the business of child care

The most effective way to keep your center on track financially is by creating and using a budget. In the day-to-day work of running the center, it’s easy to lose sight of the big picture. Your budget can help you monitor the direction and performance of your center, and provide opportunities to make corrections quickly and successfully.

Building the budget is the first step. Learning how to use it is the second. These resources will help you do both.

Paying attention to cash flow can help keep your center out of financial hot water. It’s important to understand and regularly monitor key metrics including cash on hand, receivables, and payables.

Video of a webinar created for child care providers on Managing Cash Flow in Times of Uncertainty. Click on the links below to download worksheets that will help you calculate your own cash flow.

13-week cash flow -- Analysis master

13-week cash flow -- Learning is fun

13-week cash flow -- Learning is fun -- Board decisions

If you could set fees as high as you need to, running an ECE center would be a lot easier. But some factors are beyond a center director’s control. A financially viable center’s revenues must cover its per-child cost.

These resources will help you manage the factors you can control, and answer questions like:

1. What determines per-child cost?
2. What is the per-child cost per program/classroom?
3. What cost factors can you and should you control? How do full enrollment and collections impact per-child cost?

General financial management is an assessment of the skill level of the people managing your finances and the methods they use to track financial information.

A center should ensure that leaders and staff have the skills and training needed to implement financial management best practices and technology, as well as policies that ensure consistency and compliance.

The following are resources for nonprofit centers wishing to improve their general financial management practices.

An important accounting component, checks and balances, or internal controls, ensure a level of transparency and accountability in a center’s financial management. This is particularly important in a nonprofit, but also relevant to a for-profit business that is answerable to employees for the level of its compensation, to parents for the price of its service, and to partners and investors who have an interest in its success.

Additionally, internal controls protect the center when multiple employees are collecting or handling money.

Below is a selection of relevant websites and related articles for all centers wishing to assess and improve internal controls.

The Iron Triangle represents a trinity of practices that are the foundation for sustainable financial management in early childhood education: enrollment management, collections, and fee setting based on a center’s per-child cost.

When seeking to balance their budgets, early childhood program directors typically focus on the rate—the price charged to parents or received as reimbursement from government. While rates are important, income is also profoundly influenced by enrollment and fee collection. All three factors must be understood and monitored for financial sustainability.

The articles below expand on The Iron Triangle and its importance in managing a financially successful early learning program.

Assessments are a practical way to evaluate core business and management practices. Effective tools can help a program director identify their operations’ strengths and areas in need of improvement.

If you’d like to dig deeper into business and administration assessment, consider the Program Administration Scale by Paula Bloom and Teri N. Talan. It was designed to measure the leadership and management practices of center-based early childhood programs.

Child care and early education businesses are  regulated differently in every state, so it’s important to know your state’s laws, as well as federal laws, that govern employment, child welfare, and general business practices.

The following resources will help assess the level of legal risk at your center and provide guidance on using insurance as a tool to protect your business.

An effective human resources program includes relevant personnel policies that are consistently implemented, a creative and thoughtful recruitment plan, and ongoing constructive performance evaluation. You also need to provide and a safe and productive workplace. It takes a lot of work to make this all happen!

The following resources will reinforce your leadership skills and improve your understanding about laws and best practices in human resources.

Nonprofits are typically organized for a community benefit and led by boards of directors. Governance describes the board’s role in determining the center’s long-term direction, implementing policies and activities to achieve objectives, complying with legal requirements, and ensuring accountability to those with an interest or stake in the nonprofit.

To have good governance, the board should contain diversity of skill and experience while being representative of the center’s client base, needs, and mission. The board should also be self-reflective and able to adapt to meet the needs of the center in an evolving regulatory and economic climate.

Below is a selection of relevant websites with resources for nonprofit centers wishing to excel in board governance.