As a childcare provider, maintaining a balanced budget is vital to running a childcare center. No matter how good your service is, your business will fail if you’re not bringing in as much money as you're spending. In this article, we'll go over budgeting basics to help you understand the many factors that go into a daycare budget.
At its most basic level, a budget is a financial tool that helps track your center's income (money you’re making) and expenses (money you’re spending) while running your business.
A thorough daycare financial plan and childcare center budget will help you understand where your money is going and how to improve efficiency. Consider your daycare's budget to be similar to your household budget. You have mortgage or rent payments, utilities, phone, internet, cable, gas, water, and car payments. Similarly, when starting a daycare, you must budget for utilities, classroom furniture, classroom supplies, advertising expenses, salaries, and other expenses.
Crafting and maintaining the proper budget can help your childcare business reach your financial goals. It’s the ultimate tool for helping you maximize profits so you have what you need to keep the business running and invest back into your center. You can consult your budget to help you prioritize the right purchases, see where you can cut expenses, and know where your profits are going. It helps you maintain checks and balances for your spending and is an ongoing resource you can consult for:
Your childcare business’ budget should be a living document. As a resource, it needs to be continuously adjusted to fit your goals. Regularly review the budget to track your finances and stay flexible to adjust as your needs change or unexpected things occur.
As you update your budget over time, continue to keep your team in the loop. Your staff needs to be on the same page with financial planning so they can bring you feedback or suggestions regarding the decisions. Remember, your team is a financial resource for you to utilize in financial planning and can make a big difference in reaching business goals.
Utilizing a budget spreadsheet resource can streamline your center’s efficiency. Track every business expense, record your revenue, and use it to see a snapshot of your finances throughout the year.
Accuracy is important for everything you do regarding the finances of your childcare business. Tracking and recording your revenue is part of budgeting and financial planning, so you’ll need a reliable system in place. You may be accounting for revenue from multiple places and payers, and it can be time consuming to track down families when payments are late. A billing and payments software like brightwheel can make your billing process organized, accurate, and up-to-date with customizable billing reports that help you track every dollar with ease. Save hours each week with automated invoicing, payment notifications, and autopay, so you get paid on time, every time.
A majority of your revenue as a childcare provider comes from the tuition fees paid for the children registered in your program. Therefore, the most important calculation you'll need to make as a business owner is determining how many children to enroll and how much to charge.
Setting the right tuition fees is one of the most difficult and important decisions you’ll make when starting your childcare center. Before setting your prices, consider all of your financial costs such as salaries, utilities, rent payments, supplies, advertising costs, and other operational expenses, and how many children you’ll be caring for to ensure your prices allow you to stay profitable.
It’s also a good idea to gauge what competitors in the area are charging, as families will likely compare prices to ensure what you’re charging is fair. If your tuition fees are higher, explain why and show parents the added benefits your center will provide over others.
In addition to child care, providers can charge additional fees for extra services, such as providing meals, supplies, (i.e., diapers, wipes, etc.), laundry, transportation and drop-off service for children, and night care.
Childcare providers often charge enrollment fees for the time, paperwork, and individualized attention each applicant requires. Childcare centers can also make money through registration fees and waitlist fees.
Unscheduled care, late payment fees, early drop-off, or late pick-up (outside your regular business hours) are all additional childcare costs. Your childcare charge schedule needs to include any extra costs families might pay to your facility.
Daycare grants can greatly help childcare centers, allowing you to get access to additional funding and financial assistance to run your program. You can apply for funding for things like building and remodeling projects, food, equipment purchases, labor costs, and administrative expenses.
There are several government grants you can apply for to get the funding necessary for your childcare business. Some grants you can apply for include:
Check with your local, state, provincial, or federal governments and advocacy organizations to learn about available options and how to apply.
There are plenty of simple, yet effective preschool fundraising ideas you can implement at your center to help supplement your program's revenue. Communities recognize the importance of high-quality child care and can often be very supportive and willing to contribute to funding your childcare center.
For example, you can organize an online fundraising campaign for specific projects for your daycare center, such as a garden expansion or purchase of equipment. If your daycare is registered with the IRS, you’re eligible to receive donations on Facebook. You can do this by signing up on Facebook with your registry, tax ID number, and bank account for your childcare center. It’s one simple way to raise awareness and receive extra funds.
You can also hold a yard sale or set up a penny drive where families can donate any spare change. Selling tickets for raffles, art exhibits, or talent shows is another method of raising money. You can also organize a bake sale or sell handcrafted jewelry and lanyards to the community to raise funds.
As you budget for your childcare business, you’ll need to understand your expenses thoroughly. Maintaining solid record keeping and making updates promptly will give you the information you need to keep using your budget as a resource and reference. Explore software for childcare providers, like brightwheel, to stay informed of your finances with a real-time snapshot of account balances, payments, and cash flow.
Below we discuss the different expense categories you’ll encounter as a business owner.
Operating expenses are ongoing costs associated with the day-to-day operation of your childcare center. Operating expenses include rent, supplies, utilities, marketing expenses, staff salaries, and business insurance.
If your childcare center is a for-profit entity, the Internal Revenue Service (IRS) permits you to deduct operating expenses from your business taxes. But in order for you to do this, those expenses must be required and appropriate for your childcare center.
Fixed and variable costs can be included in your operating expenses. Fixed costs are expenses that remain constant month after month, whereas variable costs fluctuate in proportion to your business activities.
A fixed cost could be your monthly internet bill, which is the same regardless of how many children are enrolled in your program. Meals, on the other hand, are considered a variable cost. If your center has more children enrolled, you’ll need to spend more money to provide more meals, i.e., the cost varies.
Understanding the various types of expenses will allow you to estimate costs more accurately as you create your childcare center budget.
A capital expense is any money spent purchasing a long-term asset for your childcare center. If you buy chairs and desks, that is considered a capital cost. Capital expenses are investments a childcare center makes in the form of purchases. This includes any money spent on tangible or intangible assets such as:
A sample operating budget helps you anticipate your business expenses before they occur. You can also plan for extra income or find ways to cut costs so you don't spend more than you bring in monthly.
Your budget calculations will be based on estimated monthly costs for each expense item. For this example, let's say you have about 60 children enrolled in your program, you have a full capacity of 80 children, and are open 254 days a year.
You’ll be open Monday through Friday, closed on weekends, and closed on major public and national holidays such as Veteran's Day, Thanksgiving, Christmas, Martin Luther King Jr. Day, and President's Day. Your sample operating budget may look as follows:
Expense item
Total center expenses
Advertising costs:
Business cards and flyers
Social media account management and content creation
