Save Your Pennies Now, Count Your Dollars Later!

At a glance:

• If you feel like this blog doesn’t apply to you because your cash balances are low, remember that it’s never too late to make changes. It’s not easy and difficult decisions might lay ahead, but it’s never too late. Find yourself a

  strategic partner to help you get to the other side!

• Continuously monitor your spending.

• Periodically evaluate your vendors. Are they providing a quality service? Is it time to compare pricing to other vendors?

• Always be on the lookout for loan opportunities with good interest rates.

• Work on paying off unfavorable loans early.

• Have a savings strategy and make it work FOR you.

• Even small amounts of spending add up over time, so no amount is too small to disregard!

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If you’ve owned a childcare center for long enough, you know that there can be times of uncertainty, not only during the parts of the year when you expect to see dips in enrollment (children aging out), but in the future demand of private childcare in your area. We simply cannot always predict the future and the forces that be.

The ever-evolving landscape of childcare can keep us guessing, and at times, make us feel nervous about the future of the industry. Will the state double down on universal childcare and provide funding to private center

s at actual cost of care rates? Will the states create/continue programs within the public schools for young children, further limiting those families that are willing to pay for quality early childhood education? Only time will tell.

What does this mean for us in the short and long term? 

After talking to and understanding the business of countless childcare centers over the years (various sizes, cultures, private pay/subsidy, those turning a profit, those not turning a profit), we have come to our own realizations. 

When business is good, it feels great! You are more likely to have time to breathe and focus on things more strategically, instead of constantly putting out fires. In these times, when you feel that everything is working in your favor, it’s easy to loosen the purse strings and spend freely. Maybe you have repairs you have been putting off, or your classrooms are in desperate need of new materials or furniture. Our advice is to STOP and evaluate needs versus wants. 

When business is good (especially if you just came out of a rough period), it’s not the time to think your problems are behind you for good. It’s time to start stockpiling your cash for the next uncertainty period, in hopes that it never comes. We believe in this for all childcare businesses, unless you have one year or more in cash reserves. Prepping financially for the next uncertainty is not a negative viewpoint; it’s smart. Doing so will help keep anxiety levels low and will help you be a sustainable business for the long haul.

What can you do strategically? 

Need vs. Want

As much as you might want to spend your hard-earned money, we advise you to make a wish list, and in that list, identify what is a need and what is a want. Talk to your staff and walk around your building. What repairs are in desperate need (perhaps for licensing or maybe to help increase enrollments - people do judge your business by the way the building looks)?

Once this list is created, you can come up with a spend strategy. Not everything needs to be purchased at once, so plan it out by month. After each large purchase, analyze your cash to make sure you are still on track for your next purchase, knowing you might need to adjust the timing of the next purchase. If the timeline shifts, this does not mean there is failure to reach your goals; in fact, this is success because you are creating a plan, analyzing your plan, and then adjusting your plan based on what’s currently happening. Planning = Success!

Shop out your vendors

Over time, it's natural to see prices rise. The more important issue is whether the value you're receiving has changed along with the price. Ask yourself: Is the service better, worse, or about the same? It's not uncommon, especially with cleaning companies, to see prices increase while the quality of service declines. If you're no longer happy with the work being done or the level of customer service you're receiving, it may be time to compare other providers. Shopping around can help you determine whether you're getting the value you deserve for the price you're paying.

It’s also important to periodically shop out your vendors for food, disposable gloves, toilet paper, paper towels, and other commonly ordered supplies. Be sure to compare “apples to apples” when looking at pricing. For example, since quantity per box might vary between brands, you’ll want to use the same baseline to compare, so you’ll need to convert the items into a per unit price. Once you’ve done that, you can easily see your price per item. **Word of caution: price per unit isn’t the end all, be all. Quality matters. Cheap toilet paper or cheap gloves may leave your staff or parents unhappy, so be sure to consider both cost and quality!

Leverage a business loan

When it comes down to it, there are two types of loans. The first is a loan you obtain proactively (when times are good), where you have time to shop around and find the best interest rate. The second type is a scramble to get a loan when cash is tight. During those times, it can be harder to qualify for a business loan. Even if you do, you may face higher interest rates and monthly payments that put additional strain on your cash flow. 

