Per Resident Day (PRD) costs/revenues refers to the calculation of how much do you spend or make for each resident, who is in your community, by each accounting line. Typically PRD is used more for calculating and comparing costs more so than revenues.
Let's dive in a bit to understand this better. Typically, costs can be classified as Fixed (does not change proportionate to the number of residents in the community) versus Variable (varies in direct proportion to the number of residents in the community).
An example of a Fixed cost could be your power bill. If you have a 20,000 square foot building, heating and cooling would cost just about the same whether you had just 20 residents or a full complement of 50 residents. This does not change much with occupancy.
On the other hand, an example of Variable cost would be your food bill. If you have 20 residents, you would be ordering and consuming a lot less food than you would when you have 50 residents. As such, these variable costs lend themselves to better analysis using PRD. You are able to take the cost of food for the month, for example, and divide it by the number of occupied days for that month, to come up with the PRD cost of food for the month.
Here is an example PRD Formula used for calculating the Raw Food expense/resident/day.
Number of Days Occupied = Based on Occupancy, not capacity. A 50 bed facility that is fully occupied for a 30 day month would have 1500 Days Occupied. If one of the 50 beds was empty for a week, then in this example, Days Occupied will be 1493.
Total Expense for a Account Line (Ex Raw Food) – All the spending for raw food in that month, for example 10,000 dollars spend in a 30 day month.
PRD for Raw Food = (Total Expense for Raw Food Account Line/Number of Days Occupied)
So in our above example, PRD for Raw Food would be $10,000/1493 = $6.69 per resident per day.
This PRD is actually a great basis for comparison of buildings of different sizes, from large Assisted Living to Group Homes, so you can compare the cost efficiency of a 20 bed community to a 50 bed community to a 100 bed community. You can see that the one with the lower PRD is more efficient in their operations.
Regardless of such uses for community to community comparisons, the real benefit is in comparing your actual PRD to your projected (budgeted) PRD. This will help you identify those specific areas of your operations (reflected by the account number in your chart of accounts) that need more attention to improve performance. However calculating PRD numbers is a monthly exercise that usually takes up a lot of time, and you may not catch variances as they happen, but only at the end of the month/cycle when you go through the calculation exercise. At that point, it is usually too late to prevent the variance from occuring.
So how can we help you with this? ACC/Sushoo Assisted Living Software automatically calculates the PRD for each account line, both revenues and expenses, on a daily basis and provides it to you. You are able to make daily 'course corrections' and avoid negative variances to your PRD versus the projections.
This ability to improve your budget discipline and budget compliance is especially critical in the emerging Middle Market space, where cost is a primary driver of occupancy and profits. To be a successful player in the Middle Market Assisted Living space, it will help you greatly to have an automated Assisted Living or Group Home software in place from the beginning, that helps you stay on track.
- Naveen Venkatachalam, posted 11/11/2020