We previously offered a quick list of budgeting basics for childcare centers. How can you tell, however, if things are already getting rocky? Here are 5 warning signs that your childcare center is in financial trouble (and some tips for what to do about it): 

Warning Sign #1: Your center is consistently spending more money each month than is coming in.
Having a clear picture of your center’s finances is important. When you don’t have that knowledge, it may be the case that you’re often spending more money that you bring in, whether that be from tuition, loans, grants, or other sources of income. This ties into one of our budgeting basics for childcare centers—make sure to have calculated your projected cash flow: how much cash do you expect to come in to your business, and how much will be going out? 

Warning Sign #2: Your center’s bills aren’t being paid on time.
The more your center gets behind on paying the money it owes to others (accounts payable), the harder it can be to get out of that hole. Common things to watch are payroll taxes, bills due to suppliers and vendors, and payments owed to lenders. If you do find yourself unable to pay a bill, be honest and reach out to the creditor. Be proactive and work out a payment plan.

Warning Sign #3: Your center is borrowing money from the owners or board members.
While borrowing money from the center’s owners or board members may be a short-term fix, it won’t be a long-term solution. Avoid relying on this consistently or you could find your center suffering from bigger financial woes that were hidden by this quick fix.

Warning Sign #4: Accounts receivable (money that others owe the center) are often paid late.
To keep your center financially healthy, you have to keep track of and enforce your payment deadlines. If you consistently allow others to pay late, you may find your center in trouble, too. To keep this from happening, have clear procedures in place with center families. Invoice parents regularly, collect deposits before accepting new children, and don’t allow late payors to get too far behind. Consider hosting a parent education night with an expert who can offer resources about budgeting and finances, if it seems appropriate. 

Warning Sign #5: You feel constantly stressed about the business aspect of running your center and you’re not sure what to do about it.
With so much to juggle in running a childcare business, help keep from falling behind by considering a software management solution like Smartcare. The right tool should be able to automate those time-consuming administrative tasks—like payroll and accounts receivable—while also tackling the unique needs of a childcare center, such as maintaining child records and communicating with parents.

The information in this post was adapted from First Children’s Finance, a nonprofit that maintains an online business resource center for childcare centers. Check out their website for more!

Remember that with a streamlined, all-in-one solution like Smartcare, you can be out of the office and back to the children in no time, without worrying about the financial health of your center. 

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