Securing a business loan with a low interest rate is forward thinking, especially if you don’t need the extra cash right now. While interest rates are less than desirable for everyone at the time this was written, always look for good opportunities as they arise!

Another good option is to establish a line of credit through your bank before you need it. You may never have to use it, but having access to those funds can provide valuable peace of mind. Think of it as a financial safety net, there when you need it, but hopefully never called upon. A line of credit will need to be secured while the business is doing well financially.

Paying off debt vs. holding onto cash

It might be tempting to pay off a credit card or loan, if you have the cash to do so. However, we caution using this approach without having a strategy behind it. Things to consider: 

• The balance on the loan currently 

• The interest rate on the loan - was interest calculated upfront, therefore paying it off early won’t save you in interest?

• Your monthly/weekly payments

• Can you pay the loan off early without penalties?

Depending on the answers to these questions, you might be better off holding on to the cash (and avoiding being debt free, but cash poor) and continue making your normal payments. If the loan is at a very high interest rate and you're stuck with expensive weekly payments, this is one we would prioritize paying off. We would also always prioritize credit card debt, as interest will continue to accrue on unpaid balances.

Paying off credit cards or loans doesn’t have to be an all or nothing situation. Budget to pay off an additional $100/month towards the principal. Once you adjust to that additional payment and you feel comfortable, can you increase your additional payment to $200/month? You can plan this out and increase your monthly payments as cash flow allows. If cash starts to feel exceptionally tight, you can always back off your additional payments.

Have a savings strategy

We recommend having a business savings account, even if your starting balance is low. With a savings account, you can strategically decide how much cash to transfer to it each month. You can set up an auto transfer of a certain dollar amount each month, or you can transfer a percentage of your main bank balance. 

We recommend the percentage method, but this is something you will need to set on your calendar as a recurring reminder, so you don’t forget. Start by transferring 1% of your month end bank balance on your main bank account each month. From there, adjust to see what you are comfortable with. This method can be done once a month or multiple times throughout the month.

High Yield savings, Money Market account, or CD

These higher earning accounts usually require a minimum account balance, but they earn significantly more interest than the standard bank account. While everyone is different, seeing that we earned 33 cents of interest angers us! 

Strategies to consider:

• Shop different banks to see their going rates. Opening a higher earning bank account at a different bank is fine as long as you don’t anticipate needing to transfer that money into your operating bank account often. Having savings in a separate bank account will set the tone that it’s not to be touched!

• If you have multiple savings accounts, combine funds into your best earning savings account. Which account gets a better interest rate?

• Move as much of your cash into these higher earning accounts as feels comfortable. Having a large balance in your main operating account does you no good, as the funds only sit there earning you no interest! Only keep what you need for the month (plus a little extra) in your operating account.

• Some banks don’t offer high yield savings accounts but instead have flexible CDs. These have lower interest rates than the traditional CD, however, it gives you the flexibility to transfer those funds (penalty free) if you need that cash. The interest is still much higher than a standard savings account.

• Traditional CDs are a great way to stock pile cash if you have extra to spare. Check out banks near you to see the current offers. Pay attention to the length of the CD; sometimes a shorter time period will give you a better interest rate!

Grants

Always be on the lookout for grant opportunities. If you're awarded a grant, consider setting aside approximately 30% of the funds in a separate savings account right away. In many cases, grant proceeds are considered taxable income, meaning you will owe taxes on that money.

Planning ahead by reserving a portion of the grant can help you avoid unnecessary stress, and an unexpected tax bill, when tax season arrives. Even with the potential tax liability, grants are often well worth pursuing because the financial benefits typically far outweigh the taxes owed.

Life is unpredictable, and you can't plan for every situation. But with the right financial strategy, you can prepare for most of them. Having a plan in place allows you to spend less time reacting to the unexpected and more time focusing on the moments that truly need your attention.

Building a financially strong childcare business takes thoughtful planning, intentional spending, and consistent discipline. The good news? Every day is a new opportunity to make a decision that moves your business in the right direction.

"A penny saved is a penny earned." — Benjamin Franklin