Enhance your community’s operating model to address declining revenues and increased expenses.
COVID-19 has negatively affected the financials of many public sector organizations. These organizations already have implemented many quick wins such as eliminating travel and discretionary spend and pausing capital expenditures. Moreover, many of these organizations have continued to find ways to manage revenue shortfalls by seeking Coronavirus Aid, Relief, and Economic Security Act funding, conducting revenue and cash flow analysis and modeling, issuing debt, and managing receivables – to name a few strategies communities have used in the short term.
Looking to the future, how can these same organizations continue to address potential declining revenues and ongoing increased expenses and still maintain a positive cash flow situation? Our road map can help you continue to find your path forward.
Optimize current operating model
Moving beyond budget quick wins and the easiest revenue management tactics, public sector organizations might turn to these operating model optimization techniques:
- Eliminate unfilled positions. With unfilled positions likely frozen, organizations can eliminate these positions in the next budget cycle. While reducing planned staff size is challenging, exploring opportunities for efficiency might prove beneficial.
- Implement efficiencies. If you are operating with less than planned-for staff, explore opportunities for efficiencies. For example, look for ways to automate manual processes such as transitioning paper forms to online formats, or stop performing certain functions that are not required.
- Align long-term capital plan. With capital projects likely on hold, now is the time to update your capital plan. Consider the overall needs of the community, and align with likely available revenues.
- Dispose of capital assets. Selling unused assets will provide a one-time cash infusion. This could help a community bridge part of a short-term revenue gap.
- Optimize fees and costs of service. Analyze the true costs of providing services to constituents. Are you covering your costs with fees? If not, consider refining the cost structure.
- Rationalize services. Take a look at services you offer. What is required? What is optional? Consider reducing optional services until revenues are in alignment with the costs.
Move to lower-cost operating model
Beyond optimization of your organization’s operating model, look for opportunities to lower the overall cost. Strategies that organizations might consider include:
- Optimize workforce. Find opportunities to optimize staffing. Share resources among departments. Consider moving to a shared services model to deliver traditional back-office functions.
- Consolidate facilities. Explore ways to reduce the physical footprint and reduce space costs.
- Optimize IT. Leverage technology to deliver services to constituents and collaborate with employees. While an investment likely will be required to implement new solutions, when done correctly, returns on the new technology investment will be seen over several years due to efficiencies gained.
- Implement outsourcing and partnerships. Discover opportunities to outsource services and create partnerships with other organizations. Consider shared service models with other communities, and issue procurements to outsource services to vendors at a lower cost.
These road map options, when implemented with cost reduction or revenue enhancement opportunities in mind, will help a public sector organization with cash flow needs for years to come.