As a childcare provider, maintaining a balanced budget is vital to running a childcare center. No matter how good your service is, your business will fail if you’re not bringing in as much money as you're spending.

A thorough daycare financial plan and childcare center budget will help you understand where your money is going and how to improve efficiency. Consider your daycare's budget to be similar to your household budget. You have mortgage or rent payments, utilities, phone, internet, cable, gas, water, and car payments. Similarly, when starting a daycare, you must budget for utilities, classroom furniture, classroom supplies, advertising expenses, salaries, and other expenses.

We'll go over budgeting basics in this post to help you understand the many factors that go into a daycare budget. At its most basic level, a budget helps track your center's income (money you’re making) and expenses (money you’re spending) while running your business.

Daycare income

A majority of your income as a childcare provider comes from the enrollment fees paid for the children registered in your program. Therefore, the most important calculation you'll need to make as a business owner is determining how many children to enroll and how much to charge.

Tuition fees

Setting the right tuition fees is one of the most difficult and important decisions you’ll make when starting your childcare center. Before setting your prices, consider all of your financial costs such as salaries, utilities, rent payments, supplies, advertising costs, and other operational expenses, and how many children you’ll be caring for to ensure your prices allow you to stay profitable. It’s also a good idea to gauge what competitors in the area are charging, as parents will likely compare prices to ensure what you’re charging is fair. If your tuition fees are higher, explain why and show parents the added benefits your center will provide over others.

Service fees

In addition to child care, caregivers can charge a service fee for extra services, such as meals, supplies, i.e., diapers, wipes, etc., laundry, transportation and drop-off service for children, and night care. Caregivers can also charge extra for allowing parents to log in to a protected website owned by the childcare center to watch their children’s live feeds. 

Enrollment fees

Childcare providers often charge enrollment fees for the time, paperwork, and individualized attention each applicant requires. Childcare centers can also make money through registration fees and waitlisting fees.

Additional fees

Unscheduled care, late payment fees, early drop-off, or late pick-up (outside your regular business hours) are all additional childcare costs. Your childcare charge schedule needs to include any extra costs parents might pay to your facility.

Grants

Daycare grants can greatly help childcare centers, allowing you to charge less for enrollment — a win-win situation for both center owners and parents! You can apply for funding for building and remodeling projects, food, equipment purchases, labor costs, and administrative expenses. 

There are several government grants you can apply for to get the funding necessary for your daycare. Some grants you can apply for include:

• The U.S. Department of Commerce Minority Business Development Agency (MBDA) 
• The Small Business Innovation Research Program (SBIR)
• Community Development Block Grant (CDBG)
• Child Care Development Block Grant (CCDBG)
• Child Care Access Means Parents In School
• Community Facilities Grant Program 
• The Child and Adult Care Food Program (CACFP)

Check with your local, state/provincial, or federal governments and advocacy organizations to learn about available options and how to apply.

Fundraising

There are plenty of simple, yet effective preschool fundraising ideas you can implement at your center to help offset your enrollment fees. Communities recognize the importance of high-quality child care and can often be very supportive and willing to contribute to funding your childcare center.

For example, you can organize an online fundraising campaign for specific projects for your daycare center, such as a garden expansion or purchase of equipment. If your daycare is registered with the IRS, you’re eligible to receive donations on Facebook. You can do this by signing up on Facebook with your registry, tax ID number, and bank account for your childcare center. It’s one simple way to raise awareness and receive extra funds.

After receiving donations from families, you can also hold a yard sale or set up a penny drive where families can donate any spare change. Selling tickets for raffles, art exhibits, or talent shows is another method of raising money. You can also organize a bake sale or sell handcrafted jewelry and lanyards to the community to raise funds.

Daycare expenses

There are a lot of costs that go into running a daycare. These can be grouped into two overarching categories: capital and operating.

Operating expenses

Operating expenses are ongoing costs associated with the day-to-day operation of your childcare center. Operating expenses include rent, supplies, inventory costs, marketing, staff salaries, insurance, etc.

If your childcare center isn’t a non-profit, the Internal Revenue Service (IRS) permits you to write off operational expenses. But in order for you to write them off, those expenses must be required and appropriate for your childcare center.

Fixed costs vs. variable costs

Fixed and variable costs can be included in operating expenses. Fixed costs are expenses that remain constant month after month, whereas variable costs fluctuate in proportion to your business activities.

