Child Care Business Budget by skk51796

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Child Care Business Budget document sample

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									                                         BUILDING
 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
                                                                             food purchases.
                                                                                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.

                                                                             Typical expenses
                                                                             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

								
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