How to improve cash flow in a Child Care center

1. Improving
Cash Flow
In Your
Center!
Danny Morris

2.  Money is the life line in any business.
 Cash Flow problems and mismanaged
finances are the major causes of
business failures.

3.  Tuition
 Registration Fees
 Private Pay
 3rd Party Income
 Fundraising

4.  Simply defined it is:
“The Available Cash you have in the
bank to operate your center”.
 It is a measure of your company’s health.
 Ideally at the end of the month a
Positive Cash Flow is when your income
has exceeded your expenses.

5.  Cash Flow determines liquidity.
 Symptom of Cash Flow problems:
 Stretching to cover payroll each pay period.
 Paying bills past due date.
 Lack of funds for emergencies.
 Choosing a excellent Financial Software Program
will help in managing Cash Flow.

6.  A Budget aids you in creating a plan for your
money.
 A Budget is created for the purpose of managing
your cash flow.
 It is an overview of how much income is flowing in
& out of the business, i.e. where your money is
being spent.

7.  Estimate your income based on room capacity and tuition
rates.
 Calculate the Income for each room:
 10 Children X $130.00 Per Week = $1,300.00
 Calculate the number of teachers for student enrollment.
 Multiply the amount of hours times the teacher’s rate of
pay for each room.
 Let’s take a closer look at a Budget…

9. CHANGE IT!
 Don’t like the income that you see? Here are some ways to
increase your income:
 Raise your rates for new families.
 Hold 2-3 Fundraisers a year.
 Collect Annual Registration Fees.
 Offer occasional Weekend or Evening Care.
 Are your Expenses Too High?
 Evaluate what you spend your money on and make changes.
 Where could you save money and reduce the monthly
expenses?

10.  Financial - Having a financial software product is a great way
to manage your income and expenses.
 QuickBooks (Offers Free Trial Online)
 Quicken
 Internal Record Keeping – Tuition Payments, Child Record
Information, Immunization, etc.
 Pro Care
 Easy Care
All of these software suggestions are ideal for
Payroll and Profit & Loss Statements and record keeping.

11.  Being a business owner does not mean that
you love to maintain financial records.
 Signs that you need an Accountant:
 Record keeping is not your favorite thing to do.
 You are unwilling to maintain your income and
expenses on a regular basis.
 You prefer someone else accept the responsibility
of maintaining your financial records.

12.  Understand the importance of efficient record keeping
 Create files for maintaining receipts for all expenses,
i.e. tuition income, food costs, gas expenses, supplies,
etc.
 Plan a specific time each week to enter Income and
Expenses to your computer software.
 Back up financial records on an outside source, i.e.
External Flash Drive, Carbonite, etc.
 Maintain all financial records for a period of 10 years in
the event of an audit.

13.  Payroll
 Food
 Paper Goods
 Supplies
 Insurance
 Rent and/or Mortgage Expenses
 Equipment Purchases

14.  Payroll should be 50% of Gross Revenue (Income).
 Largest Payroll issues are early morning and late
afternoon.
 Need to use a Teacher/Child Ratio Schedule.
 Salaries should be based on credentials and length of
time in industry.
 Use Grid to establish payroll range.

16.  Reduce your Food Expense!
 Plan Ahead – Use a Grocery List!
 Plan Ahead – Don’t go to the Grocery Store
everyday.
 Plan your meals ahead so you know what to buy.
 Use Store Flyers and Coupons.
 Reduce Waste – Cook and use only food needed.
 Check Amazon for snack food and staples.

17.  Price Shop!!!
 Amazon is an excellent source for paper
goods and supplies.
 Spend the money and join Amazon Prime.
 Always compare prices before spending!

18.  Types of Insurance Needed
 Liability
 Building and Contents
 Personal Property
 Workman’s Compensation
 Professional Liability
 Bid Out Insurance Costs at Renewal.

19.  Explore the possibility of Refinancing your current
Mortgage for a lower interest rate.
 Rent or Mortgage payment should never
exceed 15% of your gross tuition income.
 Periodically call financial institutions and shop
around for the current rates being charged for
mortgage refinancing.
 Talk to your landlord, if renting and negotiate a
better lease, rate or term.

20.  Replacing Outdated & Old Furniture and Equipment
 If cost exceeds $500, the item may be a
depreciating expense as it relates to income tax
reporting.
 If cost is under $500, the item may become a
regular expense item.
 New IRS Regulation #179: You may write off entire
purchase price of equipment with the exception of
Autos and Vans for the current tax year.