How to Assess and Plan for Capex Investments in Allied Health  

Allied Health and related organisations in Australia are diverse and complex businesses. While there is growing demand for services in a range of healthcare settings, there are also restraints and challenges which exist.  

Can we keep up? Challenges with new technology and equipment 

With the advances in medical science and information, Allied Health and related organisations need to regularly invest in technology and replace or upgrade equipment. 

This requires prudent financial management and the ability to assess return quickly and easily – be it from greater efficiency, additional revenue, or potential costs savings. Of course, this must be considered in the broader context of patient outcomes, quality of care and staff satisfaction. 

Not only is the cost of equipment in the health domain expensive, but medical technology itself is rapidly advancing. This can result in equipment becoming outdated before it has delivered the required return on investment.  

Furthermore, regulatory compliance of equipment with respect to safety, effectiveness and quality can add further challenges.  

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How to assess and plan for capex investments 

The final decision to repair, upgrade or replace equipment is not necessarily the domain of the finance team.  

However, the capability to assess capex investments considering initial outlay and commissioning charges, useful life, repairs and maintenance and various financing options – including rates and payment terms, coupled with assessing the impact of additional revenue or cost efficiencies – most certainly is. 

An Excel model can and will get you part way there for a single or perhaps handful of assets. However, in the health sector, it is necessary to understand a complex array of capex investment scenarios across different asset classes and timeframes. 

Importantly, this must be assessed through the lens of the entire organisation’s funding and capital picture – and this simply is not possible to do with Excel spreadsheets.  

Having a capex modelling capability operating within a fully integrated 3-way financial model for the entire business is achievable and best done through a technology solution. This means that capex assessments are quick and easy to conduct at a micro level for specific assets or asset classes, and various parameters can be tweaked from a purchase, financing and return perspective.  

Moreover, unlimited capex scenarios can also be assessed at a company-wide level to understand how significant investments in the latest health technology and equipment impact on profitability, cashflow and liquidity ratios. 

team meeting planning organisation

How one company used an integrated 3-way model successfully 

At QMetrix we recently worked with a health company to make this happen. This healthcare company has been in the industry for 70 years and empowers people to live better lives through natural healthcare.   

Working with 40 budget workbooks that had to feed into other spreadsheets through manual input, financial management processes for the finance team were tedious, error prone and slow.  

After choosing a new technology to improve this process, one of the key priorities was to build a Profit and Loss, Balance Sheet and Cashflow integrated 3-way model.  

This means they could model out the schedules that impact balance sheet and cashflow, analyse scenarios, and forecast their cash position in the next 6 – 12 months.  

Being able to forecast out enabled them to manage their funding and liquidity better – and how they could leverage those funds to drive growth and capacity through facilities and equipment.  

Moving forward with health and technological advancement 

Medical science and information will continue to advance, to the benefit of us and our communities. Continually investing in the new technology and equipment, as well as funding for growth more broadly, requires prudent financial management.  

How can the office of finance partner with the business to assess and plan for these opportunities and deliver improved results in areas of patient outcomes, quality of care, staff satisfaction and the organisation’s strategic goals?

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