Last reviewed 3 January 2020

Many providers have their accounting year end at the end of the calendar or fiscal year (31 December or 31 March), but whatever the provision’s year-end date Val Moore reminds us that childcare is a business, must be run on business lines and that includes keeping control of the finances.

Income versus expenditure: the former needs to exceed the latter for financial stability and peace of mind. Sounds simple, but …

Main sources of income

These are the following.

  1. Government early years funding is what it is and there is no way that providers can influence the amount received. Best advice is to ensure that claim forms are completed correctly and submitted promptly.

  2. Fees paid by parents and prompt payment is within the influence of the provider.

    • Wherever possible and particularly where parents take up regular sessions, ask them to pay by standing order. Alternatively, the provision could set-up a direct debit scheme (but there will be a cost implication to the provision from its bank). In these days of internet banking, many parents will bank online and can easily set-up a standing order. Where parents are unwilling to use internet banking, a paper form is easy to complete. The provision should keep and send-off the form to the parent’s bank to ensure that the form is actually sent to the bank. The provision’s bank can supply standing order forms or there are suitable examples online.

      Perhaps parents vary their sessions. In this instance, again, set-up a regular standing order for a minimum payment and remember to invoice any additional sessions on a regular basis: preferably weekly or monthly.

      Check bank statements online to ensure that payments have been made when they are due. A standing order can be cancelled, or not paid if there are insufficient funds: do not presume that payments will always arrive.

      Where standing orders are not being used, invoice at the beginning of the month/period.

      Make it very clear when payment is expected by. If monthly pre-billing, then a maximum of two weeks (ie by the middle of the month) is a fair compromise: ideally by return.

      Those not paying through internet banking, rarely these days carry a cheque book or sufficient cash and there are always the excuses. Have the ability to take payments by credit/debit card — most people carry these. There is a cost to set-up a card system; then going costs of a percentage of the invoice — this cost can be added to the invoice price — but — it must be clearly stated in the provision’s terms and conditions and on the invoice itself. It should only cover the costs involved, not used for added profit.

      Make it very clear of what penalties there will be for late payment, or missed payments (ie by standing order) or bounced cheques. Enforce it.

      It is better to put up fees “little and often” rather than a large amount every several years.

    These first two sources of income must cover the provision’s expenditure.

    • Be business like: take deposits; have a policy about payment when a child is unable to attend (ie holidays and illness) as rent, etc, has still to be paid, as do staff wages, NIC, pension payments, etc.

  3. Fundraising: it is useful for additional items (ie play equipment or special outings) but should not be necessary for day-to-day funding of activities. See the topic Fundraising Ideas for more information.

Expenditure

There are fixed items of expenditure; rent, rates, utilities, staff costs. There are variable items of expenditure: activity materials, refreshments, etc. Generally, in childcare, costs are fairly regular.

Prepare a budget — and having prepared it — use it to monitor income and expenditure. See the topic Budgeting and Financial Planning for a more how to guide.

Monitoring expenditure. It is just so easy to spend more on refreshments or activity materials because “it’s for the children”: but the provision will not be there for the children if it runs out of cash.

Talk to local shop keepers: buying from them regularly, it may be possible to arrange a discount — rather than being dependent upon the big chain supermarkets. If using supermarkets, why not use their delivery system (deliveries from £1) and it prevents any impulse buys — as does their “click and collect” service.

Activity materials. Could parents donate paper or other items; does their employer, or local businesses, throw out items that could be used. Adopt a Blue Peter mentality.

Utilities. Ensure that the provision has the providers’ very best deals on telephone, broadband and fuel. Check yearly. The same goes for stationery suppliers, clothing, accountancy and payroll bureau costs, insurances, cleaning materials and more. Go through the expenditure and see where money could be saved.

Practice good housekeeping. Turn off unnecessary lights and heat and don’t leave machinery on standby. Use second class post or better still emails.

All of the above are not new ideas, but as Val says “we often just forget, or let things slip”.

Undertake regular maintenance of buildings, gardens and equipment. It is false economy to let items deteriorate in the longer term, the repair bills will just be higher.

Marketing

Yes, marketing is part of having a financially healthy childcare provision.

While the provision has most or all of its places taken up, marketing, that is keeping the provision’s name out in the community, will ensure that when advertising is undertaken (ie to fill empty places) the brand will be instantly recognisable. Marketing activities need not be expensive.

Examples include: ensuring the school logos are on uniforms and other equipment; placing regular features in local newspapers; keeping the website up to date with relevant information; using Facebook, Twitter and other social media; sending out monthly e-zines to parents; and placing banners, posters and A-boards outside the school. More information can be found in the topic Promotion: The Basics.

Be in control of the finances, remember the proverb “Money is good servant, but a bad master”.