Cash in the Bank Is Not Profit: What Home Care Owners Need to Know About Margins

Account Executive Raysan Benito sits down with Dana Charumbira, CPA and founder of Home Care CPAs, to explore how home care leaders can use financial insights to drive smarter decisions and sustainable growth. They break down key concepts like gross margin, automation, and financial clarity, offering practical ways to turn numbers into meaningful strategies for scaling a business.

Raysan Benito: You're listening to Rancho Mesa's StudioOne™ Podcast, where each week we break down complex insurance and safety topics to help your business thrive. My guest today is Dana Charumbira, a CPA, MBA, and business leader behind Home Care CPAs, who brings a unique blend of corporate and international experience to the home care industry. With a passion for conscious business and social impact, Dana combines analytical expertise with a deep belief in human connection to help leaders scale in a meaningful and sustainable way.

Dana, welcome to the show.

Dana Charumbira: Thanks, Raysan, and thank you for that great introduction. I sound so professional and put together. I love it.

RB: Well, you are so professional and put together. You're very well known. I would have even added that you are going to be a conference speaker at CAHSAH as well. And we, I, yeah, there's so many, I get the list could go on, but I at least wanted to make sure that I had that locked in. So welcome to the show.

Dana, I appreciate you being available. You survived tax season. I think I want to jump into that. There's a little bit of a path I'd like to go on, but you survived tax season, so well done on that. How is that for you?

DC: Thank you. Thanks for having me on.

Yeah, we made it. It was, you know, each year we get better and better. Each year has its nuances. We support a lot of like the business returns. So once we get through that March deadline, there's a little bit of a sigh of relief. And then there's a couple of, you know, April 15th deadlines that we really support. But

Our team was really good this year about being proactive in Q4 prior quarter, just to kind of make sure we had a good start to 2026 to get filings done. So not too many sleepless nights. Yeah, and shout out to the team, shout out to the clients too that worked with us to make sure we got everything that we needed.

RB: Yeah, that is absolutely crucial. Having that team of people to work alongside you and then having your clients bringing things in a timely manner. I know that challenge all too well. So I am glad that it went well for you. You know, I was thinking about this beforehand. I'll jump into the problem and some of the solutions that we have, but it was so interesting to me because when I was preparing for this podcast.

I asked a couple of business owners about their profit and loss statement and how often they review it. So I talked to one business owner and I said, how often are you looking at your P&L? And their response was, almost never. My accountant. That's my accountant's job. My accountant does that. And so I want to address some of the, I want to address that statement, but I also want to address some of the individuals that may be listening. What I'm really excited from our conversation from yesterday and preparing for this was that I really believe that there's going to be something for everyone. So you can have the startup, home care agency that's learning as they're going and they have a heart to serve, but they're not entirely sure how financials fit into it or how to leverage it. And then you have people who are scaling and then some of the more legacy agencies that are there. But I want to camp a little bit on that phrase and I'd love to hear your perspective on it. When someone says, I don't usually look at my P&L, that's the accountant's job.

DC: Yeah, so there is. I think first, let's say just acknowledge that home care is, you know, a business or an industry that pulls people in a lot of directions. So home care agency owners or home care leadership vault has a lot on their plate at all times. And even if they're not actively doing something, they're probably thinking about their business and, you know, maybe it's marketing, maybe it's recruitment, maybe it's a shift that needs to be staffed. So I think a lot of the times, you know, the accounting piece of it, because it's not so in your face every day does kind of fall into that list of like, I'm going to engage with it when I'm filing my taxes and it becomes more of this like passive, I say compliance based activity and that it's just something that needs to get done when you're filing your taxes at the end of the year. And so I don't think that's an uncommon approach or sort of, you know, comment that we do here. And sometimes it's just easier to manage your business from your bank account. So like if you have the money to make payroll and there's some leftover to, you know, pay whatever else you need to like workers comp and rent and utilities, you know, sometimes that can feel like that's enough.

And it can be scary because you know if that number on the bottom isn't where you want it to be, sometimes not engaging with it or just like hoping it's going to get better might feel safer. But really it's just kind of kicking that can down the road a little bit for like that inevitable day that comes when there isn't the cash in the bank or that number just really starts to become zero or negative. So yeah, that's not an uncommon, you know, starting point. But and even, I mean, I would say that's agencies of all size. And there's a lot of different ways you can look at your numbers that aren't looking at your profit and loss, which we, you know, we encourage. But for us, the profit and loss really brings everything together. And for me, it really tells the story of the business and you can see like operational decisions that the business is making and how they play out in the financials

RB: I agree. And it's interesting that you bring that up because as we work with home care agencies as well, you're talking to these CEOs or owners or what have you, and they're going, listen, I've got an intake to do. I probably have to do some type of marketing.