A fixed cost could be your monthly internet bill, which is the same regardless of how many children are enrolled in your programs. Meals, on the other hand, are considered a variable cost. If your center has more children enrolled, you’ll need to spend more money to provide more meals, i.e., the cost varies.

Understanding the various types of expenses will allow you to estimate costs more accurately as you create your childcare center budget.

Capital expenses

A capital expense is any money spent purchasing a long-term asset for your childcare center. If you buy chairs and desks, that is a capital cost. Capital expenses are investments a childcare center makes in the form of purchases.

This includes any money spent on tangible assets such as real estate, computers, office furniture, and intangible assets such as intellectual property, copyrights, and licenses. 

Unlike operational expenses, capital expenses must be capitalized or deducted over time. There are several classes for different sorts of assets, and the IRS has guidelines on how businesses must capitalize assets.

How to make a sample operating budget for daycare

Creating an operating budget for your daycare is easy. Here are the steps you can take

Step 1: Calculate your daycare’s monthly income

Step 2: Create a monthly income template

Step 1: Calculate your daycare's monthly income

It’s important to calculate your average monthly income to know your profit.

As a daycare business, you’ll make most of your income from the weekly or monthly childcare costs that families (or state programs) pay you for childcare services.

Average cost of toddler care

Although the actual costs of childcare can vary greatly based on location, setting, and age, this 2021 report estimates that the average monthly cost for center-based toddler child care in the U.S. is $1,096/month. For an example of how to estimate your monthly and annual income, let’s say you have 30 toddlers: 

• Each family pays $1,096 per month per toddler
• The childcare center would make $32,880 per month with a class of 30 ($1,096 x 30)
• The childcare center would make $394,560 per year with a class of 30 ($32,880 x 12)

Average cost of infant care

While the costs of infant care will vary by location, setting, and age, this 2021 report estimates that the average monthly cost for center-based infant child care in the U.S. is $1,324/month (about 21% more than costs for toddlers). For an example of how to estimate your monthly and annual income, let’s say you have 30 infants: 

• Each family pays $1,324 per month per infant
• The childcare center would make $39,720 per month with a class of 30 ($1,324 x 30)
• The childcare center would make $476,640 per year with a class of 30 ($39,720 x 12)

Step 2: Create a monthly income template

Assume you’ve already collected the registration fees for the 60 children. If you charge a $100 registration fee per child, you’ve made $6,000 in revenue before your grand opening day.

You can include this $6,000 in your yearly income calculated using the income template. You can charge an additional registration fee for each child who renews their term at your daycare yearly to generate additional revenue.

This income template assumes that you’ll keep the 60 children enrolled in your facility for a few months without enrolling any new children. Of course, there will be extra income if another family is interested in enrolling their child in your daycare. Because you have a total capacity of 80 children, you can enroll up to 20 more before starting a waiting list.

Sample operating budget for daycare

What should you do now that you've opened your daycare? It's time to create a sample operating budget. A sample operating budget helps you anticipate your business expenses before they occur. You can also plan for extra income or find ways to cut costs so you don't spend more than you bring in monthly.

Your budget calculations will be based on estimated monthly costs for each expense item. For this example, let's say you have about 60 children enrolled in your daycare (you have a full capacity of 80 children) and are open 254 days a year.

You’ll be open Monday through Friday, closed on weekends, and closed on major public and national holidays such as Veteran's Day, Thanksgiving, Christmas, Martin Luther King Jr. Day, and President's Day. Your sample operating budget may look as follows:

FAQ

Why do you need a childcare budget plan?

Creating your childcare center budget is important for opening and running your facility. Making a budget for your childcare center helps you:

• Understand the steps you must take from inception to opening day and beyond to launch your childcare center successfully.
• Anticipate and create a daycare financial plan for the various expenses you'll face as you prepare to open your center.
• Secure financing or investment for your center.
• Calculate the resources needed for a successful childcare center launch.
• Make sure you have enough operating capital to keep your center running in the short term while you work to increase enrollment.
• If necessary, secure investment or financing to help you launch your center.
• Find ways to budget to accommodate expenses if your monthly revenue is small.
• Limit your spending by allocating a specific dollar amount to each category.
• Determine how much profit you can make after deducting all expenses from your monthly income.
• Decide which items are essential to running your center and which are nice to have.
• Decide how many children you’ll need to enroll to sustain your center.
• Decide how much you’ll need to charge to cover your expenses.
  
