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A Complete Guide to Managing Child Care Billing

The child care billing process at your daycare, preschool, or after school program can be a complicated and time-consuming operation. With staff looking after kids and planning lessons, and busy parents running out the door, it is easy to lose track of billable care hours for each student and any additional fees that may be accrued.

It can even be a challenge to track down parents and guardians to collect their checks or payments. However, having a consistent cash flow is key to running a successful business, which means that no matter what, time has to be made to organize and collect payments from parents.

There are a lot of considerations that go into the child care billing process aside from collection. Child care providers have to thoughtfully choose their billing rates and structure based upon a multitude of factors, as well as come up with a system to track payments, fees, and credits.

How to Manage Child Care Billing

To simplify this process for child care providers, here are some top considerations and tips for child care center owners as they build out their billing protocol.

Setting a Child Care Rate

Financing Your Daycare Center

Setting the price for care at your daycare center can be tricky. Center owners must find the right balance of what is reasonable for parents, and what is required to keep the center running and providing high-quality care.

It is important to remember that many parents will plan their child care budget out far in advance. Therefore, increasing your billing rate, though sometimes necessary, can be a major inconvenience for parents. That said, it is important that providers be as thorough as possible when pricing their services, to avoid unforeseen price hikes in the future.

First, when mapping out your child care billing rate, factor in how much your space and materials cost. To earn a profit, the payments from each family have to cover the cost of your space, utilities, and supplies such as snacks, games, and crafts for the kids. When assessing these costs, keep in mind seasonal expenses such as the cost of heat in the winter and air conditioning in the summer.

Of course, this money will also have to cover payroll for your staff. The number of instructors centers have to employ will depend on the number of children, and the required student to teacher ratio. As such, center owners will have to keep a record of enrollment numbers as well as tracking enrollment projections to ensure they are not overstaffing, resulting in greater expenses.

Finally, owners must also factor in the prices charged by other care providers in their community to ensure their prices are competitive, as well as the average income in the community to ensure they are not be pricing their child care out of range.

Determining Billing Frequency

Child Care Payments

When it comes to payment structure and how often parents will have to pay, child care centers have many viable options. Among the most popular are weekly, monthly or tiered, which is based on attendance. This might mean paying a flat monthly or weekly rate, or paying on a weekly or monthly basis for the hours of care accrued. A daily tiered, or stepped up rate, means different flat rates for up to a certain number of hours, after which the rate increases.

When deciding how often to bill parents, it’s important that it aligns with how often you pay bills and staff; to ensure your payment structure will support your business on a monthly basis. For example, if you plan to pay staff twice a month, but collect from parents at the end of each month, this could present some issues. To ensure a stable billing structure, you will have to align your enrollment, how often you pay staff and bills, and how often you want to collect from parents.  

Tracking Child Care Billing

child care management software

Regardless of the billing structure chosen by individual child care centers, the most important aspect of billing is that the center is adequately compensated for work on a regular basis. This means keeping track of the number of hours each child attends the center, tracking fees for late pickups or additional costs such as field trips and class outings.

For child care centers to continue to run and be successful, it is necessary that these costs are accounted for, and paid in a timely way. Conversely, maybe your center offers discounts to families that have multiple children enrolled. When tracking costs, it is important that you are as accurate in billing as you want parents to be, so be sure to have a system in place account for these discounts.

Tracking payments manually can be time consuming, and leaves room for error. Child care management software can automatically track billing, while integrating with attendance tracking systems to ensure billed hours are accurate.

Furthermore, statements can automatically be emailed to families to help them track their own finances, while serving as a reminder that their payment is due. The software automatically tracks all transactions and instances of cash leaving and coming into the center, providing center owners with updated reports to ensure the financial needs of the center are being met.

With Procare, child care centers also incorporate automatic billing through Tuition Express. This allows families to pay from their computer or mobile device, or setup recurring payments. This is both convenient for families, and ensures your center is paid on time every time.

Final Thoughts

For child care providers, high quality child care is always the number one priority. However, neglecting the business and financial aspects of your child care business jeopardizes the ability to provide this car one a regular basis. With child care billing software, caregivers can be sure that their billing and accounting are taken care of, allowing them to spend more time with their kids.

Learn more about streamlining the child care billing process here.

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How to Start A Daycare: The Ultimate Guide

Starting your own daycare center can be both exciting and daunting. Many of those who choose to pursue this step in their career do so out of passion for helping children develop and reach their full potential.

While passion and child care experience are musts when opening a daycare, it cannot be overlooked that child care and daycare centers need a solid business plan. Therefore, the opening of your daycare center must be approached with a careful strategy in place to ensure success in the early make or break years. This combination of a clear mission and a carefully constructed business plan will greatly increase the success of your child care business.

