Finances are the foundation...
You may have heard it said that running a quality child care program in your home means first running a quality business. Therefore, your business' finances are the foundation of your program. .
As a provider, you may be thinking "I get my bills paid, so I have enough money coming in!" or "Aren’t budgets only for when you *have* money? I don’t have any money, so what is there to budget?"
So, why budget? First of all, budgeting is a planning process. A budget estimates your money coming in and your money going out. It gives you a way to understand where your money is going and where it is coming from, as well as a way to plan for improvements that you might want to set aside or save funds for, whether it is for your Quality Improvement Plan, retirement, or other important improvements.
If you are in a situation where you don’t feel like you have enough money coming in to cover your expenses, budgets can help you identify areas where spending may be too high and can be adjusted by reducing some expense. Budgeting may also help you to justify any rate changes, which increases income, you may need to make to keep your business in the black.
If you are doing a budget for the first time, you may feel a little overwhelmed. Whenever we choose to organize something for the first time, it’s natural to wonder where to start! Doing a budget just means organizing your estimated income and expenses. When figuring your budget, you can choose to start with figuring out your expenses or your income. Let's start with looking at some of the possible Income and expenses you might put on your budget.
As a provider, you may be thinking "I get my bills paid, so I have enough money coming in!" or "Aren’t budgets only for when you *have* money? I don’t have any money, so what is there to budget?"
So, why budget? First of all, budgeting is a planning process. A budget estimates your money coming in and your money going out. It gives you a way to understand where your money is going and where it is coming from, as well as a way to plan for improvements that you might want to set aside or save funds for, whether it is for your Quality Improvement Plan, retirement, or other important improvements.
If you are in a situation where you don’t feel like you have enough money coming in to cover your expenses, budgets can help you identify areas where spending may be too high and can be adjusted by reducing some expense. Budgeting may also help you to justify any rate changes, which increases income, you may need to make to keep your business in the black.
If you are doing a budget for the first time, you may feel a little overwhelmed. Whenever we choose to organize something for the first time, it’s natural to wonder where to start! Doing a budget just means organizing your estimated income and expenses. When figuring your budget, you can choose to start with figuring out your expenses or your income. Let's start with looking at some of the possible Income and expenses you might put on your budget.
Possible Income and Expenses
Preparing a budget helps you define where you expect the money to come from and how you expect to spend it. It gives you a picture of whether your projected income will meet your expected expenses.
Have you ever wondered what Income and Expenses you should include in your budget? Look no further...click on this link for an interactive tool that will illustrate line items: http://www.spicynodes.org/a/e847e56a2565350dea6dab19731568be
When the link opens (it may take a minute) you will see a wide range of possible income sources and expenses in any family child care program. Be
patient loading the document-it may take a minute! However, if you find your computer has trouble loading this document, you can see the information here instead:
Have you ever wondered what Income and Expenses you should include in your budget? Look no further...click on this link for an interactive tool that will illustrate line items: http://www.spicynodes.org/a/e847e56a2565350dea6dab19731568be
When the link opens (it may take a minute) you will see a wide range of possible income sources and expenses in any family child care program. Be
patient loading the document-it may take a minute! However, if you find your computer has trouble loading this document, you can see the information here instead:
Once the site opens, you can click on any of the light blue squares to read a list of that type of income or expense.
If you find this website too cumbersome, you may want to simply open the Income and Expense categories document below. When we begin creating your budget, we will look at some of the detailed explanations/definitions of some of these categories.
If you find this website too cumbersome, you may want to simply open the Income and Expense categories document below. When we begin creating your budget, we will look at some of the detailed explanations/definitions of some of these categories.
income_expense_categories_family.pdf | |
File Size: | 125 kb |
File Type: |
You can always go back to the beginning by clicking on the 'house' picture.
Budget Worksheet
Now that you have a sense of some of the items that could get listed in a budget, we will take the first steps in creating your Family Child Care Program budget. The first step is to estimate your program's expenses. We have developed a worksheet that walks you through determining what your potential expenses are. Each family child care business is different, so some of items this worksheet addresses may not apply to your program - that's ok. Simply leave those blank.
Note on the picture below that you will answer the question in the column on the left (red arrow), then following the directions in the box to the right, and then fill in the column on the right with a dollar amount. To make this easiest to follow along from worksheet to worksheet, we have put reference numbers in each square to help you transfer amounts from one sheet to the next (purple arrow).
For example, in the first question it says "I pay myself __ per month as a salary" Let's assume you pay yourself $700 per month, so you would put that in the first line. If you multiply $700 x 12 months, your annual salary would be $8400. Use this dollar amount ($8400) when filling future worksheets whenever it asks for [A1]. Hang in there...it will get easier and less confusing!
For example, in the first question it says "I pay myself __ per month as a salary" Let's assume you pay yourself $700 per month, so you would put that in the first line. If you multiply $700 x 12 months, your annual salary would be $8400. Use this dollar amount ($8400) when filling future worksheets whenever it asks for [A1]. Hang in there...it will get easier and less confusing!
