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May 19, 2020 5 min read

Reopening Soon? 6 Steps to Strengthen Your Child Care Center’s Financial Stability

Procare By: Procare

The COVID-19 pandemic has been financially draining for many child care centers. For daycares that are eager to reopen, finances play a big role in whether they’re ready to welcome children through their doors again. These six steps can help you ensure your child care center’s financial stability as you plan your reopening.

Plan Ahead
It’s critical to not fall into the trap of inaction, because hoping that everything will work out on its own isn’t a strategy in these unusual times. You’ll need to estimate your cash flow and cash buffer, clearly communicate to parents about new procedures so they feel confident re-enrolling their children, make a plan in case your center needs to close again and proactively search out new business opportunities. The sooner you tackle these steps, the better shape you’ll be in to evaluate if you’re ready to reopen.

Estimate Your Cash Buffer and Cash Flow
It’s important to calculate your cash buffer. To do this, add up your total amount of cash on hand and divide by the expenses you owe. This gives you an idea of how long you can operate before you receive additional cash.

A second important metric is cash flow, which tracks when cash actually comes into your checking account and when it leaves. A cash flow analysis highlights when there will be delays in receiving income, such tuition payments, which, in turn, can help you anticipate when you might not have enough cash to pay bills. Here’s a helpful spreadsheet for tracking cash flow that can make the process easier.

It’s critical to closely track your cash buffer and cash flow, such as weekly, or even every few days, especially if your child care center is closed or you anticipate lower enrollment.

You’ll also want to be sure you can access cash as soon as possible after receiving tuition payments. Consider using a solution like Tuition Express, which ensures your funds are available the next business day.

Prioritize Expenses
While it’s important to conserve cash now, you’ll also need to prioritize expenses that are critical to your business operations, such as paying a lease or mortgage. Realize that you can also re-negotiate payment terms with lenders, creditors or vendors if needed.

If you’re considering taking on new debt, project your future cash flow to be sure you’ll have enough money on hand to pay it back. Unless it’s absolutely necessary in order to reopen your business, consider delaying new debt until you have a better idea of your re-enrollment numbers.

Since families will likely re-enroll in waves and state and local regulations will impact your child-to-teacher ratios, you’ll also need to project appropriate staffing levels and payroll expenses. This includes estimating how many teachers you’ll need for the first few weeks of re-opening and having enough cash on hand for the first payroll.

Help Parents Feel Confident About Returning
Even as state and local stay-at-home orders relax, families may still be wary of re-enrolling their children which, in turn, directly impacts your revenue. It’s important to assure parents their children’s safety is paramount to your reopening. Parents will want to know about the new health and safety protocols you’ll be implementing including social distancing procedures, disinfecting processes and PPE guidelines for children and staff.

Constant communication is important, but it’s also critical to streamline the process of reaching out since you already have a lot of tasks to juggle. Make it easier by using a child care management solution to send out newsletters, emails, photos or videos that describe your reopening plans.

Plan for Future Closures
You also need to plan for the possibility that you may need to close your child care center again if a child or staff worker contracts COVID-19, if your re-enrollment numbers don’t increase to the level needed to pay expenses, or if coronavirus cases increase in your area. After you take into account costs to start up your business, how long would your cash last if you need to shut down again?  Prioritizing expenses and maintaining an adequate cash buffer can be valuable tools if this happens.

This is where cash flow analysis and financial reports come in handy – especially if you need to apply for a loan to cover the costs of another temporary closure. Lending institutions will want to review your financial numbers, and having those reports prepared will make it easy to get them the necessary documentation.

Look for New Opportunities
The daycare centers that navigate the COVID-19 crisis successfully will be those that are flexible and adaptable to families’ new and evolving needs. That means searching out new growth opportunities such as welcoming students from nearby child care centers that permanently closed, providing extended hours of care, offering part-time enrollment or drop-in care, and marketing directly to essential workers.

No matter how prepared you are, you’ll likely find that reopening your daycare center requires changing directions quickly and making fast decisions to overcome obstacles. By taking these six steps, you’ll help ensure your child care center is financially stable to reopen and welcome children again.

Helpful financial resources for child care centers:

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