The short answer: what CQC actually asks for
CQC asks for a statement of financial viability, and the thing that trips owners up is how small that document is. It is not a business plan and it is not a forecast. It is a short letter from a financial specialist confirming that the provider has the money to deliver the service safely, as CQC set out when it changed its approach to assessing financial viability at registration in February 2018. The specialist can be an accountancy, bank or financial services firm, and CQC even publishes a template letter, last updated in September 2021, that you can use but are not obliged to.
The catch is that no honest specialist signs that letter on a hope. The letter is the visible tip of a forecast that has to stand up, and getting that forecast right is the real work. LOYALS is a King's Cross firm of accountants and business consultants in London, and for new care homes we build the forecast, satisfy ourselves it holds at a realistic occupancy, and then provide the statement on that basis. If you are still weighing up who does what, our care home accountants page sets out how the registration work and the ongoing finance function fit together.
What is the CQC statement of financial viability?
The statement of financial viability is the document CQC uses to satisfy itself that you meet Regulation 13, the financial position requirement in the CQC registration regulations. Regulation 13 says a provider must have the financial resources needed to provide, and continue to provide, the services described in its statement of purpose to the required standards, and must hold suitable insurance and indemnity. In plain terms: can you afford to open this home, and can you afford to keep running it safely if things do not go to plan. Registering with CQC is a legal step before a care home can open at all, as the government's guidance on the registration of residential care homes in England confirms.
Because the requirement is about resources rather than a particular form, CQC does not want to read a fifty-page plan at the application stage. It wants independent assurance, which is why the practical output is a specialist's letter. The letter, and the pack a specialist builds to support it, usually cover four things.
Evidence of funds shows the money to open and run the home actually exists, whether that is cash, a facility or committed investment. The cash flow forecast runs month by month. The break-even analysis shows the occupancy at which fee income finally covers the fixed-cost floor. The contingency answers the question CQC is really asking, which is what happens if the home fills slowly. These are the supporting documents CQC references in its guidance on new provider applications, and they are also, not by coincidence, what a bank asks for when it lends against a home.
Who signs it, and can you write it yourself?
You cannot credibly write and sign your own statement of financial viability, because the whole point is that someone independent is putting their name to it. CQC describes the author as a financial specialist and gives three examples: an accountancy firm, a bank or a financial services firm. In practice, for a care home, it is almost always an accountant, because an accountant is the one who can build the forecast, test it and stand behind the numbers rather than just restate them.
That is the difference between a letter that reassures CQC and one that invites more questions. A specialist who has actually modelled the home, the opening funding, the wage bill, the occupancy ramp, can answer the follow-up if CQC asks for further evidence, which it is entitled to do. As qualified accountants we treat the letter as the last step, not the first: the forecast comes first, and the statement follows once we are satisfied it holds.
What the forecast behind the statement has to show
A viability forecast is not a single annual figure, it is a monthly picture of the first year. That matters because a new home opens as an empty building with a full cost base. The registered manager, the core staffing needed to be safe, the rent or mortgage and the insurance are all there from day one, while the residents, and their fees, arrive slowly. The month that decides whether a home survives is not month twelve, it is the low point somewhere in the middle when costs are high and occupancy is not yet paying for them.
So the forecast has to show the ramp. Take an illustrative 40-bed home that fills gradually across its first year, reaching around 26 residents, roughly 65 percent occupancy, by month twelve, and passing its break-even of about 22 beds somewhere near month nine. Until it reaches that point it is losing money every month and living off its opening funds, which is exactly the risk the contingency is there to cover.
Set out month by month, the same home looks like this: heavy losses early, a narrowing gap through the middle, and a cash balance that falls before it steadies. The figures below are illustrative, but the shape is the point.
| Line | Month 1 | Month 6 | Month 12 |
|---|---|---|---|
| Beds occupied | 6 | 18 | 26 |
| Fee income, monthly | £29,000 | £86,000 | £125,000 |
| Fixed-cost floor, monthly | £110,000 | £120,000 | £128,000 |
| Monthly surplus or deficit | −£81,000 | −£34,000 | −£3,000 |
| Cash remaining from opening funds | £520,000 | £250,000 | £150,000 |
Read the bottom row. On these illustrative numbers the home never runs out of cash, but it comes down from £600,000 to around £150,000 before it steadies, and that headroom is precisely what CQC and a lender are looking for. A forecast that shows the home comfortable in month one and profitable by month three, with no dip in between, is not reassuring, it is unbelievable. The honest version, with the low point on show and covered, is the stronger application. It is the same monthly discipline we run as management accounts once a home is open.
Why we build it on a slow fill, not a full house
Owners almost always want to model the home at 90 percent from the start, because that is the business they are buying into and the one they believe in. We build it on a slow fill of around 65 percent across the first year instead, and we do it deliberately. The reader at CQC, and the lender behind the deal, are both looking for the downside case. A forecast that only works when the home is nearly full is the forecast that gets questioned, because everyone in the room knows homes do not fill overnight.
There is a second reason to be conservative, and it is about the fee mix. Before you are registered you usually do not know how your beds will split between council-funded and self-funder residents, and the two carry very different fees. A single blended fee hides that. We show both cases, a council-weighted mix and a self-funder-weighted one, so the statement holds whichever way the home fills. If the split turns out better than the cautious case, that is upside; if it turns out worse, the forecast already survived it.
What gets a care home application questioned
CQC does not publish a pass mark, and it does not have to. If it has concerns about financial viability it can ask for further evidence during the assessment, and the application is not approved until it has the assurance it needs. In practice, the same handful of weaknesses are what invite that second look.
- A forecast that only balances at full occupancy, with no slow-fill case.
- One blended fee that ignores the council and self-funder split.
- No evidence that the opening funds actually exist, only an assertion that they do.
- No contingency for the months before break-even, so any delay sinks the plan.
Put the other way round, a statement stands up when the forecast survives a realistic occupancy and shows both fee cases, and when the money behind it is evidenced rather than assumed. That is the test we apply before we are willing to sign.
What happens to the forecast after registration
Here is the part most registration guides skip. The forecast does not go in a drawer once CQC approves you. The plan you registered on is the plan you now run against, and the home that tracks its real occupancy, fees and costs against that forecast every month is the home that spots a slow fill while there is still time to react. The one that files the forecast and forgets it finds out at the year-end, when the options are gone.
That monthly tracking is ordinary management accounts, and it is the natural next step after registration rather than a separate project. It is also where the numbers you built for CQC start earning their keep a second time, informing pricing, staffing and the conversation with a lender. Most owners we register stay with us for exactly this reason, and the wider picture of how the pieces connect sits on our care home accountants page.
Whether you are opening a first home or adding a second, the thread is the same: CQC wants proof you can afford to run the home safely, that proof is a specialist's statement built on an honest forecast, and the forecast keeps working for you long after registration. That is the work our care home accountants do, from the registration pack through to the monthly numbers.