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  • Writer's pictureRoger Cavendish

Controlling your nursery finances can be child's play

It is essential that you keep a tight reign on your nursery finances. You must ensure your invoices are paid on time, keep an eye on your costs, cash flow and if you have time left; evaluate your financial performance.


How will you juggle all of this and keep the nursery running?


Nurseries that have regular management reporting will stand a far greater chance of success than one writing up their books on an ad hoc basis, and providing these to the accountant once a year. If this sounds like your nursery, then the only time you may look at your nursery finances is when you look at your annual report, which is probably several months after your year end. In fact the only reason you have this is because you have to complete your taxes.


Instead, by keeping on top of your finances will not only keep you in control, but it will provide you with valuable information to enable you to make crucial decisions about your business.


Here are my suggestions:


Send out timely invoices to parents either monthly, or weekly.

Identify separately early years grant funding and mark this is zero to the parent (an ofsted requirement) Note the entitlement of free hours to the  parent.


You can set up different revenue streams in your accounts, such as child tax vouchers, early years grant funding and fees billed. The other revenue stream may be milk funding.


I also recommend splitting your nursery into divisions such as babies, 1-2s, 2-3 year olds, pre school.


Generate sales invoices with your book keeping system, and email invoices direct.

You can then monitor your sales ledger and issue statements and reminders as appropriate.

Run an aged debtor report. This will show how old the debts are and which ones to focus your time on as a priority.


Other income such as child tax vouchers and early years grants will be added straight from the bank and allocate to the sales invoice. This will not be possible for the grants as these will be received in a lump sum from the council, but the amount received should be checked to ensure it agrees with your claim.


Log all purchase invoices and cash receipts onto your system either manually or scan receipts using software such as receipt-bank. Do this regularly, say once a week.


This ensures that you can run a reliable profit & loss account.


Post all bank transactions direct by having a direct bank feed into the book keeping software.


We suggest using cost of sales codes for food, consumables, ie nappies, cleaning items, replaceable toys etc.

These items will vary according to the number of children. Ie food, nappies, replacement items.


Your overheads on the other hand will be largely fixed. Eg. Rent, rates, professional fees, etc. Wages can be semi variable and will change in line with the children/staff ratio


So, what next-


OK so you have got a system where either your book keeper or your accountant will enter your bills onto your software.

It would not be a wise use of your time as owner to do this yourself. Yes you want to look at the results but don’t be tempted to spend your valuable time inputting receipts!


There are many different software systems around but we recommend cloud based online systems. This way you and your accountant can share the numbers and provide two-way feedback.


The next stage is the interesting part. This is where you can get to look at the numbers which will show you where you are right now and how this compares to your targets.

You can then work out where you should be going.


Look at our example. This was put together using Quickbooks, but we also partner with Xero.


The profit & loss provides useful information and this can be compared either monthly or more frequently if required.


The clever part comes when we introduce non financial data, such as staff numbers, children numbers etc. We can combine these with sales and costs to view what are known as key performance indicators.


We will use the actual children numbers as a percentage of the nursery capacity to see

What the occupancy levels are.


As you can see, we have used children numbers to see average income per child and likewise average food costs per child. We use staff numbers to see income per staff member.

This can be very valuable as we can see how efficiently the nursery is running.

We can also compare actual staff numbers to the ofsted required ratio. Assuming you have the required number of staff we can then see how over staffed you maybe and in which age group. This can enable you to re allocate staff amongst teams as necessary.


Using current financial data can enable you to make decisions to maximise your resources. Ultimately using financial information to plot your course forward rather than historical data, looking in the rear view mirror.




















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