There's networking that needs to be done. I also need to look at operations. Also, we're constantly hiring, so I have to do that as well. And interestingly enough, I was talking to another owner and they were going, I'm also HR, so I'm handling that as well. To your point, I think it's helpful for us to just take a beat and go, okay, well, we acknowledge a lot of the aspects of actually leading a home care agency and the difficult conversation that needs to be had around the profit and loss statement. It can be daunting. It can be scary. I think of the quote by Tim Ferriss, right, where he says that your success, and I think it's Tim Ferriss, and he says, your success in life is predicated upon how you can have difficult conversations.

Now, I think about that phrasing in with others, but as I was preparing for this podcast, I was thinking, oh my gosh, well, I think it's difficult conversations even with yourself and using the profit and loss statement as a guide, really, not as a guide, but as a helpful barometer to have that conversation. It's a conversation starter and it sounds like for you and your organization, you really act more as a guide to help people look at that story and be able to have that conversation. I'm wondering, because you had a phrase that resonated with me when we talked about this, and I'm hoping you can elaborate on it. What do you mean when you say that many agency owners feel like if they can make payroll and have money in the bank, then that's all they need to do when it comes to the profit and loss statement?

DC: I think it's really just probably one of the... When you're being pulled in a bunch of different directions, like you just described, it's probably one of the easiest, like most accessible way to like gauge the financial success of the business because you can open your banking app on your phone and say like, hey, there's this many dollars left over after payroll came out. Like, okay, that's where I need to be right now.

And that's, that is, I mean, looking at that cash balance and also, you know, not to get into the accounting vault weeds, but sometimes the profit and loss isn't telling you that cash story as well. So there's like different, there's the cash aspect of it, then there's like the profitability aspect of it, but understanding like how those work together. You know, really take some of that fear of the unknown away and I would say the more you engage with it, the more that it becomes familiar and easier to look at the profit and loss. And then going back to...Just, you know, thinking about like a home care agency owner, a lot of the times that is like their livelihood. So their personal and their professional like success and wealth are like very closely intertwined. And so the performance of that business oftentimes like can impact lifestyle.

And I think as part of that, there's this feeling around like the books, as people will say, of like pride or like, I don't want maybe something to be seen that, you know, is happening or, you know, just this guarded feeling towards it, which is completely understandable. And I always say that we're accountants, but we and we were like strategic partners and we lead strategy sessions with our clients. But sometimes it feels like we become therapists because we're seeing like things that are going on in those books that like family members might not even know about. So there's balancing like, yes, there's the business aspect of things and like responsibly we should be looking at, you know, the financial statements. But then there's also like that personal piece of it that we have to tap into and understand like, this person did this, this and this to get to this place right now in terms of like financial success. And so we need to like appreciate that, understand it. And then like, how do we help guide them, as you said, you know, to continue to grow and build on that success.

RB: That's so good. I'm thinking already in my brain, I'm going, oh my gosh, we need to make another podcast on personal stories around and how they're crafted through the profit and loss statement. That's actually what I thought of when I thought of a P&L. I go in, okay, sure, there's numbers and that can be daunting, but really, it's a story.

It is a story and thankfully you have individuals like yourself that are able to hold people's stories well. Not what I was originally intending to talk about, but so glad that we went to that, we went down that way because what I, if I was to go back to the path that I was thinking of originally, I think the word I want to go back to is clarity. That's what I have found with our conversation together is really for you, Dana Charumbira, is you are looking to provide clarity. And it's interesting you bring up some of the differences, right? You were talking about cash and then income and some of the differences between that.

And I want to get into the meat potatoes of it, which is a phrase that may be, you know, that may not be as noticed, but is absolutely important, which is gross margin. I mean, if you were to stand on a soapbox and from some of the interactions that we've had, I'm almost sure that that is one of the soapboxes that you're going to stand on and really let people know about is the correlation between gross margin and the fact that it is truly the driver for everything. So can you explain a little bit more about that and why this is a hill for you and why it's so important to you?

