How to Prepare and Manage Your Childcare Budget Effectively

Did the pandemic put your childcare under financial strain? You’re not alone. Reports confirm that childcare center owners were the worst hit by COVID-19. Now that it is behind us, you’re tasked with rebuilding your business. But do you have a strong financial plan and childcare budget to hit increased enrolment numbers?

Building and managing a budget will give you not only peace of mind but also financial freedom. And which business owner doesn’t aspire for that? But it’s important to be free from debt bondage and loan sharks to scale up your childcare center. In this post, we at Illumine will share resources and tips to manage your daycare’s budget and reduce extraneous expenses.

Table of contents

  • Why is budgeting important in a childcare setting?
  • Who sets the childcare budget?
  • What is the biggest expense in an early childhood setting?
  • Is running a daycare profitable?
  • How to manage your childcare budget?
  • Set up your childcare budget with Illumine
  • Download our childcare budget template

Why is budgeting important in a childcare setting?

Setting a budget ensures you keep aside money for any short-term financial crises and control your spending. Visualizing your budget will allow you to understand whether your funds are being allocated accurately.

Here are other equally important reasons why running a daycare without a budget is unthinkable:

  • You can’t create a roadmap for the future or set any program or activity goals without planning how much money you will invest.
  • Growing your revenue without knowing the annual budget and the year-on-year growth of returns generated is an exercise in futility.
  • Managing early childhood programs involves budgeting for workshops, events, faculty onboarding, parent days, and referral money.

Who sets the childcare budget?

The daycare coordinator is responsible for developing a fiscally-responsible budget along with the business owner(s). By definition, a fiscally-responsible budget supports the philosophy of a school program and meets the needs of the students and the parents.

The coordinator is actively involved in resource planning and budget reporting. That’s why they must know about the local guidelines for spending. In most cases, working closely with the finance team assures compliance with the district, state, federal, and national statutes.

Listed below are the responsibilities of a daycare coordinator:

  • Helps the department manager create and keep track of the center budget
  • Gives all center employees accurate paycheck information
  • Aids in maintaining the records required for billing
  • Organizes and carries out fundraising events
  • Helps with grant bids to boost earnings.

What is the biggest expense in an early childhood setting?

Childcare is exhausting because children need experienced teachers to engage them and look after them. There’s room for automation at the administrative level, which childcare management tools like Illumine have made possible. But, childcare will always require teachers.

Source: CAP Action Fund

Thus, it is no surprise that the biggest expense in a daycare center is the workforce. 55% of a daycare’s expenses are allocated to staff hiring and training.

Here’s a typical distribution of daycare expenses:

Daycare expense Allocation
55% Staff hiring and training
15% Maintenance, utility, rent, phone, and internet bills
15% Permit fee, daycare supplies, and equipment
15% Meals and observation tools used in the classroom

Is running a daycare profitable?

Yes, the US Bureau of Labor believes so.

The 2020 Bureau statistics project that daycare businesses will witness meteoric growth in the future. New data from Sageworks supports this claim. The data says that daycare centers in the US have grown in revenue in recent years amid the economic recession.

While other businesses have struggled and shut shop, daycares have remained afloat. Parents cannot go to the office or work remotely from home with children hounding them every five minutes or so. That’s why they prefer to drop them off at the daycare, as they’re convinced the children will make cognitive, emotional, and social progress among other kids their age.

Sageworks analyzed financial statements of daycares across the US in 2020. They concluded that sales among private childcare centers have grown by 9% between 2019 and 2020.

Business in daycares grew by 6-7% between 2008 and 2012, regarded as the period of the great economic recession in the US. This is in contrast to other private companies, which saw 5% losses during the recession, as shown below.

Source: Forbes

How to manage your childcare budget?

Keep the following aspects in mind to streamline your daycare’s budget.


Your income is your daycare’s revenue from new enrolments and quarterly or monthly fees. Depending on the charges you’re asking parents for tuition, equipment, meals, events, workshops, camps, registration fees, deposit amount, and transportation, it will vary.

To generate recurring income, you should increase the tuition fee by 7-10% annually to beat inflation and meet your ever-increasing expenses.

To find your income, simply identify the rates the students in your daycare are charged. Take care of who you’re charging monthly, quarterly, and annually.

Loans, funds, and grants

If your childcare center is not a part of a franchise, you’ll have to seek an investor or a bank that funds you. You can require funds for several reasons, like expanding your business or continuing it.

To learn more about the loans, funds, and grants your center qualifies for, read our blog on assessing and managing your childcare’s financial stability.


There are various costs involved with running your childcare. Expenses are a financial strain on parents and childcare owners if not budgeted correctly. They include the following costs:

  1. Telephone bill
  2. Internet bill
  3. Water bill
  4. Childcare management software, like Illumine
  5. Paid advertising
  6. Daycare insurances
  7. Maintenance fee
  8. Meals
  9. Books and other supplies
  10. Rent
  11. Staff salaries
  12. Cleaning supplies
  13. Utilities
  14. Activities, workshops, and events
  15. Referral money

Set up your childcare budget with Illumine

Make bookkeeping easier with Illumine’s extensive suite of financial management tools.

Our childcare billing software automates the following tasks:

Simplify collecting fees online

Manage overtime, late pickup penalties, and hourly billing digitally. Automate childcare billing to record equipment and activity fees, sibling discounts, family discounts, and tuition fees. We also help you seamlessly track your bills, receipts, and invoices.

Generate digital invoices with a single click

Print out invoices as a PDF file for all past-due accounts and late payment penalties.

Stay updated on each family’s balance

Credit and instantly refund a family’s balance online. Keep track of each family’s balance and their childcare payments. You can also pull out the history of their enrollment fees and family discounts they’ve availed.

Create reports for all your accounting needs

Produce reports for balance sheets for doing your daycare’s taxes. You can also generate monthly and year-end tax statements, sales, and income reports. This will help you comprehensively view your business situation and save money on accounting softwares.

Send automated fee reminders

Illumine is used by 300+ daycares worldwide. We facilitate smoother school operations by helping daycare owners send fee reminders to parents automatically, saving time and resources.

Set up recurring payments

Take charge of the collection of your tuition fee by setting up recurring payments on a weekly, monthly, or hourly basis. The platform was created with parents in mind and enables easy online tuition payments, guaranteeing you receive your tuition on time.

Secure online payments in every major currency

Parents can pay online via NEFT, credit card, or set up autopay. They can also make safe and secure online payments using any computer or mobile device. The money is debited immediately from the parent’s bank account or credit card and is safely credited to your account.

Our platform and billing system run on a virtual private cloud (VPC). Therefore, there’s no communication with the internet gateway, making it 100% secure and reliable.

Manage staff check-in/out and leaves

Our daycare attendance app records staff check-in/out and leaves online to help them get paid quickly. Our app eliminates the chances of human error in determining a staff’s salary accurately and error-free. No stress of manual bookkeeping!

Make your cash flow predictable

Gain a thorough grasp of your business’s finances so you can base your decisions on the flow of income. Keep track of your payment schedules and spending on books, transport, rent, and utility bills through our visually appealing organizer.

Download our childcare budget template

Once you’ve calculated and calibrated your expenses, we recommend creating an expenses budget template.

Our free childcare budget template will give you a full view of your daycare’s financial status.

Remember that your daycare budget is a living document, so make changes you deem fit based on expense shifts.

To try Illumine’s financial management features, you don’t even need a credit card! The first 30 days are free of cost. Book a demo to speak to our expert today.


Related article: How to start a preschool? A complete guide

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