Track money with A BUSINESS Typical income sources
cash-ﬂow budget ▼▲▼▲▼▲▼▲▼▲▼▲ Your main source of income
Operating a child care facility will be parent fees. Estimate
successfully requires a realistic Draft a budget this amount by multiplying the
operating budget. In its most You can set up a cash ßow bud- number of children in care by
basic form, a budget is a plan get on your computer using pro- the monthly or weekly fees you
that estimates how much grams like Microsoft Excel or charge for each child. Some
money you will have coming in Quicken. Investigate other soft- children’s care may be subsi-
(income) and how much you ware options by talking to your dized by community or gov-
will spend (expenses). Because accountant, bookkeeper, profes- ernment grants. Remember that
it’s a plan—not set in stone—it sional association, or a child care you probably will not have full
can and should change as con- administrator in your community. enrollment every month. Some
ditions change. You can also draft a cash ßow experts recommend that you
The person responsible for the statement manually by using a assume 85 percent enrollment
budget is the owner or manager. bookkeeping pad or a sheet of every month. This allows for
In a family day home, that’s the paper on which you have drawn lost fees when parents move to
operator. In a center or school, it columns, one for each month. a different part of town or lose
would be the director, the To understand the cash ßow their eligibility for subsidized
Þnance committee, or the board concept, study the sample on care.
of directors. Some centers hire a this page. Another source of income is
bookkeeper or accounting Þrm Note that cell C3 records food costs reimbursed by the
to handle money. your “Beginning balance.” In U.S. Department of Agriculture.
Experts recommend using a this cell you write the amount One simple way to estimate
budget that shows cash ßow. you have in your business this amount is to use the stan-
This shows the actual cash you account at the beginning of dardized food rates approved
expect to have coming in and your budget year. Line 34, by the Internal Revenue
going out in each of 12 months. “Balance and carryover,” Service: breakfast 98 cents,
Analyzing cash ßow allows reßects the end-of-month bal- lunch or dinner $1.80, and
you to answer a key question: ance that becomes the begin- snack, 53 cents. Multiply these
Will each month’s income cover ning balance the following amounts by the number of
each month’s expenses? month. meals and snacks you serve
(based on children in care) dur-
ing each month. If you think
you spend more than these IRS
rates on food, estimate an
amount based on receipts for
Many child care facilities Þnd
it necessary to raise money. At
various times during the year,
they hold bake sales, carnivals,
and spaghetti dinners. Some ask
local organizations and busi-
nesses for donations, and others
apply for grants from founda-
tions. List the proceeds from
these activities in the months
you expect to receive them.
Your expenses will fall into
four categories: personnel,
38 TEXAS CHILD CARE / FALL 2003
space, equipment and supplies, care business can save taxes,” every month when you pay
and other. Personnel—salaries Texas Child Care, Fall 2001. bills. Continue adding months
and beneÞts—will be the Under Equipment and sup- so that you can always see your
largest expense. According to plies, you will list such things cash ßow at least 12 months
the National Day Care Study, as food, books and toys, and into the future.
the average child care center in paper. Find actual cost of Over the long term, this kind
1979 spent 69 percent of its equipment and supplies in cat- of budgeting will help you see
yearly budget on salaries, 10 alogs and stores. Use actual trends. Is inßation (the cost of
percent on rent or building receipts as much as possible. goods and services) rising?
costs, 16 percent on equipment The other category includes Which months are the tightest?
and supplies, and 5 percent on such expenses as licensing fees, When are we mostly like to use
other costs (Billman, 1993). liability insurance, accounting substitutes? Are parents falling
In a child care facility, you and audit fees, banking and behind in fees? According to
will Þgure the salaries of all legal fees, annual payment for one source, parents who fall
your employees, such as the start-up loan (if applicable), behind two or three months are
director, teachers, aides, a secre- taxes, training, credentialling more likely to leave your facili-
tary or bookkeeper, cook, and fees, association dues, journals, ty without notice than pay up
janitor. Next you will Þgure and advertising. what they owe.
FICA (Social Security and Ideally, a cash ßow statement
Medicare tax) at 7.65 percent Using your cash ﬂow helps you make important
and perhaps add health insur- statement Þnancial decisions. You’ll see
ance and retirement at about 8 As you estimate your income when it may be time to raise
percent. Remember to estimate and expenses for each month, fees or look for additional
wages you will pay substitutes you will note that some expens- income. You’ll also know
when your regular staff take es, such as licensing fees, occur whether your spending match-
sick leave and vacation. only once a year. A cash ßow es your priorities in quality
For a family day home, statement alerts you to these care and education.
experts recommend setting a fees well in advance, so you
salary goal. Let’s assume you can plan to spend less on References
want to earn $30,000 a year. another item the month those Billman, Jean. “Managing
This represents roughly 3,000 fees are due. Finances,” Starting and
hours at $10 an hour. In the row A cash ßow statement also Operating a Child Care Center.
for your salary, write $2,500 in allows you to plan for unex- Dubuque, Iowa: Wm. C.
each month. Multiply that pected expenses. Assume, for Brown Communications, Inc.,
amount by 15.3 to Þgure FICA. example, that new licensing 1993.
Add amounts for health insur- regulations require resilient Decker, Celia Anita, and John
ance and a retirement plan. surfacing under indoor climb- R. Decker. “Budgeting,”
Space refers to the building ing equipment by a certain Planning and Administering
where you care for children. In date. You can begin now to Early Childhood Programs, 3rd.
a child care center, this would plan how you will cut expenses ed. Columbus, Ohio: Charles
include rent, electricity, gas, or increase income each month E. Merrill Publishing Co.,
water, telephone, and property so that you will have the need- 1984.
insurance. In a family day ed amount when it’s due. Ladd, Linda (project director).
home, you would pay your In tight times, avoid the “Child Care as a Business,”
home expenses (mortgage or temptation to delay pay raises The Child Care Provider
rent, utilities, repairs, insur- or cut beneÞts. A well-paid, Program: Training for Family
ance) out of your personal well-trained staff will be more Day Homes & Licensed
account. Keep good records, likely to stay with you (saving Facilities. College Station,
however, so you can count a turnover costs) and provide Texas: Texas Agricultural
portion of these expenses as high quality care. Extension Service, 2000.
deductions on your tax return. After drafting a 12-month
See “How an in-home child cash ßow statement, update it
TEXAS CHILD CARE / FALL 2003 39