15 Financial Planning Tips for Child Care Centers

Is it time for recess yet? I'm so glad you found time to join us here on the Child Care Director's Chair, where Erica Sacocchio shares her best practices that she's refined through her passion of directing child care centers over the last 23 years. From parenting interaction systems to save you time, money and stress to profitability, she shares it all from the Child Care Director's Chair.

Hello, child care leaders. It's Erica Scosho here with the Child Care Director's Chair. And I'm super excited to bring this episode to you. Today we're going to talk about the business side of child care, which is one of my favorite things to talk about. As money gets tighter for all of us, budgets have always been important and necessary, but now more than ever, we're really, really, really stretching out to try to make those dollars work for our programs and for our communities and for our children to provide a high quality programming. And you can't do that without money. So let's talk about creating your budget. So I've compiled 15 essential tips to help you establish a solid financial plan that will ensure that you, you have success and sustainability for your child care business.

So number one is we have to start at the beginning and let's assess your current financial situation. Begin with evaluating your income, your expenses, and any existing debt that you currently have. And this will provide you with a clear picture of your financial standing and help you identify the areas where you need to make adjustments. Once you've done that, then you need to set clear financial goals and determine what you want to achieve with your child care program, whether it's expanding your services, improving your facilities, increasing enrollment, or having specific goals that will guide you during your budgeting decisions. I know at our program last year we wanted to buy some new vehicles because the vehicles we had were pretty old. They still ran and they were, you know, they were great and they met all of the, all the safety requirements, but they really, they really were pretty old. So we found it was time to get some new vehicles. So we purchased two additional vans. So we had to make some accommodations in our budget to be able to have enough money to put down a substantial deposit. So that way our payments weren't that high. So, you know, little things like that that you know that you're going to need in the upcoming year. You want to make sure that you put those into your budget and plan accordingly. The next thing you want to do is you want to track your expenses, you want to keep a detailed record of all your expenses. Make sure you include the little things that are easy to forget about, but include the supplies, the utilities, your staff salaries and any associated costs that you have with running your child care program. This will help you identify areas where you can cut back or find more cost effective alternatives, which we've done several times in the last year or so and really relooking at what you're paying for each of those things. And we tend to be very loyal to the vendors that we work with, which I think is a great thing. But you do have to make sure that you are looking at those contracts and making sure that you are getting the best deal that you can. So we'll talk a little bit about more, more about that down the line. But prioritizing your expenses. So you want to categorize your expenses into essential and non essential items and then prioritize your spending on necessities such as staff salaries, insurance, licensing fees, while finding ways to reduce spending on non essential items.

Next, you want to create a contingency fund. So set aside a portion of your budget for unexpected expenses and emergencies, because we all have them. I just had an air conditioned unit that went well, I guess it was a heating unit. It's a kind of a dual unit that went right in the middle of winter. So that was, you know, seven grand to re to repair and it would have been 20 grand to replace. So we did go ahead and have it repaired. But luckily we had the funds set aside to make sure that we could do that. But could you imagine in the middle of winter if you didn't have heat, you would have shut down. So, you know, making sure you have a contingency fund, having that safety net will provide you with peace of mind and prevent financial setbacks from derailing your child care program or even possibly having to shut down, especially if it's something that is connected to licensing. You want to also research funding options like explore grants. In the last couple years there has been many grants and many subsidies available to help support the child care industry because they understand it has been struggling for quite some time. I mean, we were working on shoestring budgets before the pandemic and then after the pandemic, and then increased, you know, inflation and everything that has just gone up, up and up and up. And we know families can't really afford more and we can't afford to charge less. So we're kind of at the standstill. So the good thing is in many states they are jumping in and they are providing some type of grants or subsidies or Financial assistance programs that are available for child care providers. So this can help alleviate some of the financial burden and provide additional resources for your program. I know here in Rhode island they have offered many incentives, incentives for employees, they have retention bonuses, they just did a step up program or step up wages program where they'll be giving supplemental bonuses based on your education level. They also are putting in a pilot program that will help pay child care tuition for staff who have children who go to centers. And for most of us, we either provide free tuition for our staff or greatly reduced. And that's a great benefit to have. But right now, with budgets being so tight, if you have, you know, seven or eight children in your program where you're not charging the staff a fee, you know, that's, that's thousands and thousands of dollars by the end of the year. So it's great if your state has any type of funding options like that.

Going back to like reviewing and negotiating contracts, you really need to do this on a regular basis and regularly review contracts with your suppliers, your service providers and vendors to ensure you're getting the best value for your money. And don't hesitate to negotiate better terms or seek alternative options and if necessary. And sometimes that's hard because you do build great relationships with your vendors. But I have found this year I had to change a couple vendors because their pricing was just a little bit above what we could fit into our budget for this year. So although it's sad to have to break those relationships, at the end of the day, it may be necessary.

Also consider outsourcing non essential tasks. So evaluate whether certain administrative tasks can be outsourced to reduce costs. For example, hiring a bookkeeper or an accountant can help save you time and money in the long run, especially if that means that you're able to get out on the floor more, you're able to help your staff more, which could help reduce staff turnover, which could save you tons of money there. It can also save you from parents pulling out because you have high turnover rates by, you know, having somebody else do your bookkeeping for you so that you're not, you know, backlogged behind a desk.

