Cash Management for Day Care Centers

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Cash flow is the way money moves in and out of your business during a specific period of time.

Managing your cash flow is extremely important for a successful daycare business, especially during plans for expansion and market share growth.

Projecting Cash Flow

Before you can properly manage the cash flow for your daycare center, you need to be able to project it accurately. Projecting cash flow means knowing how much money will be coming in and how much you will have to pay in expenses.

Of course, it’s nearly impossible to predict your cash flow with 100% accuracy. Unexpected expenses will arise, children will come and go, and parents will pay late. However, if you’re diligent and organized, you will have a good idea of how much cash your daycare center has in its account at any given time.

To get started, here are some basic cash flow terms:

Starting cash

The amount of cash you have on hand at the beginning of the month.

Cash in

All of the money that you collect over the course of the month. This includes paid receivables from parents as well as cash from the sale of any assets.

Cash out

All fixed and variable expenses for your daycare center. Some common examples include:

  • Rent/mortgage
  • Utilities (electricity, phone, Internet, etc.)
  • Food
  • Payroll
  • Supplies
  • Liability insurance

Ending cash

Add your starting cash and your cash in, and subtract your cash out. This is your ending cash.

If the number is positive, your daycare center has a positive cash flow for the month.

In most cases, the best way to keep track of your cash flow is to use software or a spreadsheet.

And while it may take some time, if you’re properly managing your cash flow and keeping good records, you should be able to anticipate when things will be tight.

A best practice that will help you budget your cash flow is to always lower your projections for cash in and raise them for cash out.

A good rule of thumb is to project a maximum of 85% capacity for your daycare. This way, if a few families leave unexpectedly, you will still be able to pay your bills.

What to Do if You’re Projecting a Deficit

If your daycare center isn’t at full capacity and you’re projecting a deficit, this is where you want to begin your efforts.

Put more time and energy into your marketing to increase enrollment. Encourage current customers to make referrals (incentives might be helpful here), and get social online.

However, if your daycare center is at full capacity and you’re still projecting a deficit, there are a few things you can try:

  • Collect money from parents who are late on payments
  • Try offering a small discount to people who pay early
  • Think about ways to lower your expenses

Sometimes, even after doing all of the above, you may run into a projected deficit. Here are a few ways that you can meet cashflow needs when money is tight.

  • Use emergency funds that you’ve set aside
  • Utilize short-term financing
  • Establish a line of credit with your financial institution

What to Do With Extra Cash

Early childhood education is some of the most rewarding work a person can do. Of course, from a business perspective, the ultimate goal is to make a profit.

If you find yourself in a position where you have extra cash each month, here are some ways you can reinvest the money into your daycare center to ensure future positive growth.

Repay debt

Paying down your debt when you have extra cash will lower your monthly expenses and help you maintain a positive cash flow.

Invest your cash

You probably don’t want to take high risks with your businesses profits, but investing in CDs, money market accounts, or other interest-bearing checking accounts will allow your positive cash flow to work for you by earning interest.

Create or add to your emergency fund

Think about putting money away to establish an emergency fund.

While you may have a positive cash flow right now, things might not always be this way. If you have money set aside, you will be prepared for months where your cash flow is negative or your van breaks down.

Give back to your team

Your staff is the foundation of your business. If your business is successful and consistently profitable, think about increasing wages or offering profit sharing.

This will serve as an incentive for your employees and will help you retain your best team members.


Consider using extra cash to improve your business.

New supplies, equipment, toys, and furniture are all great ways to spend your cash. By improving your facility, you will show your customers that you take pride in your business.


If you’re consistently profitable, it may be time to consider expanding. A larger building or a second location could be viable options that will help you continue to grow your business — and your profits.

If you’d like to learn more about cash management for your business, or if you have any questions not covered by the above article, feel free to come in and talk to a cash management specialist at a branch near you.

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