Click on the "Estimate Family Expenses" documents below to open. Save to your computer, and then consider printing the 'template'. This document does not open in a new window, so you will have to click on the 'back arrow' in the upper left corner of your computer screen to go back to the tutorial. You may have to 'enable editing' once this document opens, depending on the Office version you have.
Now take some time to fill out the Budget Worksheet to Estimate FCC Program Expenses (below). You can use the 'sample' worksheet on the left as a guide to completing the 'template' on the right. You might find it easiest to print the template document and fill out using pencil, this way you can transfer information from one document to another quite easily.
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Before we go further, below is a short explanation of each line item. For example, what is considered 'children's supplies'? Consider printing this document and saving so you can quickly go back to it as you determine your budget for income and expenses.
line_item_definitions_2013.pdf | |
File Size: | 77 kb |
File Type: |
Creating a Budget, Step by Step
The first step on the next document is to determine your possible income and possible expenses for your annual budget. The worksheet below will walk you step-by-step through the process of working out your possible income and then your possible expenses, using the previous worksheet.
For example, you will notice on page 2 under Business Expenses the notation asking for the amount on line [A1]. In the example above, we calculated this to be $8400.
For example, you will notice on page 2 under Business Expenses the notation asking for the amount on line [A1]. In the example above, we calculated this to be $8400.
Click on the "Creating a Budget" documents below to open. Save to your computer, and then consider printing the 'template'. This document does not open in a new window, so you will have to click on the 'back arrow' in the upper left corner of your computer screen to go back to the tutorial. You may have to 'enable editing' once this document opens, depending on the Office version you have.
Now take some time to fill out the 'Creating a Budget" Worksheet (below). You can use the 'sample' worksheet on the left as a guide to
completing the 'template' on the right. You might find it easiest to print the template document and fill out using pencil, this way you can transfer
information from one document to another quite easily.
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Annual Family Child Care Budget
The final step is to complete your Annual Family Child Care Budget transferring amounts from the previous worksheet, 'Creating a Budget Step by Step'. See [B1] example below:
Click on the "Line Item Budget" documents below to open. Save to your computer, and then consider printing the 'template'. This document does not open in a new window, so you will have to click on the 'back arrow' in the upper left corner of your computer screen to go back to the tutorial. You may have to 'enable editing' once this document opens, depending on the Office version you have.
In order to put it all together, your estimated income and estimated expense figures will need to be on the same document which is called a budget.
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Questions to consider...
Consider how you would answer these questions - use your answers to develop and implement financial practices that will help support the financial health of your business.
1. Does my business have a current annual budget?
2. Do I have line item? (A line item is a description of what the income or expense is.)
3. Does my budget project a profit or a loss? Am I ok with that?
1. Does my business have a current annual budget?
2. Do I have line item? (A line item is a description of what the income or expense is.)
3. Does my budget project a profit or a loss? Am I ok with that?
YoungStar Requirements
Under the Business and Professional Practices section of YoungStar, Family Providers are required to have an ongoing annual line-item budget for 3, 4 and 5 Stars.
The line-item budget must include projected income and expenses for the current year divided into line-items. This is to be a 12-month budget but does not necessarily need to follow the calendar year (January to December). Providers may choose to follow the state or federal fiscal calendar (July to June) or some other time period. The requirement is to show 12 months as a whole or it and can be broken down monthly or quarterly, depending on the
program's preference.
One line-item should include funding for at least one item in the program's Quality Improvement Plan (QIP): this may be a line-item by itself or may be an item within a line-item. For example, a provider may have WMELS training in their QIP and that may be shown within a line-item for "Training" or may be named "QIP" explicitly.
The working budget in this tutorial is an annual line-item budget and does explicitly offer a separate line for QIP. Although the line-item budget in this tutorial is designed as a yearly budget, you may choose to use it quarterly (every 3 months) or monthly; just be sure to indicate on the budget
what timeframe the budget covers.
The line-item budget must include projected income and expenses for the current year divided into line-items. This is to be a 12-month budget but does not necessarily need to follow the calendar year (January to December). Providers may choose to follow the state or federal fiscal calendar (July to June) or some other time period. The requirement is to show 12 months as a whole or it and can be broken down monthly or quarterly, depending on the
program's preference.
One line-item should include funding for at least one item in the program's Quality Improvement Plan (QIP): this may be a line-item by itself or may be an item within a line-item. For example, a provider may have WMELS training in their QIP and that may be shown within a line-item for "Training" or may be named "QIP" explicitly.
The working budget in this tutorial is an annual line-item budget and does explicitly offer a separate line for QIP. Although the line-item budget in this tutorial is designed as a yearly budget, you may choose to use it quarterly (every 3 months) or monthly; just be sure to indicate on the budget
what timeframe the budget covers.
Disclaimer: Materials and links provided by WECA on this tutorial do not constitute legal, accounting, tax or finance advice. Participants seeking professional business advice about specific aspects of their program should consult a professional such as a lawyer, accountant, etc.