DC: Yeah, so kind of just to reinforce the reason I find it to be so important is we looked at profitability. So like bottom line return on sales, which is just a measure of like income relative to your revenue, which is a lot of the times like a measure of success, you know, after you've paid all your bills. And so the higher the return on sales, the better the business is doing.

And one of the drivers of higher return on sales was a higher gross margin, which makes sense because that's like a bulk of home care, right? It's the people that are delivering the care. And so the more that we can improve our gross margin, the more that we have to cover our overhead costs and grow the business or, you know, do it, what needs to be done to improve the bottom line.

And so we focus heavily on gross margin as the industry does, and I'll just define it quickly just to kind of make sure we're on the same page with how we think about it, which is pretty in line with industry standards. So it's caregiver wage, the employer tax on that, which we assume to be 7.5 to 10, sometimes 11% depending on the state, and then your workers' compensation associated with that wage that's being paid.

There's like other minor things that'll flow through there. So like if there's supplies or, you know, merchant fees that you're paying, but the bulk of it is like that caregiver wage and the associated cost for delivering care. And so focusing on getting that, we like to see that 40 to 45%, which is usually you're taking your caregiver wage and doubling it as like your sort of starting point for what you're charging clients. And again, that varies based on like the tax and your workers' compensation rate that you have in there as well. But really starting to, you know, track that over time, because you can do like a snapshot of it and say like, here's where we're at right now.

And that's fine, but like really we start to look at that over time and then understand like what's driving that, the levers behind it, so that the agencies can like make more informed decisions.

I can give a couple of examples that I think help bring that to life a little bit, just because it kind of, I think sometimes accounting sounds very theoretical, but then when you like bring it into practice or like how a business owner would use that information. So when I'm looking at a gross margin, I'm thinking, okay, in home care, really, there's a few drivers, which, and I don't want to oversimplify it, but you have your volume of hours, you have your price per hour on like your income side.

And that's typically what makes up your revenue fluctuation. And then on the cost side, you have your caregiver wage as the main driver, because everything else is really a function of that. So we oftentimes track like what's the average price per hour you're charging clients and what's the average pay rate per hour you're charging or you're paying your caregivers.

And I would say there's actually a lot of meaningful conversation around both. But what I find what we uncover more is like on the pay rate per hour is when we present an average pay rate and we don't layer on like, it's not just the total loaded cost with the employer tax and the workers comp. It's purely just like, here's on average what you pay a caregiver per hour in this time period that we're looking at. We get pushback a lot from owners. They're like, no, you're telling me my average is $22.50. Our starting point is $21 an hour. That's what we pay our caregivers. And it's like, well, let's take a look at the data.

Okay, well, we went into overtime. So, you know, overtime was 10% of total cost, and we can only pass on 5% of that.

Another big one is there'll be call-offs, especially with the caregiver shortage and like just, or if you're going up in hours, you don't have the caregiver bench to fill those. You're going into overtime or you're paying staff incentives. So you say, hey, there's a call-off, there's a last minute shift that came up because we onboarded a new client. We're going to pay 50 cents more an hour than our, you know, $21 standard.

All these things add up. And so when an owner steps back and they're like, oh my goodness, I thought we were paying $21, we're paying $21.50. It has this impact on my gross margin. And that's when you can start to have conversations with like your scheduling team and, hey, help me understand, like, what are we doing to fill these shifts? You know, how are we going about it? Maybe the scheduler has a favorite caregiver that they're going to, and that person's already in overtime. So then they're making incentive on top of that overtime.

So you're starting to understand like your employees' habits. How do you coach them? How do you improve what they're doing? Not like it's right or wrong because scheduling is a tough job in home care, but just guiding them and saying like, here, if we did this instead, you know, this would have this impact and here's how you're contributing to the company as well. Same thing on the recruiting side of like the caregiver bench isn't there. You can bring that recruiter into that and say like, here's the number of caregivers that we want to bring on in this period. So that's where I mean, like it starts to tell a story and it starts to help that business owner feel like confident in some of the conversations that they're having, because it's not just from like a theory that they have. So that's one example on like the price per or the pay rate per hour side. Price per hour, I would say is a little bit like.

