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Marissa Schneggenburger

Understanding and Increasing Cash Flow at Your Childcare Center

  • September 18, 2020

Now more than ever, it’s important to understand the financial viability and goals of your childcare center. However, this isn’t always easy as there are many considerations to take into account. From budgeting tools to funding opportunities, there is a lot of information to keep track of.

In part two of our Q&A with Audra Wilson-Russell, Owner of WATS CPA, we focused on how to understand and increase the cash flow of your childcare center. Audra is a licensed Certified Public Accountant (CPA) in the state of Florida and has over 14 years of experience in accounting and taxation. In this article she offers insight into funding opportunities, tools for budgeting and cash flow, and tips to increase your cash flow.

1. What are some good funding opportunities for childcare centers?

With the sharp decrease in student enrollments and government mandated closures, childcare centers are seeing a big decline in revenue. We are all optimistic that the pandemic will turn around and life will be back to business as usual. Until then, you are tasked with paying rent/mortgage, paying teachers, and keeping the lights on. But how do you maintain your centers until then?

According to Forbes, on March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It is an estimated $2 trillion package, which specifically allots $10 Billion for Economic Injury Disaster Loan (EIDL) and $350 billion for Paycheck Protection Loans (PPP) to help small businesses. If you missed the opportunity to participate in the PPP loan program with your bank, there is still time to apply for the EIDL through the Small Business Administration (SBA).

Gusto Payroll company has put together an online spreadsheet of funding opportunities by Federal, State, and Private Resources available to small businesses. Check it frequently for updates.

Diversify your revenue sources to curve the effect of COVID. Consider participating in subsidy programs as well as private pay.  Child Care and Development Block Grant, Head Start, and the USDA Food Program are a few to research.

In addition to your traditional banks and SBA loans, there are also non-traditional loans you may qualify for from FinTech companies. They typically connect directly to your accounting software, banks, and sales platform for a determination of loan amount. The interest rates and/or fees are generally higher, but requirements are less stringent. Checkout Kabbage, Blue Vine, PayPal, Square, and Ondeck.

2. What tools do you recommend for childcare centers to organize and understand their cash flow/budget?

Understanding your cash flow will aid you in making financial decisions today and in the future. Some people think cash flow and budgeting are the same. That is far from the truth. A budget will help with overall planning over the next 1-3 years and a cash flow projection will give insight into how to operate your center in the immediate future. Tools like excel, CashFlow Tool, and Live Plan are designed to connect directly with your accounting platform to create budgets and cashflow forecast. Be sure to connect with a CPA who is knowledgeable in these programs or something similar.

3. What are some tips for childcare centers looking to increase cash flow?

  • Accelerate your cash collections

Increase your cash flow by accelerating your collections from parents. To help speed up your collections from parents, consider using a program that allows you to send online invoices, like Kangarootime. This will allow parents to pay outstanding invoices directly from their cell phones.

We are in a time where we seldom carry cash or checks. Implement a merchant service that would allow you to accept debit and credit card payments.

Even better than the first two options, allow families to set up recurring payments. Automatically collect payments via ACH or credit card with parent’s written consent. Make it a normal part of your center to run payments automatically weekly or monthly.

  • Increase Enrollments

Increase your cash flow by increasing your number of enrollments. There are several creative ways to market your center and increase enrollments. Join your local chamber of commerce and network with other businesses. Try and connect with businesses that serve children and parents.

  • Put Your Business on the Map

Do you ever visit a new town, pull out your phone, and search for “food near me?” Parents are doing the same when it comes to finding a childcare center. Be sure to register your business with Google My Business and put your business on the map. It is free. And we all love free. Doing so would allow parents to leave friendly reviews about your center which increases your chances of being found online. 

  • Be Social

Finally, utilize social media. Use it to increase brand awareness, solicit reviews, and generate leads. Consider creating a private Facebook group for parents of your center. Allow them an opportunity to connect with your brand on a deeper level. This will help to continue to build trust and loyalty and perhaps referrals.

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

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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