Child Care Business – Increasing Cash Flow
Successful cash flow management requires managing the money that comes in and flows out of your child care business. The goal is to maintain a smooth, consistent cash flow. Large increases in expenses and drops in revenues create uneven cash flow situations. It is important to predict and operate your child care business in a manner that provides consistent cash flow and provides funds for future growth. Follow these tips to increase your cash flow.
Keep an eye on your financial records. Cash flow problems often catch the child care owner off guard. The busy day to day operation of the business often allows little time for the review of financial records. You should review your financial information at least once a month. Also, the child care industry has yearly predictable cycles, enrollment decreases during the summer, enrollment increases in the fall, etc. You should plan and adapt your financial management accordingly.
Collect your receivables. Every child care business has a group of “non-paying” or “slow paying” parents. Develop and maintain an effective collections system to lessen the financial stress caused by high receivables.
Retain Cash. Every child care business should have cash reserves or a “rainy day fund”. Having cash reserves allows a business to weather financial spikes and dips better.
Manage your payables. If your suppliers offer a discount for paying early, take advantage of it. Other payables should be paid when due and not early.
Keep your inventory in control. Excess inventory, i.e. food, supplies, toys, and paper products tie up significant amounts of cash. Avoid buying more than you need.
Be price sensitive. Make sure you are paying the best price for everything. Review every service, expense, and purchase to make sure you are not overspending.
Review your tuition rates. Charging the lowest tuition in town only means you are the lowest. Charging the lowest tuition is not a good business decision. Your tuition rates should be adjusted to reflect the market average or above. Find out what your competitors are charging and change your rates accordingly.
Look into leasing. Leasing costs more over the long run, but can still be an effective cash flow management option. Check into leasing versus buying for playground equipment, office equipment, kitchen appliances, etc.
Manage the food program and subsidize care funds. The volume of paperwork is great, but it is imperative that you complete and submit the required paperwork on time. Late submission and errors cause payment delays and denials.
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