  

However, getting into the details, this process gets a little tricky. When you factor in all expenses — from the small things like crayons to bigger ones like salaries and rent — costs quickly increase.

How do you claim daycare expenses on your taxes?

Consult with a business accountant or tax professional to claim daycare expenses on your taxes. Getting your registered tax agent or tax attorney to help with your filing will ensure that your forms are filed correctly and that you’re maximizing all of the benefits from your state-specific expenses.

The amount you pay in salaries, benefits, and operating expenses counts as deductible business costs for corporations, regardless of where your daycare is located. Then, you’ll need to pay a corporate tax based on your daycare's profit at the end of the year.

Daycare expenses for sole proprietors can be deducted under Schedule C. Furthermore, if your daycare business is located in specific areas of your home, a portion of your housing cost — such as a mortgage or rent payment — can be deducted as an expense from taxes. However, you can only deduct the portion of your home used for daycare.

The items you can claim as deductions will vary from state to state, so check your state's website for more information on the income tax deductions that apply to you. The Internal Revenue Service (IRS) also has a comprehensive list of what can and can’t be deducted.

How can I get more grants and donations to benefit my daycare facility?

Setting up a crowdfunding account on sites like GoFundMe can help you get more donations for your daycare facility.

Hold a bake sale and lemonade stand to benefit your daycare, or partner with a business (restaurant, toy store, etc.) for a fundraiser night to donate a percentage of the proceeds to your daycare.

More grants for your daycare can be obtained by:

• Applying for them through the US Small Business Administration.
• Enter "daycare business grants" into your preferred search engine to see what comes up.
• Check whether local or national organizations provide small business owners with daycare business grants.

How can I cut my monthly expenses?

Check your inventory before reordering more supplies to ensure that you don’t have an excess of a particular item.

You can also sign up for a grant such as the Child and Adult Care Food Program funded by the USDA Food and Nutrition Service to help cover your food costs and, in turn, reduce your expenses. 

How can I increase my monthly income?

You can increase your monthly income by trying out new fundraising ideas. Ask parents what types of fundraisers they would support so they can become more involved in them. Incentivize families to sell items from your monthly fundraisers by offering a percentage discount off their weekly tuition based on how much they raise.

How do I ensure tuition fees are paid on time? 

It’s important to set guidelines and policies that encourage families to pay tuition fees on time. Implement late fees and establish a payment reminder system to notify families when tuition is past due. Utilize email reminders before payment is due and after a missed deadline and consider following up with a phone call if your first attempts have no response. While unpaid invoices can be written off as bad debts on your taxes, they also serve as missed income and can affect your ability to pay your business expenses. 

If your center accepts subsidy payments from agencies, this can have a direct impact on your revenue and how you manage payments. Keeping track of payments from multiple payers can be complex and time consuming. A tool like brightwheel’s subsidies feature simplifies subsidy management, enabling you to easily track and manage the money your school is owed and has received from agencies. This feature can ensure you never miss a payment by allowing you to manage your finances in one place, giving you a complete picture of agency invoices, balances, and payments right from within brightwheel billing.

How can I make a daycare balance sheet template for my daycare business?

To make a daycare balance sheet template for your daycare business, create a chart on either Google Sheets or Microsoft Excel. With both options, you can put separate charts on one Excel sheet. If you don’t have or know how to use Microsoft Excel or Google Sheets, you can use other software like Microsoft Word or Google Docs by accessing Drive in your Google account.

A balance sheet template will help you see the total value of your assets, liabilities, and equity. The balance sheet is usually viewed as a "snapshot" of your company's current state. You or an observer can understand your company's financial position at the time of reporting by looking at it.

Create your own childcare budget

Create a simple spreadsheet for your budget plan once you've gathered data and information on all of your anticipated costs. Try to keep your list organized in categories. Make an itemized list for each category of what you intend to buy and how much you expect it to cost. Remember, your budget is a living document, so feel free to tweak it as your projections change or whenever you save money by getting a great deal.

Being a childcare provider is an integral part of society as you help children develop skills they will need for their academic and social life. Best of luck as you are starting your own center!