At Procare, we want to encourage and enable child care professionals with all of the tools they need to enrich the lives of their students. That is why we have created this outline of important business needs to consider when starting a daycare center. The following information will provide aspiring daycare owners with direction throughout this challenging process.

Daycare Center

The “Why” Behind Opening Your Daycare Center

Starting a business, especially one as demanding as child care, is a huge time and financial commitment. It’s a good idea to examine the reasons driving your decision to open a daycare center, or “your big why.” Make sure you have a clear understanding of the time you will be required to devote before and after opening.

You should also consider your previous child care experience. If you have been in this field for years and know it is what you want, then you can move on to the business planning stage. However, if you have relatively little experience in the field, it might be prudent to gain more experience at an independently owned center or even franchise. Think about why you want to open a daycare and the specific attributes that make you uniquely qualified for this filed.

Assessing Your Market

Once you are committed to opening your own daycare center, you will have to do research to determine how competitive a marketplace your community currently is, and how sustainable an environment it will be for your business in the future.

First, are there already daycare centers open in your community? If so, you will want to look at things like:

  • What kind of center are they?
  • What age groups do they accept?
  • Where are they located?

Another good indicator of the need in your community is whether these child care centers have waiting lists. This information can help you determine if there is enough demand in your community to open you center there.

Another research strategy is to look at the current demographics in your neighborhood. If there are a lot of young families or newlyweds, this indicates that there will continue to be a need for your services in the future.

Differentiating Your Daycare Center

Once you are familiar with the current child care landscape in your community, you have to think about how you will differentiate your program to fill a need not currently being addressed.

Look at the hours of operations for the other centers in your community. Perhaps there is a timeframe early in the morning or late in the evening during which these centers are not open. Filling this need could make your center a valuable resource for parents.

Additionally, if there is an age group that is not being served, such as daycare for infants (newborns to a year) or after school programs, your center could establish a foothold by filling these needs.

Bonus Tip: Talk to parents in your community to find out what they need most from a daycare, and aim to address these needs at your center. 

Business Planning

Business Planning

Once you have done this initial research into whether your daycare business will be viable in your community, you have to begin compiling a comprehensive business plan that maps out your objectives and the strategies by which you will bring them about.                                              

Child Care Center Business Plan Checklist

Here’s a checklist recapping some essential steps of putting together your child care business plan:

  • Competitor matrix
  • Financial Planning: Funding and budgeting
  • Location of your business
  • Staffing needs
  • Licensing requirements
  • Materials, equipment, and program agenda

Bonus Tip: As you go through creating your business plan, it is a good idea to mark down important deadlines and milestones on a calendar. This will ensure you have an accurate timeline for how long planning and preparations will take, and a strong estimate for when your business will be able to open.

Licensing Requirements

Child Care License

There are many legal regulations to consider when opening your center. License requirements are typically determined by states, and therefore will vary based upon where you live. You will have to make sure your business is in compliance with these regulations by acquiring the proper licenses. Child Care Aware offers a licensing resource that directs you to the proper licensing authorities by state.  

It is important to note that child care licenses and business licenses are not the same. You will likely have to acquire separate business licenses and child care licenses to legally operate your business.

Financing

Financing Your Daycare Center

Starting a business is financially demanding. For your endeavor to be successful, it is essential that you accurately assess how much it will cost for you to open the center, determine where that money will come from, and then budget and plan to ensure your financial structure will sustain your business as it gets off the ground.

During this process, you should consider initial expenses, and how much it will cost to run your business on an annual and monthly basis. Consider how much you will pay your daycare staff, what your tuition structure will be for parents, how late fees will factor in, and how much property rent / cost is in your community.

Potential Costs of Opening a Daycare Center

A few examples of the costs associated with opening a daycare center are:

  • Property renovations
  • Insurance
  • Materials
  • Staff
  • Marketing

Funding

It is important that you don’t begin the business process until you know how it will be paid for. This is money can be accrued from a variety of sources including your personal savings, loans from friends, loans from the bank, government programs, or grants.

Financial Tracking

It is important that you keep track of your expenses and cash flow for multiple reasons. First, it will help you to track and pay back any loans in accordance with the agreement you made with the lending party.  

Second, tracking cash flow ensures that you don’t overspend, or create a payment structure that will jeopardize the financial stability of your business on a month-to-month basis.

To be aware of when money comes into and leaves your center monthly, you should be tracking: the number of tuition payments you get per month, how many times a month your center pays employees, how many enrolled children you are permitted to have, and how many of those slots will be filled.

