In my budgeting workshops, I always have providers start out by completing a budget exercise. As I’m passing out the cash flow worksheet and explaining the exercise, I always caution providers to not freak out, because after entering their business and personal income, and deducting business expenses, and ALL personal expenses, it is very likely that they will find themselves with a negative cash flow. If they do this exercise honestly and completely, about half of the class will discover that they are operating at a deficit every month. That’s the bad news. The good news is that now that they know where they are, they can create a plan to get them to where they want to be.
Providers always end up taking this assignment home to finish because only a few know the amounts to plug in. Most don’t really know what they are bringing in month to month, and it usually gets even worse when we get to the expenses. We usually have a pretty good idea what our bills are, but most of us are not accurately estimating what we are spending on miscellaneous items each month. I highly recommend tracking EVERY single penny you spend for at least a week (a month is even better) to see what you really spend on things. This is most effective if all adults in the household (and older children too) do this.
What often messes up our budgets are those expenses that we don’t track, like a cup of coffee, getting our nails done, lunch at the mall, that $15 you gave to your daughter to go the movies, your son’s baseball uniform, Girl Scout cookies, fast food for dinner because you’re exhausted at the end of the day, parking meters….. These little things add up and can totally derail your budget. I’ve had more than one provider come back and tell me this exercise, and the knowledge of what everyone in the household were actually spending, caused some tension in their household. But they usually follow that up by saying that it also created an opportunity for honest communication and goal setting. Once you see what you are actually spending, you will know what you might need to cut back on – AND you will know what is realistic when you create your budget.
You can’t create a budget if you don’t know how much income you are bringing in, how much you are spending, and what you are spending it on. And, to be successful as a family child care business (yes, you ARE a business!), you have to have a budget. Budgeting allows you to project cash flow for this week, this month, and for six months, and a year from now. When you can project cash flow, you can plan for savings, purchases, bill payments, education, and special events. It also makes it possible to plan for expansion or quality improvements.
