Drip, drip, drip.
Do you sometimes feel that your time and money are slowly going down the drain?
Home care billing and payroll are two of the major challenges that a home care agency owner faces. Do you ever wonder why so much of your time is spent in these two areas?
It might be that the processes you have in place are part of the problem. Identify areas for improvement and get a clear view of your revenue vitals with this helpful, in-depth list.
(1) Lack of clear home care billing and payroll terms
Being vague about terms, levels of service, changes in service, and agency policies can lead to unrealistic expectations between you and your prospective client, which, in turn, leads directly to sticker shock when a client gets a bill that doesn’t match what they’ve come to expect. Informal billing terms can sometimes land a job, as they can make you appear very flexible and accommodating. However, they lead to tremendous headaches down the road if they are not followed up with good, clear documentation of the terms.
Just about every kind of business has to contend with customers who don’t pay their bills in a timely way. If you are like many home care professionals, money matters may be outside of your “comfort zone”. Your orientation is geared toward caring for your clients, so confronting them about paying their bills can be uncomfortable. The lack of a clear policy on how past due accounts will be treated only increases the discomfort and hard feelings, as dealing with the issues is put off further and further. The older the past-due balance gets, the harder it is to collect.
(2) No checks and balances
Any complicated business process leaves plenty of opportunity for human error: payroll and billing are no exceptions. In some ways, they are even more prone to errors because of the sometimes intense negative reaction that comes from making a mistake. Billing or paying someone incorrectly sometimes can evoke a firestorm!
Even the most careful, fastidious person is subject to the occasional slip. That’s why it’s very important to have systems and procedures that check things from different perspectives, minimizing the possibility of making mistakes. Scheduling software can help with this tremendously, but even a purely manual process can have checks and balances designed into it. Back in the day of all-paper accounting, accountants would use separate ledgers to redundantly record transactions (e.g. a General Ledger and a Payroll Ledger). If the numbers didn’t add up on either ledger, a mistake would show up so it could be corrected.
(3) Poor record-keeping
It is remarkable how many people keep track of important information on post-its, whiteboards and notebooks. It’s hard to beat the simplicity and ease-of-use of those methods, but they break down pretty seriously when it comes to information storage and retrieval. Resolving billing disputes without good, easy-to-find records of shifts, charges, payments, adjustments, invoices, statements, etc. is extremely difficult. If a client calls in about a billing issue, you should be able to put your hands on all the pertinent information right then and there. If you can’t answer basic billing questions in the course of the initial call about it, the time cost of the process will easily be tripled (or more), as you have to hunt down information and remember to call the person back. Besides the direct costs of the delays, there is the frustration that the client experiences and the impression you give of being a disorganized and not very professionally-run agency.
(4) Lack of clear policies
Most entrepreneurs do many things “by the seat of the pants”, figuring things out as they go. This can start to bite you in the same spot, as your business grows. Taking time to establish written policies & procedures can save you mountains of headaches when you run into employment issues later on. A simple way to get one started is to write down the resolution of a sticky problem each time one happens. In looking at how you resolved it, you’ll start to formulate general policies that will make it clear(er) how to handle the next one.
(5) Excessively complicated rates structures
Startup businesses often wheel and deal with prospective customers, making special arrangements in order to bring in those precious first customers. That flexibility is one of the hallmarks of a startup and represents a real competitive advantage, at least at first. But it can become an insidious habit that leads to greater and greater complexity in the billing process.
The same thing holds true for hiring caregivers. In order to get yourself established and get caregivers to take shifts, you wheel and deal and pay them what you need to. Sometimes this will settle into a “policy”, like paying more for weekends than weekdays, for example. While these kinds of arrangements may continue to be necessary (depending on your market and your pool of caregivers), anything you can do to simplify the structure will help reduce administration costs down the road.
When your rate structure is overly complicated, it can limit your agency’s growth. You spend more and more time in operations, which means you are spending less and less time marketing and expanding your customer base. It also means you are probably enjoying the business less and less. There are good reasons that successful, established agencies tend to settle on a clear, consistent rate structure. While it’s good to have some flexibility, it shouldn’t turn into a culture of price negotiation at every turn.
(6) Poor Communication
The payroll and billing processes are just components of a bigger process that is largely about communication: with your clients and their families, your staff, your caregivers, vendors, etc. When communications are not well-documented and followed up, the breakdowns can occur at every level.
Lack of follow-up and assumptions about what the other party understands underlie many of the common breakdowns in payroll and billing processes. Every communication you have with a client or caregiver is an opportunity to improve clarity or to muddy the waters. Missed communications not only represent a loss of information, they also constitute promises broken. If there is a pattern of poor communication, it can erode confidence and morale.
(7) Double-entry of data
The information you have to enter when scheduling a caregiver is largely the same as what you have to enter when paying them: time, duration, pay and bill rate of the shift along with their personal and compensation-related information. Any time you are entering the same data twice you are:
- risking making a mistake
- wasting your time
As you choose caregiver payroll software and systems to run your agency, you should aim to reduce or eliminate double-entry.
(8) Tower of knowledge
When you first started out, you learned everything there was to know about the operations of your agency. As your business grows, you delegate some of those tasks to the people you hire. Over time, you may completely lose knowledge of these delegated processes, potentially leaving you vulnerable to the “Tower of Knowledge problem”. This is when only a single individual knows critical components of your operations process. Were they to leave, operations could grind to a halt and your business would suffer tremendously. To avoid this, insist on documentation of processes and the inclusion of more than one person on any critical components. Check the documentation and see if, in a pinch, you (or another owner or staff person) could pick up the thread and keep things moving.
(9) Lack of knowledge of regulations
Depending on your particular market and what state you are doing business in, regulations can have a significant impact on your payroll and billing. Even non-medical home care is strictly regulated in some states while being almost completely unregulated in others. Being unaware or under-informed of the rules can land you in trouble. For example, overtime rules for home care vary widely between states; if you haven’t been paying overtime and it is required in your state, you could have employees coming back and suing you for years of back pay! Take the time to explore the educational resources that your state provides, network with other agency owners, or consult a professional who knows the regulations in your area.
(10) Lack of accounting knowledge
Most home care agency owners are not accountants. Being good at what you do can go a long way toward running a successful business, but without at least a basic understanding of accounting principles (or at least a partner who does), you’re headed for trouble. Finding and hiring someone to handle the books is essential for a growing company.
While it might not be your favorite thing, it’s worth investing in learning the basics. Besides helping you monitor and manage your home care billing and payroll, learning the lingo and concepts will also help a great deal with more strategic aspects of running and growing your business.
We hope we have cleared up some questions that you may have had about your own home care billing and payroll process. You may want to consider automating the process and turn off the leaky faucet of your valuable time and money. Our Summary Report about how automating the process can really streamline your accounting practices will be helpful in picturing a better process. If you want to learn more about The Rosemark System’s home care management software or how a caregiver payroll system can help your agency, contact us today!