Three Strategies To Solve Cash Flow Problems In Your Daycare Business

Accountant and Family-focused financial educator | Helping daycare owners stop stressing about finances and start creating the empowering, thriving child care centers they always dreamed of.

Following different interactive sessions with Childcare and Daycare owners, I found that, most of them have the same prevailing problems. The usual problems for these business owners were, particularly exacerbated when the pandemic struck the whole world.

Cash flow in businesses among Daycare owners have proven to be the major challenge. This problem can be associated with the challenge of ”Cash tightness” which emanates from the lack of adequate and steady influx of money that flows into the business.

However, the cash flow needs of businesses may vary depending on the growth moment or stage of the business. As a business owner, you have financial obligations to meet for your business to stay afloat. You must have consistent revenue to cover necessary expenses and costs related with the business’s operational and strategic management. It is also critical to understand your numbers. Therefore, your business requires reliable and predictable cash flow projections.

Here are three strategies that may be useful in resolving the issue.

1. Maintain a steady upstream Cash Flow
   You must understand the variables that keep cash flow high and revenue margins high with zero significant quality issues. You need to also increase your social media marketing efforts to maximize the number of children enrolled in your programs to assure expansion, scale and significant changes. It is also important to review your prices.You can also explore and benefit from other workstream initiatives, such as

• Funding opportunities
• Participation in Food Assistance Programs
• Automating payment procedures for parents to speed up receivables collection
• Renting out your facility on days when children are not present to raise revenue without needing to add more children.
• Assisting new Childcare business owners as a consultant, or business coach. You can also write a book to share your knowledge and experience with other business owners and stakeholders within the industry or add tutoring to your services.

2. Maintain tight control on Cash outflow.
   The more money you have after expenses, the better financially fit your center will be.
   
   To lower your expenses, you can follow these ideas:

• Reduce your overhead by maintaining the proper staff-to-children ratio and/or reducing your administrative expenditures.
• Manage your payables and take advantage of supplier discounts.
• Maintain control of your inventory levels.
• Review your contracts and obtain the necessary insurance policies.

3. Build a Reserve Account
   Creating a reserve account is very useful since it allows your business to manage unexpected expenses and be appropriately prepared for other business expansion initiatives.

• To do this, you must engage in effective budgetary planning as well as cash flow management, which will aid in the evaluation of your key performance indicators. This will assist your business in establishing a sufficient financial reserve for a successful Daycare.
• Furthermore, you must be familiar with your industry’s child enrollment cycle in order to be better prepared for windfalls and business shocks.

In summary, the basis of a sustainable Daycare business is excellent management of your organization’s cash in and cash out, as well as the creation of a good reserve account, which will considerably reduce the risk of cash flow tightness and its related problems in your business. This will allow you to predictably know when money will come in, what bills must be paid, and easily plan the future of your business.

Here you have it, the three (3) strategies to solve cash flow issues in your daycare business.

If this makes sense and you want to have a conversation about how to improve cash flow in your business email me at admin@daycareaccountants.com and write FREE CONSULTATION.

To Your Success

Irma Oke, CPA