Bonus Tip: Doing these calculations by hand leaves room for error, so we recommend a child care accounting solution that will track financial information for the center and the families you serve, as well as tracking bookkeeping, tuition payments, and cash flow.

Choosing a Location

Daycare Center

The first thing to determine when choosing a location for your daycare center is if you want to run the center from your own home, or in a commercial space. This will affect your expenses and licensing requirements.

The location of your daycare center will be subject to many licensing regulations, including building safety, zoning, physical space requirements, emergency preparedness, and more. Many of these are to ensure that the environment in which you run you center is healthy and secure. This includes things like proper waste removal and having fire alarms. 

Two important location licensing requirements to keep in mind are zoning and physical space requirements. Zoning refers to a permit from the proper authority that allows you to run a business, or be zoned for business. The physical space regulation refers to the requirement that child care centers must have 25 square feet available per student. Therefore, you have to keep in mind that the size of your space will determine how many students are allowed to enroll.

Staffing

Daycare Staff

For parents to feel comfortable leaving their children at your center and confident that they will get the developmental stimulation they need, you staff has to be well trained and experienced. Additionally, you must have enough instructors to provide quality group and individual care, as well as meet ratio requirements.

When hiring staff for your center there are three key features to keep in mind:

  • The student-to-teacher ratio
  • Licensing requirements
  • Training

Student-to-Teacher Ratio

The student-to-teacher ratio refers to the number of instructors that must be present based on the number of and age of the students. The National Association for the Education of Young Children provides recommended ratios based on age and group sizes.

Staff Licensing Requirements

Professional certification requirements and licenses vary by state; however, child care providers are often expected to have a high school degree or secondary degree. Common certification requirements are the Child Care Professional certification and the Child Development Associate certification. These require a certain number of hours of experience in different child care fields.

Staff Training

You should also make sure that your staff has training in safety courses such as CPR and first aid, as well as how to asses and document child development to report to parents. Child care instructors can provide important information to parents about where their children are developmentally, and where they may need individualized attention. That is why it is important to have reporting and parent engagement processes defined at your center, to simplify communication between caretakers and parents. 

Bonus Tip: The interview and review process to find the perfect candidates for your center can be time consuming, so you will want to start the hiring process at least two months prior to the opening of your center.

Last Steps

With financing, licensing, location, and staffing researched and prepared, you are almost ready to open your child care center. Final steps will be getting the necessary equipment and supplies, and setting an agenda for your daycare programs. You will need kid sized tables, furniture, and cots, as well as toys, crafts, and games. You will also need cleaning and administrative supplies.

When setting the agenda for your program you will want to establish routine daycare schedules for each age group. These schedules should incorporate activities that promote early child care development in major areas such as cognitive, emotional, and physical development.

As you get to know your students better, you will be able to cater the activities and learning programs to their specific interests.

Final Thoughts

The processes and planning that go into starting a daycare center can be overwhelming. However, with a defined mission and strategic business plan in place, it can be a successful and worthwhile endeavor. Following the guidelines above will give you the structure you need to build a thriving daycare center with an environment that fosters healthy, happy kids.   

Looking for ways to automate and organize administrative and business functions at your daycare center? Learn how Procare can help!

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Track Donations and Fund Raiser Revenue

Do you want to know how effective your fund-raising efforts are? With Procare Software® you can track donations to your childcare center, preschool or other child-centered business a couple of different ways, depending on your needs.  Track detailed contributions for individual families in the Family Accounting module, with amounts included in deposit reports or, if you don’t need family-level tracking and reporting, you could use the Expenses and Ledger module to record this revenue as a simple journal entry.  We’ll examine both of these options in this article. Continue reading

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January Giveaway With a Twist!

$500 Giveaway$500 towards your school’s fund raising efforts!

ProCare Software wanted to start the New Year right, so we’re beginning with a HUGE giveaway!

Consider the following scenario,

Jimmy is enrolled in your child care center for Tuesday and Thursday, full days. But once a month, his mom brings him on Mondays as well. It was so infrequent, and you’ve been so busy, that you barely noticed when Jimmy started showing up more. It took you a couple months to notice, and now that you have, you realize you should probably mention it to Jimmy’s mom.  Continue reading

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Reporting Payroll Hours for your Child Care Business

42-16072097Recently this question came in to the ProCare Tech Support team. Perhaps your child care business could use payroll reports like this too.

“I need to produce a summary report containing employee name, straight  time and overtime hours and their hourly pay rate.”

This turns out to be an easy one. ProCare Software already includes a Daycare Payroll report with all that information. In fact, ProCare can automatically calculate payroll and withholdings and print payroll checks, as well as offering many standard payroll reports.      Continue reading

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