The success of your childcare center depends not only on the quality of your services but also on how you financially manage your business. Bringing in more money than you are spending is vital in keeping your doors open and your childcare center running smoothly. To ensure that your money is being handled accordingly, creating, balancing, and managing a budget should be a priority for any childcare business.
What Is a Budget and What Categories Should It Include
A budget is a financial tool that tracks how much money your business is making (income) and how much your business is spending (expenses).
When building a childcare budget, it’s essential to account for all potential income streams to ensure accurate financial planning. Your income breakdown should include:
- Registration, Enrollment & Tuition Fees: tuition payments from families, one-time registration fees, annual re-enrollment fees, application fees, waitlist fees
- Subsidies and Government Assistance: childcare subsidies from state or federal programs, VPK program funding, food program reimbursement
- Grants and Donations: local, state, or federal grants for early childhood education, facility improvements, private or corporate donations, nonprofit fundraising
- Extended Care and Add-On Services: before and after-school care, weekend or evening care, holiday or summer programs, enrichment classes (dance, music, STEM)
- Late Fees and Other Charges: late pick-up fees, late payment fees, returned check or transaction fees
- Merchandise or Fundraising Sales (optional): branded gear, seasonal fundraising or events (bake sales, raffles)
- Rental income (if applicable): income from renting out your facility after hours for community use or events
A well-rounded childcare center budget should be flexible in order to accommodate fixed and variable expenses and “emergency” funds for unexpected costs. Revenue typically fluctuates during the year, and some expenses are variable with the increase or decrease in that revenue, typically food, merchant fees, and sometimes labor. Other expenses are fixed and do not change, like childcare insurance cost or rent. With that being said, here is a general list of expenses that should be part of your budget:
- Staffing and Personnel Costs: salaries, wages, payroll taxes, employee benefits, professional development, and training. (Tip: This is usually the largest line item, often 45-55% of your budget)
- Facility Costs: rent/mortgage, utilities, property maintenance and repairs, cleaning services, supplies, security systems
- Classroom and Childcare Supplies: curriculum materials, art supplies, books, toys, educational tools, diapers, wipes, sanitation items, nap mats, cots, cribs
- Food and Meal Services: Groceries or catered meals/snacks, kitchen supplies, and cleaning products, compliance with food safety standards
- Administrative and Operational: Office supplies, software, and technology, marketing, and advertising, legal and accounting services, bank fees, and credit card processing fees
- Daycare Insurance: General liability insurance, workers’ compensation insurance, property insurance, vehicle insurance (if you provide transportation)
- Transportation (if applicable): fuel and maintenance for vehicles, driver salaries, licensing and insurance
- Emergency and Reserve Funds: Savings for unexpected repairs or emergencies, coverage for temporary drop enrollment, funds for future investments or upgrades
- Dept Repayment: Often overlooked, cash used for debt repayment or capital improvements, or sources of cash from debt or the sale of assets should be factored in below the operating budget. Debt can either consume or provide cash and it needs to be factored into your budget.
PRO TIP: Build your budget using percent of total revenue, With each portion of revenue adding up to 100%, and each expense would be shown as a percent of the revenue that it is associated with, For example, if your total tuition is $1,000 and you budget your total cost of labor to be $540, your cost of labor would be budgeted at 54% of revenue. The impact will be seen in increasing staff during peak enrollment and reducing staff hours during slower months.
How To Build a Childcare Center Budget Step by Step
Creating the budget sheet for your business can be done in five easy steps:
Step 1: Gather and Review Your Historical Financial Data – Your historical financial data refers to records of your past financial activity, basically what you have earned and spent over time. This includes your income records, expense records, profit and loss statements, enrollment history, previous budgets, and variance reports.
Step 2: Project Your Income – estimate how much you expect to earn.
Step 3: Estimate Your Expenses – list all your anticipated costs for the year or month.
Step 4: Create the Budget—Place your projected income and expenses side by side. You can do this on a spreadsheet, budgeting software, or printable template.
Step 5: Monitor and Adjust Regularly—Once your budget is set, check in monthly or quarterly to ensure you are staying on track and to determine if any adjustments are needed.
Budgeting Supports Long-Term Planning & Growth
Budgeting doesn’t just track dollars; it’s also a powerful tool for long-term financial planning and the growth of your childcare center. Having a clear and organized budget allows you to see the big picture, which helps set saving targets, allocate funds toward long-term investments, and plan for new services and upgrades.
You can avoid overspending and prepare for seasonal slowdowns and unexpected costs by tracking income and expenses. Budgeting also provides your team with stability by ensuring consistent payroll and operations during tight months.
Budgeting also helps you create and grow an emergency fund by making intentional space for it in your financial plan. By creating a budget, you can set aside a fixed amount each month specifically for emergencies, helping to better prepare you for unexpected events.
Track Income & Expenses Regularly
Consistently tracking income and expenses is a cornerstone of good daycare bookkeeping. Revenue may come Budgeting provides real data that can help guide many of your business decisions. By tracking your finances, you have the foresight you need to make wise decisions. Budgeting can help you answer some critical questions you might be asking:
Can we afford to hire another teacher?
Is it time to increase tuition or adjust hours?
Should we invest in marketing or focus on retention?
Should our daycare open on Saturdays?
Knowing your numbers, you can answer these questions confidently and make strategic choices. Having a budget can also help you secure funding or loans for your business because lenders are more likely to support you if you have a solid financial plan.
Need Help Creating or Managing Your Childcare Budget?
Budgeting doesn’t have to be overwhelming, especially when you have the proper support. Whether you’re launching a new childcare center or looking to grow an existing one, Radius Childcare Solutions can help. Reach out today for expert guidance, tailored budgeting tools, and one-on-one support explicitly designed for childcare professionals like you.
