Service efficiency
Nov 4, 2022

Tips to cut operational care home costs

With the cost-of-living crisis, prices are sky-rocketing with residential services feeling the pinch, with 96% of care homes experiencing increased costs. In this week’s blog, I look at how you can cut operational costs to survive the price hikes.

Mark Topps
Mark Topps
Regional Business Manager

Table of contents

Create a budget

The first step to understanding how to cut costs is to work out how much you’re spending every month. If you don’t already have one, implement a budget and record all your outgoings. This should include all your staffing costs as well, as well as annual leave, national issuance contributions, sick pay, pension contributions etc.

Review this monthly so you can identify what you most expensive costs are and if you’re overspending or underspending in certain instances. If you’re overspending, think about what you can do to reduce these costs.

Shop around

Did you know that 12-16% of your care home’s costs include utilities, external cleaners/window cleaners, PPE, insurance, contractors, IT, waste removal and more?

The best way you can save money here is to shop around. Find out when each of your contracts come to an end and add these dates to your budget spreadsheet. When any come up for renewal, have a look at how much other providers are – price comparison sites like Money Supermarket are great for this. Many companies also offer price matching schemes, so if you’ve got a cheaper quote elsewhere, let them know!

Invest in energy efficient alternatives

Look at every item in your home that generates a cost and think about ways you can save costs. Here are some ideas:

  • Using motion sensor lighting
  • Swapping out traditional lightbulbs for energy saving ones
  • Installing thermostatic controls on radiators and heaters
  • Upgrading windows to double glazing
  • Buying more energy efficient appliances.

Revisit your processes

Think about the things you do on a daily basis that you don’t think twice about – a great example for this is how much paper you use:

  • Can you reduce the amount of printing you do?
  • Can you introduce paperless systems?
    (Don’t forget, there are a number of grants available to support care homes to go digital).

Access financial support

It’s important to look at whether you’re claiming everything you’re entitled to. Here are some better-known initiatives:

Review your pricing

It’s worth working out when you last increased your fees for the people you support. If this was over 12 months ago, look at increasing these to help remain financially viable. If people are funded by the local authority then this can take a lot longer than private paying residents and this should be factored into any plans.

Look at your staffing costs

Staff are likely to be your most expensive overhead, accounting for 40-60% of your operational costs, but are by far your most valuable investment.

Nobody wants to cut hours or reduce staffing levels, so what can you practically do?

Here’s my advice:

  • Try using a combination of contracted hours and overtime/bank shifts, to reduce or increase your resource as your occupancy levels change. A lot of places I’ve worked have used a 70/30 split.
  • Incentivise overtime using vouchers instead of paying overtime rates.
  • Reduce your agency usage – agencies charge through the roof, so you may as well pay your staff more and save in the long run!
  • Introduce flexible working arrangements.
  • Reducing bonuses or pension payments.
  • Introduce electronic systems to streamline your processes and become more efficient.
  • Focus on training and upskilling your team to prevent higher levels of turnover as recruitment costs will exceed this.

Worst case scenario, you may need to look at your staffing levels and consider where you can make cuts. Understandably, you’ll want to protect your frontline care staff, so see if there are any other roles that could be removed.

Whatever cuts you make, speak to your team first and be honest with them. Some team members might want to take voluntary redundancy, which can make the process a bit smoother.

Save those pennies…

Managing costs is an ongoing process and it’s important you keep on top of these as they can spiral out of control very quickly. There are plenty of resources and templates on the internet to support businesses and your accountant can also support with financial advice and insight.

Most importantly, communicate the challenges you’re facing with your team. The long-term impact can be beneficial so that everyone is on the same page, however this needs to be done with a delicate approach.

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