Handling Financial Matters Chapter 5 ©2013 Cengage Learning. All Rights Reserved

Handling Financial MattersHandling Financial Matters

Chapter 5

©2013 Cengage Learning.All Rights Reserved.

Chapter Objectives

• Explain general policies and procedures related to documenting fiscal transactions.

• Describe how and why a budget is created.

• Explain how an approved budget is used.

• List other financial documents that are needed.


Balancing Income and Expenses

• The director is responsible for managing the finances of the center and obtaining funding

• The director prepares a budget by

– Estimating how much the program will cost– Determining how much income will be available– Seeking more income to equal expenditures,

adjusting expenditures to equal income, or doing both


Estimating Costs

• Factors influencing total amount of money spent by a center

1. Number, ages, and special needs of children enrolled

2. Teacher-to-child ratio

3. Staff training

4. Type and location of building


Estimating Costs

• Factors influencing total amount of money spent by a center

5. Amount of equipment already owned or available

6. Type of program and services provided

7. Section of the country in which center is located

8. General economic conditions

9. Amount and type of in-kind contributions


Costs and Needs

• Costs must be estimated based upon the needs and goals of the program

• First budget consideration should be program goals and objectives instead of available dollars

• Consider factors that will determine money spent


Preparing the Budget

There are two types of budgets

1. Start-up Budgets

2. Operating Budget


Start-up Budget

• The start-up budget consists of all the expenses incurred in starting the center

– Building expense (down payment, renovation) – Purchase of new equipment– Cost of publicizing the center– Telephone/utilities deposit– Salaries for additional personnel needed to assist

director

• Median cost of start up is $48,500©2013 Cengage Learning.

All Rights Reserved.

Operating Budget

•The operating budget consists of an income and expense plan for one year

–Used when centers enroll children and begin the program

•Budget may operate on–Fiscal year (January 1 to December 31)–Operating year (September 1 to August 31)


Budget Categories

1. Personnel: 70%

2. Facility/Utilities: 10%

3. Equipment: 5%

4. Supplies: 3%

5. Food: 3%

6. Other: 9%

(Percentages will differ depending on program,

geographical area)


Salaries

• Costs for personnel requires up to 80% of the operating budget

• Wages must be determined for all staff members, including benefits for full-time employees

PositionPosition Median Hourly Median Hourly WageWage

Preschool Teacher $12.35

Child Care Worker $10.13Bureau of Labor Statistics, 2010


Budget Categories

• New directors may consider the following as a general guideline:– 70% personnel– 10% facility/utilities– 5% equipment– 3% supplies– 3% food– 9% other categories


Additional Expenses• Consultants• Equipment and Supplies• Transportation• Communication• Staff Training• Insurance• Postage• Audit• Licensing


Other Financial Responsibilities

• Designing budget systems

• Managing cash flow

• Ordering goods and services

• Paying bills


Discussion Questions

1. How can a director handle finances in a methodical way?

2. What do you think happens when staff is not paid a reasonable hourly wage? Does this have any impact on the center’s finances?


Fee Policies

• Amount (see market rates)– http://ncchildcare.nc.gov/pdf_forms/center_m

arket_rate_table_effective_100107.pdf

• When fees are due

• Consequences for late payment

Samples

• http://lacccrye.org/campus-tour/fee-policy/

• http://www.littlegardenkids.com/tuition_policy.html

• http://www.cmbchildcare.com/about/tuition.php

• http://www.libertyfoursquare.org/Daycare%20Policies.pdf

More Samples

• http://www.tdlclivermore.com/index.cfm/PageID/1717/index.html

• http://www.stcroixdaycare.org/PDF/DayCareTuitionAgr.pdf

• http://www.coosachristian.com/day-care-policies-and-procedures/

• http://www.edwardsvilleymca.com/locations-hours/early-childhood-development-center/fee-structure-and-payment-policies

Chapter Summary

• Providing a quality program requires developing and following a financial plan

• The financial plan uses the available funds to meet the needs of the children and staff

• The budget is the most important tool for balancing income and meeting expenses


Documents

Handling Financial Matters Chapter 5 ©2013 Cengage Learning. All Rights Reserved