written up setting out assumptions
    and a 3 year forecast
  • Measure and benchmark performance continuously
  • Ensure staff have skills to perform effectively
  • Sell assets?

Outline Cash Management Strategy Document
  • Review of current position
  • Cash plans and balance sheet models for 05/06 and
    forecast 06/07, 07/08
  • Set out assumptions, risks and methodology
  • Set out process of review and reporting
  • Identify key targets and objectives e.g.
  • PSPP
  • Debtor days
  • Update strategy on a regular basis as information
    and assumptions change

My role
  • Pulling it together!
  • Liaison with management accounting
  • Reviewing current assumptions and issues
  • Communication with internal consultants/auditors
  • Presenting initial forecast to DoF/Deputy and
  • Liaising with SHA/PCTs on income
  • Liaising with suppliers and supplies department
  • Setting up robust monitoring/reporting
  • Consulting and implementing changes to processes
  • Setting up training of finance staff where
  • Raising awareness of budget managers of cash
  • Setting up communication chains for managers and
  • E.g. helpdesk type role?

FMWP (04/05) Cash Management in the NHS
  • Key points for NHS Trusts
  • DH will review trust flexibilities considers
    them too lax
  • Advances to trusts only allowed in April
  • Monthly cash monitoring by SHAs via FIMS
    explanation for variances over forecasts of 5
  • SLAs over 250K to be billed monthly
  • SLAs under 250K quarterly billing to be paid
  • Disputes over 50K referred to SHA after 3 months
  • Lower value disputes to DoF after 4 months
  • Billing after 3 months will render income