We continue our short series on Knowledge is Power geared to new entrepreneurs by discussing financial projections. You can catch up with earlier posts by reading the first installment and moving through all our stops on the new business journey.
In Florida, applications for home health agency and nurse registry licensure require financial schedules, which take into consideration your business’s known and projected overhead and operating expenses, based on the volume of patients you expect to see. The purpose of the exercise of producing financial projections is to consider all of the realistic expenses in operating the business for the first one (nurse registry) or two (home health agency) years and showing the capital required to sustain the business until its profitability. In essence, this is AHCA’s way of making sure you’re going into a potential business opportunity with solid financial footing and real-world expectations, not unrealistic, “big money” hopes.
While the financial schedules for home health agency license applicants must be created and certified by a CPA, those for a nurse registry do not. This means that someone with experience with budgets, etc. may be able to successfully create the AHCA financial projections that must accompany the licensure application.
Here are some common pitfalls we’ve seen over the years:
- Unrealistic expenses. Every entrepreneur wants to launch a business with the least amount of capital possible, and we understand that. So does AHCA, and they also know how much it roughly takes to get a new health care business off the ground. If, for example, you project that you and your leader colleagues will forego a salary, AHCA won’t take your word for it. You will need to produce evidence that meets AHCA’s scrutiny that these individuals have alternate means of support.
- Working backward from your finances. There is a tendency to try to finagle the financials to match how much money an applicant has. This is a serious mistake because we’ve seen applicants leave out or low-ball important expenses so the schedules don’t exceed their bank balance. Keep in mind that when you submit application documents to AHCA and there are errors, this will not be an endless exercise of tweaking, sending back and re-revising. You get one re-do to fix whatever they point out to you. If you do not fix the schedule to their satisfaction, AHCA withdraws your application from consideration and you forfeit the $2,000 application fee paid.
- Not following directions. The schedules are complex and interconnected, and there are instructions for completing them. Lest you think, “How hard can this be?”, keep in mind that the schedules must conform to generally accepted accounting principles (GAAP) and will be reviewed by accountants. Enlisting a professional with experience with these AHCA documents is a wise investment and one that will save you headaches, and more money than a forfeiture.
We understand that when you have a dream of opening a new business, you have every expectation you’ll be successful, and some have bristled at needing to demonstrate this to the State. But remember that AHCA wants the same thing: a solid healthcare business that meets accepted financial standards, and will be around a long time, successfully providing care to Floridians.