TIPS - Table of Contents

Keys to Successful Financial Management

Understanding the Market | Understanding the Law | Setting Realistic Policies and Budgets
Maintaining Enrollment | Prompt Collection of Parent Fees | Staff Recruitment and Retention

One of the most important tools in building a financially secure business is to develop a strong marketing plan. This plan should recognize current supply and demand demographics and understand the laws governing the business. Many good child care businesses fail because their grasp of developmentally appropriate practices and lesson plans, far exceeds their understanding of how to promote and maintain their quality programs.

Familiarization with this list should help new and existing child care programs strengthen their marketing skills, and develop and maintain a sound marketing plan.

MARKETING CHECK OFF LISTS

UNDERSTANDING THE MARKET

Understand Supply and Demand in Your Area

• Is there a need for the type of child care you will offer?
• Is there a special market niche you can fill?
• Will the market be able to afford your services?

Check With Local R & R's for Area Child Care Needs Assessments

• Demographics of existing slots available vs slots needed
• Demographics of ages of children needing care
• Demographics of hours and scheduling needs of parents looking for care.

Understand the Demographics of the Workforce in your Area

• Shift Care, Seasonal Work, Rotating Schedules
• Understand Trends (Four day work weeks might indicate a need for extended hour care)

UNDERSTANDING THE LAW

Know the Laws Associated with Child Care

• Licensing Regulations
• Wage and Hour Requirements - State & Federal
• FICA and Federal Withholding Filed quarterly
• Structure - Profit/Non-profit (501C3)
• Local Zoning
• Building Codes
• Americans With Disability Act (ADA) Requirements

Have an attorney and an accountant on retainer

Immigration Form

SETTING REALISTIC POLICIES AND BUDGETS

Develop An Annual Budget
(As a general rule, about 75% of costs are in personnel; approximately 10% are in occupancy; 6-7% are in food; the rest are in other expenses.)

• Calculate Yearly Occupancy
• Factor in "Parent Failure to Pay" Debts and Under Enrollment  (You won't be 100% full all of the time.)

• Base debts on previous year's experiences.
• Work to minimize future debts through appropriate collection policies.
• Set rates to cover expenses and vacancy factors

Keep Accurate Records Related to the Financial Aspects of the Business

• Employee Work Hours - for payroll and wage and hour reviews
• Attendance of children - for billing
• Purchases - for financial statements, tax purposes, and depreciation of large ticket items
• Fee Collection - for financial statement and management of debts

Utilize Monthly Financial Statements:

• To Keep Budget on Target
• To Identify Problems
• To do Long Range Planning

Terms To be Knowledgeable About:

• Balance Sheet - a picture of the financial health of a business
• Break-Even Point - the number of children needed to be enrolled to cover expenses. (Composition by age group is important here.)
• Accrual vs. Cash System of Accounting - which system most benefits the business?
• Full Time Equivalent (FTE) - refers to the number of enrolled children necessary to equal a full time child.

MAINTAINING ENROLLMENT

Recognize the individual costs of age groups and types of care.

• Reflect these costs in the fees you charge.
• It costs more to serve infants and toddlers because of the lower teacher/child staff ratios. It also costs more to serve several part time, or drop in children than it does for a full time child. In each of these cases you might wish to charge a higher fee.

Manage staffing patterns to minimize costs.

• Consider effective ways to blend children at the beginning and end of the day, and during low enrollment days, while continuing to meet staff to child ratios and group size rules.
• Design opening and closing rooms to take into account the needs of a wider age group. (Particular attention to the needs of younger children will assure consistent quality child care.)

PARENT FEES AND COLLECTION PRACTICES

Minimize the fee break for families with two or more children. The cost for each child is approximately the same.

Charge a start up fee for costs involved in the enrollment procedure. Some programs have a yearly enrollment fee, which may cover field trips and special activities" fees.

Require a two-week termination notice. This allows an opportunity to fill the space of the child who is leaving.

Collect the first two weeks payment in advance, to cover the costs of a person leaving without notice. (If the parent has given the proper notice, and is paid up through the leaving date, return their prepayment.)

Collect fees at the beginning of the week, as opposed to the end of the week.

Establish a late fee to discourage parents from picking up children after closing time. (Increase this amount for repeat offenders.)

Establish a bad check fee.

STAFF RECRUITMENT AND RETENTION

A key to a financially secure business is to have a quality product - in this case, your child care program. Staffing is the key to a quality program. Qualified staff, or staff with the potential for becoming quality personnel, should be targeted for recruitment. Turn over is costly with advertising, hiring and training costs. It is also responsible for increasing stress levels of remaining staff. It takes investment to build quality staff, and proportional efforts to retain staff, but it is well worth the effort.

Recruitment

• Work closely with colleges and associate programs.
• Have a plan for staff advancement (Career Ladder) with increased compensation.
• Use staff and parents as referral sources and give finder's bonuses.
• Work with high school Family and Consumer Education Teachers (FACE) to identify potential new staff.
• Offer competitive wages and benefits. Consider flexible benefits.
• Hire part time college students in appropriate fields of study. (Long term commitment of students is most beneficial as it is important to children to maintain continuity of care.)

Retention

• Have a good orientation plan. (The first two weeks on the job are critical for retention.)
• Provide paid training opportunities.
• Minimize stress with good working conditions.
• Involve staff in management decisions whenever possible.
• Find ways of showing appreciation and rewarding accreditation and other quality work.
• Build in some time away from children for planning and professional growth.
• Give staff some control over budget.
• Be a good listener and take action when appropriate to demonstrate you have listened.
• Be an advocate for your staff. Help federal, state and local decision makers understand the problem of adequate staff compensation.
• Make higher wages a priority.

 

BUSINESS TIPS TO CONSIDER

Begin with excellent parent communication.
Develop, implement and consistently enforce policies which contribute to good business management.
Develop a niche or specialty which will give your center its own personality.
Understand third party payment systems, and state and local funding opportunities.
Keep up with the latest trends in the child care field.

• Attend conferences
• Join professional organizations
• Subscribe to child care administrator magazines

Find ways to give value added services to delight your customers.
Have a marketing plan in constant operation with a special focus for your program's days/hours of low enrollment.