I do think everyone's trying to improve that and push that up as much as possible, but the agencies that are more strategic about it will say like, okay, we know we have to bring our caregiver rates up by this much based on merit or based on the current labor market. What do we need to look at in terms of like incoming price per hour for clients? Or how do we bring up like our current client's price per hour to make sure we're protecting our margin? So that, yes, I will go on for a long time about gross margin, but those are just some like examples that are relatable around like how an agency owner, when they start to kind of understand and get comfortable with those numbers, can, you know, start to make informed decisions and have conversations with their staff.

RB: I want to go back to a concept and I appreciate you sharing that. And you had mentioned when it comes to caregiver rates and how it relates to that double amount. So I was hoping you can elaborate a little bit more on bill rate versus caregiver pay rate, and then and how those two relate.

DC: Yeah, that's a great question. So gross margin is typically like a percent, so it's 40 to 45 percent as a target. And then your gross profit is the difference between your price per hour that you're charging your client and the pay rate per hour that you're charging your, that you're paying your caregiver.

If you basically take that pay rate and double it, so you're saying like, well, I'm paying my caregiver, let's use a simple example, $20 an hour, and I'm going to bill then $40 an hour. When you load on the employer tax and the workers' comp, then you typically will hit that 40 to 45% of like that gross margin target on obviously, the higher that price per hour can be, the more like comfort you have with, you know, some of the pay rate. But I think sometimes we also run into you know, if there's a really good reimbursement rate with like the VA pays really well, sometimes people are like, well, we're paying our caregivers more because we're getting paid more. And I caregivers do very meaningful work and there's, you know, I definitely think that there's a conversation around that. But it's also the question is like, you don't want to pass all of that on to your labor cost. Do you want to, you know, see if you can use that to maybe offset like a 24-7 case that you might not be able to double that rate because sometimes the volume of hours makes up for that lower gross profit or gross margin that you might see.

RB: Okay, that's really helpful to consider that. And that percentage is also really, it's very tangible as well. And I think you're taking something from the theoretical, ethereal, accounting vault, intimidating to going, okay, let's shoot for 40 to 45 percent. And that's very,

It's very realistic. Not necessarily realistic, but being able to go, okay, I can see this now. This is a helpful target or goal for me to have. I want to move on to another topic that also seemed to, you really seemed, for lack of a better phrase, you seemed really stoked on this type of topic, which was, you know, I'd go, okay, so gross margin, that is, that's Dana soapbox, but then the other idea, and I suppose they connect, but it's this idea of automation and systems. And so I'm hoping because I think at times we use these buzzwords, right? Like a circle back kind of situation. You're going, all right, come on. Let's start making these things a little bit more, again, tangible, going from the ethereal theoretical to something very practical. But when we had spoken about this, preparing for this podcast, you said, okay, well, one of the topics that was really important to you was that automation and systems set in place. So can you explain that and how they correlate with gross margin or in general?

DC: Yeah, and I love that you're talking about this because there's such, like you're saying, buzzword right now is like AI, and so like AI and automation, like all these things happening, and like they're going to take over all these jobs, which maybe, I don't know, but so I, and I do think about them separately. So like, hey, there's AI and then there's automation, and we try to really, when we first start working with agencies, focus heavily on the automation between their client management system and their accounting software. We pretty much work exclusively in QuickBooks Online because everything talks to it. And then their payroll software and QuickBooks Online. And that sounds like so basic. And I would say maybe 60% of the time there is some connection already between the client management system and the accounting software, but it's not configured in a way that gives that agency like the data that it wants on the accounting side. And what I mean by that is they see like their revenue coming in, but they, if they're working with different payer sources, they might not know that, you know, 50% is private pay, 30% is VA and 20% is other. And so I'll get to why that's relevant when we talk more about like how that plays in with financial reporting. Payroll is like the bigger one and I just think that's because it can feel so...overwhelming. Like if you look at a payroll software configuration to the accounting software, it's called like general ledger interface, which like, I mean, that just sounds like confusing when you think about it, right?

RB: All right, sweet. Yeah, exactly.

DC: And so, and then they start asking you like for your chart of accounts and like, where do you want these things to go? And you know, it's like, I'm not an accountant, I'm a home care agency owner. So wherever you think they should go. And that's even if the payroll software hand holds their way through this. So oftentimes that's a very underutilized feature, but so critical. The reason that these are critical for us, like underlying sort of structures and foundations because that's how we get information to our clients very timely. So one of the kind of jumping back to the opening question or like the opening kind of conversation we were having around, you know, I don't look at my P&L. Well, oftentimes that's because people don't have it done for like 3 months after the month's done. So you're like, hey, I don't care what happened in January, I'm in April, I'm almost in May.

