Carefully review your cash flow and take special notice of any months where your expenses are greater than your income. You will need to take steps ahead of time to ensure you have the cash on hand to pay those expenses. Depending on the type of the expenses you may be able to shift the timing of them to when you expect to have more income or cover them with savings from excess income from previous months. If your cash flow shows consistent monthly deficits (expenses are greater than income) you will need to take additional steps to ensure your business operates at an even or positive cash flow. You may need to temporarily reduce your salary, permanently increase your rates, grow your enrollment, find additional sources of income, or find ways to save cost. If your cash flow shows consistent monthly profits (income is greater than expenses) think about the best ways to use that surplus. Things to consider might include investing in your business through such things as marketing, facility improvements, training, and program quality improvements. You can also invest profits in a cash reserve to draw on in case of unexpected decreases in revenue or increases in cost, later down the line. Also consider giving yourself a raise or investing in other benefits such as your retirement fund. The above example shows a net-positive cash flow. By the end of this operating year this business will have $1,800 extra in funds available to pay out to you, the owner, or carry over into the next year to cover additional cost and make investments in your business. Completing a Balance Sheet A balance sheet is an important tool for managing your child care business. A balance sheet provides a picture of your businesses finances (your assets, liabilities and net assets) at a specific point in time. One half the balance sheet shows your assets and the other half shows your liabilities and net assets. If done correctly the totals for each half of the sheet should balance out--this is why it is called a balance sheet.
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