Budgeting and financial planning for child care programs

Child Care

The Budget

This chapter deals with what many think is the most difficult and least enjoyable aspects of the business -- preparing a budget. The basic budget for an organization lists the amount of income you are expecting to collect and the expected expenses for the accounting period. An established budget for the year does not change. If you earn more or spend less, these are counted as variances, but the budget remains the same. The chapter recommends working on expenses first and revenue figures second. Expenses include salaries, benefits, rent, services, insurance, fees, supplies, utilities, etc. Some expenses are fixed (insurance, rent) and others (supplies per child) are variable. The following steps need to be followed in building a budget: 1. estimate expenses by a limited time period; 2. estimate future expenses over a year; 3. constructing a salary spreadsheet; 4. estimating tuition revenue; 5. balancing the budget. Each of these steps involves using spreadsheets and other accounting tools to project estimates for the entire year. Revenue is estimated based on registration fees, grants, fundraising, donations, tuition, government funds and food program revenues. Much of revenue estimation involves looking at past years' performance and extrapolating from there. This is especially true for tuition estimation, which works by figuring out how many spaces will be added or subtracted form the previous year. Tuition revenue is raised either by adding more spaces or by raising tuition. Both options need to be factored into the final numbers. The remainder of the chapter includes samples and instructions for working with the spreadsheets needed to estimate revenue and balance the budget.

Chapter 5 -- the Budget as a Planning Tool

Once the budget has been finalized it is a critical tool for planning the year ahead. It includes your enrollment goals and can also be used to educate potential donors about the needs of your organization. The first step in planning is to take the yearly budget and use it to estimate monthly income and expense amounts. One way is to simply divide the entire year's amounts by 12. This method assumes that you will be receiving and spending the same amount for each line item each month. This will likely need to be adjusted, as very few child care programs run at the same capacity and staffing levels in the summer as in the school year. Once the monthly budget has been rough estimated, you must then estimate individual categories within the budget, including salaries (by days paid), tuition revenues, etc. Some months of the year may be projected to run at a surplus an others at a deficit, but this is fine as long as the budget balances for the entire year. The chapter reminds the reader to always remember that these are estimates. Once the budget is divided by month, revenue and expenses can be tracked month-to-month. This enables you to compare what actually occurs with what you have planned on. Every month, the actual income and expenses are compared to the budget and variances are calculated. The chapter concludes with examples of two months of tracking income and expenses for a preschool and notes how to compare budget vs. actual numbers. The variances are used to plan the remaining months, but the budget is not changed. Examples are shown over seven months.

Chapter 7 -- the Decision-Making Process

This chapter discusses the role of the administrator in making decisions. Na administrator is often called upon to make decisions in a variety of areas -- capacity, ratios, hiring, ordering supplies, tuition rates, etc. The chapter begins by discussing the administrator's role. The fist bit of advice is to not to try to make all the decisions for everyone at the center. This does not enable leadership in your staff and you will get nothing else done. The goal, instead, is to make the fewest decisions yourself and to let your staff make most of the day-to-day decisions. They are in the classroom and know what is needed when and where. The decisions of the administrator are those that affect the organization as a whole. This does not mean the staff is not involved. Chapter seven promotes inclusive decision making, where others are included in the decision making process, as a teaching team. In this model, the entire teaching team is involved in making decisions about how the classroom is to be run. If agreement does not come, however, the head teacher may need to assign tasks instead of letting the team flounder. Inclusive decision making has a profound effect on the way your staff runs. While the "best" results are not always achieved, the community of staff is healthier because they were all involved in the process and had their input heard and considered. The chapter cites examples of what inclusive decision making looks like in hiring a teacher, budgeting, performance reviews, moving children up in age groups, etc. The conclusion of the chapter is that, although it may be difficult for an administrator to give up the decision making process, the organization and the people within it will be better off.