Investing in staff development, you have to allocate a portion of your budget for staff training and professional development. Well trained and motivated staff will enhance the quality of your child care program. And that leads to increased enrollment and positive word of mouth and referrals. And I would say, you know, everything comes in ebbs and flows. And so right now I know that we have the advantage in the market in one way, because child care spots across the country are very, very limited. But it's not going to stay like that forever. As the economy starts to stabilize and as more funding comes into early childhood and after school programs through the state, through the federal government, they'll be able to have more spaces available. So you really want to make sure that you work hard at keeping your word of mouth and referrals. And that really comes with having great staff because at the end of the day, it's just a building. It's your team that really makes your program and then the way that you lead it.

Also implement cost saving measures. So look for opportunities to reduce expenses without compromising the quality of care. So for instance, you consider energy efficient appliances or bulk purchases of supplies, or even implementing recycling programs. And I'm sure that you could probably name quite a few more. But think about what things you can do that will save you in the long run.

And then review your pricing structure. And if you're not really sure where you should look there. We do have an episode a couple days ago on how to put together your pricing strategy. So I would take a look at that podcast and see if there are any tips there that you haven't implemented. But regularly assess your pricing can ensure that it reflects the value you provide while remaining competitive in the market. And adjusting your rates periodically can help you maintain financial stability and cover the rising costs. And I know it's really hard. I'm literally in the midst of doing that myself at my program. So I definitely practice what I preach in these podcasts. And I feel like if you are a savvy business owner, you understand the necessity of that. You may even want to put that in your parent handbook that once a year you will be evaluating the cost of tuition. And then if you do get some additional funds or bonus money or things like that where you can provide some type of relief for the families who really need it through a sliding scale or a scholarship, then go ahead and do that. But if you don't have the money and you're not savvy, you're not going to be able to help anybody. So you might want to take that into consideration.

Monitor and analyze your budget regularly and keep a close eye on your budget. Make sure you're reviewing your financial statements. And if you're not sure what financial statements you really need to look at, again, pop into our tips. There's five financial reports that you really need to understand. We talked about that in a previous episode. Check that out. If you're not sure, but this will allow you to identify any discrepancies and make necessary adjustments and stay on track towards achieving your financial goals. You also want to seek professional advice. Consider consulting with a financial advisor or an accountant who specializes in the child care business. They can provide you valuable insights and help you make informed financial decisions. You should not be talking to your accountant just at tax time. At a minimum, you should talk to them quarterly. You should pull your report and make an appointment to sit down so you can make adjustments before you get to the end of the year. I'm not an accountant. I am not able to give accounting expertise. But I can tell you that sitting with your accountant at least quarterly, is a minimum. The next thing you want to think about is involving your staff and encourage your staff to contribute ideas for cost saving measures. They're in the classroom all of the time so they may be able to see things that you don't see. They also sometimes have great ideas on revenue generating activities. It could be a Saturday night, once a month, a Saturday night childcare session where parents can go out and have a date night and you have a few staff that want to work some extra hours and you can charge a premium for that service. They also can input and lead innovative solutions and have a sense of ownership and the success of your child care program. So you know, they I feel like my staff are very innovative and most teachers are by and large because they're used to working on a shoestring budget. They're used to making materials out of boxes and stickers and recyclables and all the magic that the preschool teachers and school age teachers do out there. They're pretty crafty and they're pretty smart and I say tap into that resource if you can. And lastly, stay informed with industry trends. Keep up to date with the latest developments in the industry and this will help you anticipate changes, adapt your budget accordingly and stay ahead of the competition. So I have one word about that and I would say universal Pre K that is coming. So is your center prepared to take on those classrooms? Are your staff trained enough at that level? It's a great source of income. Yes, it has pros and cons, but it certainly is a steady stream of income that is going to be continued to be invested in through the federal government and through the states. So if you're not tapping into that, you're going to miss out. Also, I would say quality rating systems, I would say would be another thing. If you're not part of a quality rating system and you have one in your state and they have TID reimbursement, you would be absolutely crazy to not improve the quality of your program to then increase the rates and get that additional subsidy money because that is a win win for your staff and your children and your program. So with that, I'll wrap it up and say by following those 15 or 16 tips, you'll be well equipped to create a budget that supports your growth. Make sure that your centers around for years to come. And remember, effective financial planning is a key component for running a successful child care business. This has been the Child Care Director's Chair if you have enjoyed this episode, we ask that you please follow this podcast. Please give us a review or a rating and share it with a colleague in the field. Thank you so much. We appreciate your time. We hope that you'll tune in tomorrow for our daily tips.

Well, all the cute little kiddos have been picked up and it's time to go home. And that'll do it for another episode of the Child Care Director's Chair. Please leave a review so Erica knows the information is helping you to manage and approve your child care centers. Remember to subscribe to get the latest episode from Erica's Childcare Director's Chair.