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Marissa Schneggenburger

Creating a Financial Plan for Your Childcare Center

  • September 11, 2020

This can be a difficult time for childcare centers as they navigate new government mandates, health and safety procedures, and lower enrollment and retention rates. These factors have caused a financial strain on many businesses, leading them to look for financial advice. It’s now more important than ever to create a business plan for your childcare center to ensure the financial viability of your business. 

We recently took some time to chat with Audra Wilson-Russell, Owner of WATS CPA. Audra is a licensed Certified Public Accountant (CPA) in the state of Florida and has over 14 years of experience in accounting and taxation. She enjoys working with childcare centers and other small-business owners to help them reach their financial goals. In part one of this Q+A, Audra offers some insight into childcare centers looking to build an emergency fund, organize their budget, navigate COVID-19, and prepare for the future. 

1. How do you recommend childcare centers establish an emergency fund or savings?

Childcare centers must establish an emergency fund. My recommendation would be to have at least two years in reserve. Set money aside during your prosperous seasons in order to get through the off seasons.

An emergency reserve should be comprised of both personal and business expenses. Create a personal budget by adding all of your annual sources of revenue and subtracting all of your annual expenses. This can easily be accomplished in excel.

Next, repeat the same exercise for your center. This may require a tool a little more sophisticated than excel in order to properly calculate the true annual expenses for your center. Using a tool such as Live Plan will calculate payroll more accurately than excel. 

Based on both budgets, tally up the total amount of annual expenses and multiply it by 2. This is your goal amount to have in reserves. 

2. What are some tips for centers navigating financial stress due to COVID-19?

  • “Trim the Fat”

After creating your cash flow projections, review it to “trim the fat” by cutting non-essential expenses. It is my recommendation to go review your profit and loss statement line by line and identify expenses that do not help generate revenue. Look at expenses that you can eliminate without sacrificing the quality of your programs.

  • Shop Commoditized Suppliers

Next, let’s move on to price shopping for commoditized supplies. Commoditized supplies are things such as paper goods, school supplies, meals, and equipment. Be sure not to eliminate expenses that drive revenue. Cutting a marketing program that directly ties into increasing enrollments would not be a good idea. Professional fees, such as consulting and accounting are very pertinent to the growth of the center. When it comes to professional services you do not want to cut costs. Instead, you want to find a firm that offers you more value than you are paying for.

  • Go Virtual

I know it sounds scary if you have never used resources to help you connect virtually. If you are not tech savvy, lean on your teacher’s strengths. So, what are some ways to implement a virtual childcare enter?

  • Teacher interaction

Stay connected with your teacher by meeting online with Zoom, Google Meet, Skype, or some other virtual meeting platform.

If you are using a project management software that allows you and your staff to log in and view tasks, great! If not, use a task management system like Teamwork, Asana, or Trello (some of these have free versions). It will allow you to have visibility and oversight of staff tasks as well as private tasks you set for yourself.

  • Virtual learning for students

Get creative! How cool would it be to create an online preschool? Take your curriculum online for your students. Consider offering the online learning at a fixed reduced rate for your current students.

Imagine all the parents who are now forced to work from home and are being distracted by their children. How can you occupy that child’s time while fulfilling your objective of education? YouTube videos! They are oftentimes tied to their tablets. Create your lesson plans with mini videos created by your teachers. I like this idea because it keeps your staff working AND students entertained and educated.

There are countless Edtech solutions. Check out We Are Teachers website for 190+ Amazing Online Learning Resources.

As an additional resource, visit sitejabber.com for kids’ educational resources organized by age and subject based on crowdsourced data. This guide covers which platforms to select based on your kids’ needs, pricing or free services, the suitable age range and fun virtual activities. See the guide here. 

  • Future Planning

There is no doubt this pandemic has and will continue to change the way we all do business. I would encourage you all to continue to utilize technology, fine tune your processes, and create a contingency plan for future business interruptions. It is also a great idea to diversify your revenue sources by participating in both private pay and government funded programs.

With these tools and recommendations, you keep your center thriving now and in the future. Lean on your CPAs and legal team to help guide your next moves. WATS CPA will be more than happy to assist you in creating cashflow projections for your childcare center.  

3. What are some tips for childcare centers trying to define their financial goals?  

Now more than ever is the best time to meet with your CPA to devise a plan of action for your childcare center. Many small businesses wait until the end of the year to meet with their CPA regarding the financial goals and the health of their business. Unfortunately, this has little impact on future planning.

Go beyond the typical historical financial reporting, and request cash-flow forecasting. Ever wonder if you have enough cash to hire a new staff member or buy a new van? Speak with your CPA about cash-flow forecasting and how it will help you make future decisions that will have a major impact on your business.

To start with your business goals, you must first define your personal goals. This may include creating a personal budget. What is your “why?” Start with that. What keeps you coming into the center each day? Use that as a tool to guide each decision in your business.

Once your business goals are defined, Categorize each one as short-term, mid-term, and long-term. Next, break them down into manageable steps. These tiny steps should be building blocks to accomplish the main goal. How do you eat an elephant? One bite at a time.

Finally, monitor your progress to see how much of the “elephant” you have leftover, and be proud of how much you have “digested.” This will be in the form of KPIs or Key Performance Indicators. Perhaps one of your goals is to increase enrollment. A KPI to keep an eye on would be your FTE (Full Time Equivalent).  Other KPIs to consider are payroll expenses as a percent of revenue, program expenses as a percent of revenue, and facility expenses as a percent of revenue.

All CPAs are not built the same. Find one that offers advisory services that will help grow your center. Have discussions about your goals and targets for the business and how they can help you achieve those goals.

About Audra

Audra Wilson Russell is a licensed Certified Public Accountant in the state of Florida. She is a graduate of the Florida State University with a bachelor’s degree in accounting and an MBA from Lynn University. She has 14+ years of experience in accounting and taxation. Audra enjoys working with childcare centers and other small-business owners to help them reach their financial goals. She has extensive knowledge with many accounting software programs and systems. Audra is a Certified ProAdvisor for both QuickBooks online and Xero accounting software.

Audra Wilson Russell, CPA, MBA, Owner of WATS CPA

Additional financial resources for your childcare center:

How to Maximize Efficiency at Your Childcare Center Using Software

How to Build a Better Budget for Your Childcare Center

Childcare Center Owner’s Guide to Billing and Payments

7 Ways to Increase Revenue at Your Childcare Center

Kangarootime is the leading all-in-one childcare management software for daycares and preschools. With billing and invoicing capabilities, parent communication and staff management tools and classroom automation, Kangarootime helps childcare centers grow and scale. To learn more about optimizing your center with Kangarootime, visit kangarootime.com.

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