nursery financial management

Financial planning in nurseries – how to get started

See our top tips for nursery financial planning and management, ideal if you want to start a nursery business.

Our latest series of blog posts will introduce prospective nursery owners and managers to the main aspects of financial planning and management. These tips will help you to create effective financial plans and to understand how you can make your nursery financially sustainable. 

In part one we talk about financial management systems for nurseries and forecasting income for your childcare setting. We also include a sample Nursery Budget Forecast toolkit that can be used to plan your new nursery business finances.  

Please note this is intended as a brief guide. NDNA members can contact NDNA for detailed advice on all aspects of starting a nursery. 

1. Setting up your nursery as a limited company 

When you are thinking of starting a nursery, you need to consider the different ways to set up and run a business. The four most common legal structures for a business are: 

  • Limited company 
  • Limited liability partnership 
  • Informal partnership 
  • Sole trader. 

For more information on the differences between these business types, please see the government website, here.  

2. Financial management systems for nurseries 

Having a financial management system in place for your nursery is vital to ensure long-term sustainability and success. But, it is not enough just to have this in place; you must regularly update, monitor and review the information. You need to make sure that your financial circumstances continue to support your overall business strategy.  

Financial management systems cover all aspects of the daily business activity at your childcare setting, including:  

  • Income and expenditure 
  • Managing your budget 
  • Credit control 
  • Monitoring bank balance 
  • Monitoring cash flow 
  • Auditing records at the appropriate time. 

The primary financial statements you need for your nursery financial management systems are: 

  • The balance sheet – A financial statement that includes assets, liabilities, equity capital, total debt etc. at a point in time. A balance sheet shows assets on one side, and liabilities on the other. 
  • Income and expenditure statement – A financial report that provides a summary of your nursery’s revenues, expenses, and profits/losses over a given period of time. The statement shows a company’s ability to generate sales, manage expenses, and create profits. 
  • Cash flow statement – A regular financial statement telling you how much cash you have on hand for a specific period. While income statements are excellent for showing you how much money you’ve spent and earned, they don’t necessarily tell you how much cash you have on hand to cover necessary payments. 

3. The Business Forecast – anticipated income and expenditure for your nursery 

A business forecast is used to estimate income and expenditure for the coming year, as part of your business planning. It should cover income, costs and expenses, looking forward to your business expectations for the coming year. When you make a business forecast, you look at the direction your business is heading in, based on past performance and other factors, and use that to anticipate the future. 

The forecast is prepared before the start of a new financial year and is used during the year to measure performance. You should review your forecast regularly during the year and, where necessary, re-forecast based on knowledge gained during the year to make sure that the business is on the right track. 

The estimates used in the forecast should take into account any plans for changes in your provision. This includes: 

  • Changes to the way you operate your nursery, for example, new services you intend to offer 
  • Plans for creating additional childcare places 
  • Increasing or decreasing staff numbers 
  • Increasing or decreasing costs, for example, expenditure on supplies. 

A business forecast is different to a budget report. Think of a financial forecast as a prediction and budgeting as a plan. 

Sample nursery income forecast toolkit 

  • Download our template to help you forecast the income for your new childcare business below. 

Thank you for reading part 1 of our guide to nursery financial planning and management, written to provide some brief top tips for someone wanting to start a nursery business. In part two of our blog series, we look at the costs associated with opening and running a nursery.  

If you require more support, contact NDNA about Starting a Nursery membership, so we can save you time, give you peace of mind advice and give you access to savings on nursery resources and equipment.

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