And so if we can click a button and get that information into the accounting software, like we're able to turn around financial statements in a time period that makes sense for that owner to like really look at and say like, okay, I know that this happened two, three weeks ago, I can still do something about it today. So that's why those like automation pieces are important. And then going back to like looping in, you know, why is that client management software information coming into the accounting vault software and like a structured way?

So we'll look a lot at, you know, like what is your payer source mix over time and what are the reimbursement rates or prices that you're charging. So like if you're working with the VA, typically the reimbursement rate is at the private pay level or higher. You have the private pay segment and then maybe you have some sort of Medicaid or another reimbursement source.

And so when we start to look at like the shift or the difference month on month of what revenue is coming from those payer sources, we can track like, okay, your price per hour is going in this direction because the revenue is coming from these different sources. And that's how we know like why gross margin is going one way or the other. So I think of it as this like layering of like foundational, just like getting the data into the accounting software. Okay, let's get it organized and in a timely manner and then the top is like, let's actually have, you know, numbers that an agency owner can look at that aren't just, you know, numbers on a profit and loss. It's like, hey, because you signed on this contract, it did this to your price per hour and therefore like your gross margin went up or down by this percent. You're making this much more money this month because of it. So sounds super simple to like connect the systems, but getting that done can like unlock this whole new level of like timely reporting.

RB: You're absolutely right. So you're right that it is simple, but at the same time, I want to go back even further and you were talking about stories, right? And this goes back to the story and appreciate professionals like you that are able to hold stories well in that way and just find ways to make those connections.

As we're sort of landing the plane here, one of the things I absolutely love to do is just, and it sounds like you and I both resonate with connection and human connection. And so a question I like to ask my guests to add a human element to it is, what is something hobby interests that your professional network would be surprised that you are interested in right now.

DC: Probably a surprise that I don't talk about often is I do, well, I'll say do because I'm getting back into it. I have a three-year-old, so I kind of got off this for a little while, but endurance road cycling. So I've done like very long endurance rd cycles, predominantly when I was living abroad. So I've done three major races a year, for like a series of a few years. So that was like, for me, a very like therapeutic being on that bike outside is just like an incredible experience. Cycling in a race with like a group is very cool just to see everyone like working together and just like the mental perseverance that you have to have when it's like wind in your face.

You're like, why is the wind coming at me right now? Who put this wind gust right here? Is this cycle over yet? But like you persevere through it and that feeling afterwards is just like so amazing. And just being on a bike is like so much fun. I always say that.

I couldn't, I jokingly say, because I swam and played water polo when I was younger, I can't do land sports, like I'm not good at running, but like being on a bike is just like such a fun activity for me, and I just find a lot of enjoyment from those long cycles.

RB: Love it. When you're saying long distance, in my mind, I'm like 20 miles is really long. So what, oh, you're laughing. Oh, okay. Sounds good. Like, okay, but what's the distance that you've gone that would be considered long?

DC: Yeah. So this, no, no, that's like a, that's probably for me right now that is a long ride, but we, so there it was in kilometers because it was overseas. So like the longest one was like 110 kilometers and I'm trying to think that's probably like 70 miles maybe if you divide I think yeah.

RB: Yeah, that's not, okay. Yeah, my legs would cramp and I would need a lot of those little Gatorade gels.

DC: Yeah, those help.

RB:  Gosh, well, thank you so much for, you know, it's so interesting. I was thinking, okay, accounting. I'm in the same boat. I'm going, oh my gosh, accounting. It's so theoretical. How can I even, make this practical or tangible, and then you said stories, and you really tied it all in together very well, and I feel like I could talk to you for much longer about many different things. My brain is making all sorts of connections and different ideas for another time. But gosh, I appreciate you taking the time, Dana.

If people want to connect with you or get a hold of you somehow, what's the best way for people to reach out?

DC: Yeah, so our website is thehomecarecpas.com. I'm dana@thehomecarecpas.com on email. But there's, we're on LinkedIn. We're very active and very visible. So really out there. Yeah, for sure. Happy to have chats. We love talking to new like owners and hearing what's going on in their agency and how we can help. So just really open to conversations.

And I will be at CAHSAH, so I'll be in the desert in Palm Springs, end of June.

RB: Perfect. Be sure to say hi to Dana at CAHSAH. Dana, thank you so much. I really appreciate it.

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