Kiddipedia

Kiddipedia

Some childcare business owners experienced a rollercoaster year, while others (lucky ones) enjoyed a consistent income during the financial year. Whatever your financial situation, it’s a good idea to examine your financial tools and procedures at the beginning of the year to ensure they’re still in working order. Especially for the new childcare business owners, they just bought a childcare business through a childcare business broker.

Your financial tools and procedures should help you arrange and manage cash flow. Businesses that do not manage and monitor their cash flow will quickly fail. 

If you’re struggling to keep your head above water or aren’t comfortable with numbers, a financial advisor can help you get back on track. To get you started and comfortable with your data, I’ll provide a checklist of a few simple areas of your business that you can assess and improve right now. 

  1. Know your numbers. 

Review the main parameters that reflect the health of your childcare company on a regular basis. If you don’t comprehend profit and loss, cash flow, or forecasting, you should see an accountant or financial advisor.

Keep track of these key numbers: 

  • Develop an anticipated budget and compare income and expenditure to it to evaluate progress. During COVID-19, you may need two or three forecasts to identify where you stand depending on your ability. 
  • Make sure you review your profit and loss statement and balance sheet on a regular basis. Find an accountant or financial consultant and organise regular appointments to go over the above. 
  • Cash Flow Projection – Monthly cash flow is the amount of money that enters and leaves your company. Know when you’ll have more or less money before it happens. You will feel less concerned if you can accurately predict lean moments or when you can afford to spend more. 
  • Enrolment Numbers – Keep track of how many children are enrolled based on FTE vs Licenced Capacity. Knowing the gap will encourage you to register more children if you have open spaces. Too much time spent without filling gaps costs money. 

  1. Review payment policies. 

Does your parent handbook offer a comprehensive payment policy? Several childcare facilities were able to remain open throughout the outbreak because of a documented payment policy agreement between parents. Businesses who did not have a written contract had to battle to collect tuition from parents and persuade them to continue paying in order to secure their child’s registration. 

A Payment Policy that parents sign upon enrolling is required to hold them accountable for billing issues. Your Payment Policy should include payment methods, due dates, school closures, absences, and late fees. 

We advise the following payment policy best practices: 

  • Automated and contactless payment collection for recurring tuition expenditures. This will save you time and money looking for “forgetful” parents.

  • Develop clear protocols for sick days, vacation days, and justifications for centre closures. If a pupil becomes ill, takes a vacation, or the school shuts for a snow day, you still have overhead and labour costs to cover. To optimize money flow, even during a closure, ensure that your policies protect the school’s best interests and that parents are aware of them before they are applied.

    Sick, vacation, and short-term holiday absences should not be reduced, credited, or paid. Parents should pay tuition weekly, regardless of attendance. Consider providing for more flexibility in school closures due to planned maintenance, natural disasters, or COVID quarantines. Some schools charge 50% tuition during a COVID stoppage, while others charge the full amount or nothing. To minimise misunderstandings, think about what is best for your school and enrolled families and put it down.

  • Make clear the penalties for late payments and programme disqualification. Then follow your rules. Many providers have difficulty enforcing their payment policies because they are so caring, but you must protect your organisation and avoid giving away your services. Late payment fees should begin at 12:01pm on Friday if your policy demands payments by 12pm on Friday for the following week. Your policy should specify when late fees apply and when services will be discontinued due to non-payment. 

  1. Review payment policies. 

If you’re still utilising sticky notes and excel sheets to manage parent payments and collecting cash, credit card, and check, I suggest looking at some of the many automated payment systems available, many of which are tailored exclusively to the childcare sector. There should be more childcare management options that do this. To find a suitable source, consult your current provider or Google. 

Time is money! Automatic payment schemes may save time tracking down payments from busy or forgetful parents. Automation simplifies! Let automation handle it! Most programmes have prices comparable to credit card processing fees, so they won’t break the bank while saving you time and tension, which is important. 

  1. Increase revenue sources. 

Develop additional revenue streams for your childcare business. Offering virtual learning for a price is one option. Depending on your virtual plan, you may charge extra for personalised preschool education. Many parents who are hesitant to enrol their child in a preschool during COVID prefer a preschool-like environment. 

Another option is to implement a school-age help scheme. Help school-aged children with virtual learning. Allow students to attend classes remotely and assist with assignments. 

Entrepreneurs in the childcare industry have even developed unique services. Offering a Friday meal pick-up, a monthly family photo shoot, or a parent’s night out might increase your income. Consider what local parents might desire. 

  1. Adjust the Pay Scale 

You may not have recently studied your employee handbook. Check your pay scale and raise your schedule. If you have a performance-based pay scale, think about moving to a “stepping stone pay scale.”

A performance-based pay system may make estimating your payroll budget difficult since you don’t know how much you’ll award in raises at annual reviews. Completely subjective. Performance-based pay rises may engender workplace conflict and unhappiness. Your employees may believe that only the “favourites” are rewarded. 

Instead, base your remuneration on credentials and qualifications. Set up a stepping-stone system by compensating employees for new certificates, college credits, and degrees. Consider other factors such as years of experience, tenure with your business, and great attendance. A consistent technique for setting starting wage and annual increments might assist you in establishing equal remuneration. 

It will also benefit your money by allowing you to budget for increases and bonuses. This pay scale often begins at the minimum salary and based raises and bonuses on length of employment, credentials, more education, and what you can afford. 

If you use a stepping-stone system, new recruits may begin with your new salary scale. However, verify that your existing employees are grandfathered in at their current pay rate and that the system change happens with their next raise. 

Communicate the change to your team and emphasise the benefits of moving to this new scale, such as eliminating biased raises and bonuses, reducing employee stress during a poor performance day, eliminating paycheck uncertainty, and establishing expectations and milestones to look forward to.