Managing finances is a key activity in running every business, more so an early childhood education business. These institutions’ success hinge on the institution’s management and stakeholders’ fiscal discipline. Avoiding bad financial habits is a daily routine.
Early childhood education businesses play an important role in helping young learners on the path of literacy and higher education. Despite the vital role they play, they face serious financial challenges that threaten their sustainability.
This article will delve into crucial tips to help early childhood education businesses navigate the complex maze of money and finance. Find the tips below.
Separate Business and Non-business Accounts
Maintaining separate accounts is a best practice in the running of an early childhood education center. Mixing business and personal accounts portend serious hazards as outlined below;
- It could raise eyebrows with the tax authorities.
- If business expenditure goes through a personal account, you risk creating an impression that you are not in business. This will raise doubts about your venture’s authenticity, and the business may end losing opportunities, such as access to government stimulus aid or private financing.
- Filing tax returns at the end of the financial year becomes a nightmare. It becomes incumbent to scrutinize all transactions to tell apart business expenses from personal undertaking.
- Mixing personal and business finance in the same account smacks of a lack of integrity and professionalism. Transacting in your name when dealing with other businesses will lower your seriousness in their perception and judgment.
Devise a Workable Billing Strategy
Like any other business, early childhood education businesses rely on reliable cash flow to stay afloat. Poor cash flow creates further problems down the road, such as delay in settling utility bills and paying staff salaries.
Sustaining healthy cash flows is easier said than done, with most businesses struggling with delayed payments from clients. Positive cash flows in early childhood education businesses is attainable through a billing strategy backed up by these tactics;
• Dispatching invoices early to clients to allow for faster turnaround
• Sending reminders when invoices are due
• Giving discounts to clients who pay on time
• Accepting electronic payments
• Cutting down on supplier costs
Prudent financial management in early childhood education business is not a one-off event but a long-term process. Financial managers of these institutions need to take both a short term and long-term view to avoid shocks along the way.
Planning has several benefits, such as the business’s ability to clarify its goals, prepare for uncertainties, and manage growth. Early childhood education businesses that plan enhance their resilience during tough times.
Instill Good Financial Habits
Prudence in early childhood education businesses is a whole-of-organization affair. Effective and sustainable financial management practices involves all the institution sections and departments.
A whole of organization approach enhances the attainment of institutions’ goals and promotes unity of purpose. It is unthinkable to leave financial discipline in the hands of a single department.
Financial forecasting entails estimating the future financial situation of a business and putting in place necessary measures. Early childhood education businesses’ financial forecasting takes into consideration past performance and current situation.
Financial forecasting entails collation and analysis of specific business data. This data includes the number of learners, current and expected revenue collection, cash flow position, and balance sheet status. By so doing, the ventures will get a clearer picture of where the business will be in six months, one year, or five years.
Financial projections take into consideration several assumptions covering the best case and worst-case scenario. For better results, institutions should plan around both scenarios.
Constant Monitoring of KPIs
Early childhood education businesses need to come up with a set of indicators to measure progress or lack of it. Indicators assist businesses to assess whether they are on course to achieving already set performance goals. As a general rule, an indicator should be SMART; Specific, Measurable, Attainable, Realistic, and Time bound.
Monitoring of progress of an early education institution will reveal areas of slackness hence inviting early intervention. Important KPIs worth tracking include;
• Number of new and continuing learners year on year
• Revenue collection month to month or quarterly
• Cost per learner
• Learners to teacher’s ratio
Monitor the book of accounts as part of the regular evaluation. Going through the books and bank statements reveals the financial status of the business at any one time. Regular financial reconciliation seals money loopholes and curbs wasteful expenditure.
A budget is an outline of business revenue and expenditure for a certain period. Early childhood education business relies heavily on a well thought out budget to assess the growth trajectory. A clear budget will show the business revenue sources and expenses, both fixed and variable.
A budget is a simple but effective tool that will show at a glance whether a business is existing within its means. Ideally, the business income should be higher than expenditure. The opposite, i.e., higher expenditure than revenue, displays a red flag and a business on a slippery slope.
In summary, a budget serves four key purposes;
• A budget keeps business financial goals on track.
• A budget helps a business assess its capacity to take in debt. If already in debt, a budget provides a compass for coming out of the debt labyrinth.
• Budgets prepare a business for emergencies and unforeseen events.
• A budget helps a business keep spending under control.
Additional Financial Management Tips for Early education Institutions
Over and above the above tips, some additional strategies include;
• Retaining professional financial advisors and accounting professionals to provide expert consultancy
• Creating a rainy-day kitty to cover revenue shortfalls and cash flow problems
• Negotiating with key suppliers for discounts and friendlier payment terms
• Protecting the business from fraud
Money is the lifeblood of any business. Good financial management practices are at the heart of successful early childhood education businesses. Inculcating prudence in fiscal matters and taking control of spending is key in steering early childhood institutions to sustainability and growth.