I am not an accountant. I am a retired paediatric nephrologist. But nephrologists love data, equations, and ratios. It is in the nature of kidney disease that numbers reveal a problem before symptoms emerge. Numbers that start conversations, trigger diagnostics, and predict the future.
Finance is nowhere near as scary as nephrology. But NHS board finance papers make it look terrifying. 2kg documents, month in, month out, showing isolated snapshots in time. A narrative that says the numbers are the same, better, or worse than the previous snapshot. Having non-executive directors from the commercial sector does not seem to help. The "finance NED" speaks to the finance director in a different language. The rest of the board waits for the summary.
Meanwhile, several hospitals are running out of cash. We are in quarter two.
Vendor debt is not financial management
This week a large trust was informally advised by someone in the centre to "consider" delaying vendor payments to stretch out the cash flow. The advice was quickly reversed once the comments sections filled with responses ranging from a shoulder shrug to outrage.
Instead of the agreed 95% of invoices cleared in 30 days, the instruction to delay is pushing trusts to 60, 90, 120, even 365 days. Or until the vendor screams and threatens.
I have seen this before. In 2017, in a trust in financial special measures, the lead haematologist was pacing the executive corridor because chemotherapy supplies had stopped. The vendor had not been paid for months. The linen supplier did the same. The place came close to being dangerous and dirty.
Everyone in finance must have known. With so many submissions to the centre, the centre must have known. The organisation was running on the vapours of vendor liabilities. Accountants call this vendor financing. The rest of us might call it sharp practice.
They speak of hospitals as anchor institutions in their geography. Small and medium enterprises floating around the anchored monoliths do not have the reserves to keep waiting for the anchor to pay when it suits its own balance sheet. By instructing delay, even unofficially, the NHS risks local businesses going bust, borrowing more, increasing the cost of goods. So much for the Preston Procurement Model and social responsibility.
The acid-test ratio
The commercial sector uses key ratios, trends, and financial risk indicators that everyone from board to shareholder can understand. The NHS finance paper could do the same.
Being able to pay vendors in a timely manner is a measure of financial health. There is a ratio for it. The Quick Ratio, also known as the Acid-Test Ratio: liquid assets minus inventory, divided by current liabilities. Trend it over time and everyone can see how close to 1.0 you are getting, and when you will drop below 1 and go underwater. Everyone can understand that. From board to basement.
There are other ratios that should populate the first page of the finance paper. The current ratio. Days of cash in hand. The trajectory of vendor liabilities relative to revenue. Presented as trends, not snapshots. So the board can see where the organisation is heading, not just where it is today.
Presumably someone in finance already uses these ratios to go cap in hand for cash before the cash runs out. The question is why the board does not see them on page one.
The business model is bust
If the business model keeps telling you that cash runs out in quarter two, and every year cash injections are needed to keep the business going, then fundamental questions need answering. That is what happens in the commercial sector, where reputation and market confidence are quickly lost if the shareholder becomes the permanent source of emergency cash.
The NHS cannot fail. But it seems to fail every day when it comes to financial viability. The forever conversation is the size of the deficit, staring past the growing mountain of debt.
At STRASYS, the Decision Intelligence engine for healthcare, we have done this work using commercial disciplines, investment banking frameworks, and the key sciences. Our analysis generates the evidence to surface new business models and new models of care that identify trapped value.
The Strasys Value Index measures trust-level value, not just cost, relative to population need. The Consultant Workforce Optimisation System targets the largest controllable cost: senior clinical deployment. Together with our research on why Cost Improvement Programmes fail, they provide the analytical infrastructure for boards to move from managing deficits to managing value.
Naeem Younis, STRASYS CEO, argues that a consumer needs-based analysis set against how resources are led, managed, and organised can release the finance director from the twilight zone. The finance director's job is impossible under the current business model. Under a different one, built from population need upward, the acid-test ratio stays well above 1.
There is hope. But it is stuck behind the need to take the next step. Make the decision, based on the evidence, to break from old thinking. That takes new leadership, new governance, and new management capabilities.
Find the Trapped Value in Your Trust
How we quantify recoverable value across the acute sector.
Key Definitions
- Strasys Value Index (SVI)
- A STRASYS product measuring how effectively NHS trusts deliver high-quality, timely healthcare relative to cost. Accounts for population need, not just raw activity. Designed to move boards from managing deficits to managing value.
- Acid-Test Ratio (Quick Ratio)
- A financial liquidity measure: liquid assets minus inventory, divided by current liabilities. A ratio below 1.0 means the organisation cannot meet its short-term obligations from liquid assets. STRASYS advocates trending this ratio over time on page one of NHS board finance papers as a simple indicator of financial trajectory.
- Trapped Value
- Clinical and financial capacity inside NHS organisations not being converted into patient outcomes or taxpayer value. STRASYS analysis consistently reveals significant trapped value across NHS provider systems, recoverable through needs-based business model redesign rather than cost-cutting.
- Decision Intelligence
- The discipline of converting complex healthcare data into structured, actionable decisions for NHS leaders. STRASYS coined and owns this category in UK healthcare.
Frequently Asked Questions
The business model generates costs faster than revenue. When cash runs out, trusts delay vendor payments, request emergency cash injections from the centre, and salami-slice costs. This cycle repeats annually. The underlying cause is a business model that has not changed despite decades of evidence that it cannot sustain itself within allocated budgets.
Vendor financing occurs when trusts delay paying suppliers to stretch cash flow. Instead of the agreed 30-day payment standard, vendors wait 60 to 365 days. This props up the trust's balance sheet temporarily but risks local businesses going bust, increases the cost of goods, and undermines the trust's role as an anchor institution in its local economy.
Most NHS board finance papers show snapshots: this month versus last month, this year versus plan. Commercial sector boards see trends, ratios, and forward projections. The acid-test ratio trended over time tells everyone whether the organisation is heading underwater. STRASYS advocates presenting financial health as trends and ratios on page one, not buried in 2kg documents.
The Strasys Value Index measures trust-level value relative to population need. The Consultant Workforce Optimisation System targets the largest controllable cost. The CIP research explains why traditional efficiency programmes fail. Together, they provide the evidence for boards to redesign the business model rather than manage the deficit within a broken one.
Only if the business model changes. Under the current model, the finance director is trapped between a revenue envelope that cannot cover the cost base and a centre that periodically releases emergency cash. Under a needs-based model, where resources are allocated to match population need and trapped value is systematically released, financial sustainability becomes achievable rather than aspirational.
This article is adapted from the Friday Fish and Chip Paper, Dr Nadeem Moghal's weekly newsletter on LinkedIn.
Dr Nadeem Moghal
Chief Medical and Innovation Officer