Financial management systems for nurseries and early years settings
Here are some hints and tips on keeping accounting records and choosing a nursery management system.
Accounting records for your nursery
The accounting records you need when running a childcare business are:
- The profit and loss account
- The balance sheet
- Fixed assets.
The profit and loss account (also known as the income and expenditure statement) is a statement which shows whether your business has made a profit or loss during a time period (usually one year). All income and expenditure is included in this statement. If there is more income than expenditure, then your business has made a profit. If expenditure exceeds income, then your business has made a loss.
Calculating the point at which your business ‘breaks even’ is important – and is covered in more detail later on in this guide in the section on nursery cash flow and profitability.
The balance sheet is a statement of the financial position of the nursery at that moment in time. The balance sheet shows where all the finance for the business has come from – such as shares, loans, creditors and so on – and how this has been used. A healthy balance sheet will show net current assets, indicating that short-term liabilities can be met as they become due and that there is adequate working capital for the day-to-day requirements of the business. Long-term debts (such as a mortgage) are used to fund the acquisition of fixed assets.
Fixed assets are assets that are used for business operations to generate income and are held for the long term. A fixed asset is not expected to be converted into cash in the short term. Fixed assets are not held for the purpose of immediate resale and are intended to benefit the organization for more than one reporting period. Fixed assets include things like buildings and land, vehicles, machinery and equipment.
Accounting systems for nurseries
For a new nursery owner, it is essential for you have a good system of fee collection. There are many different methods of calculating nursery fees and many different ways to structure childcare fee rates. You may want to keep your fees structure fairly simple, so that it is easier to manage and understand for both staff and parents. If you use a system to invoice fees in advance at the start of the month, you must have a system in place to record and charge for any extra sessions that a child attends.
Records of nursery fees owed and paid should be updated as and when the situation changes. Staying on top of nursery fees is essential, so that both staff and parents are clear about what should be paid and to highlight if any fees are overdue.
Depending on how you arrange payments, records can be either on paper or computerised. There are various accounting systems available to help you organise invoicing and control of fees, as well as other aspects of running a business. These include:
- Sage
- Quickbooks
- Xero.
A simple internet search will show you the various options, so look at these carefully and choose the one that seems right for you. Your accountant, if you use one, may also have a preferred system, so it is worth checking with them before deciding.
You can also search NDNA’s member discounts page for offers from suppliers of accounting systems.
Nursery Management Systems
To run your nursery effectively, you will need to invest in nursery management software. A good system can also help you to computerise other records that you need to keep as part of running the nursery. There are several to choose from.
We recommend you look for a nursery management system that can do the following:
- Maintain full records of children, include allergies, diets immunisation, medical, doctor and contact numbers
- Keep your data secure, for example details of authorised collectors and passwords
- Manage your nursery financial transactions, such as weekly, monthly or termly invoices using sessional or hourly rates
- Record staff qualifications, holiday and sickness
- Weekly or daily registers, waiting lists, and future occupancy
- Export data, for example into an accounting system such as those previously mentioned, or Excel or via BACS for direct debits.
A simple internet search will tell you what is on offer so you can choose the system that works best for you.
You will also need to check that the level of security offered is suitable, so that sensitive personal data can only be accessed by people who need it. NDNA offers support to its members on understanding the General Data Protection Regulations and being clear about how to keep records safely.
You can search NDNA’s member discounts page for offers from suppliers of nursery management software systems.
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