Running a child-care business takes heart, but keeping the budget on track takes strategy.
Whether you run a preschool, nonprofit children’s center, or private daycare, one truth stays constant: your mission is to care for children, not crunch numbers. Yet the financial side of your work determines how well you can keep doing what you love.
Running a childcare business isn’t like running any other small business. Between high labor costs, staffing changes, and tight margins, it’s easy for finances to lose direction. And when that happens, everyone feels it—teachers miss resources, morale dips, and parents may lose confidence.
Since 2019, Harmoney has been helping childcare providers bring order and confidence to their finances. Here’s what makes childcare budgeting unique, what to watch for, and the small, steady changes that make a lasting difference.
Why Childcare Budgets Are Unique
On paper, budgeting sounds simple: track income, manage expenses, and color inside the lines. In reality, daycare finances are more complex—driven by people, mandatory staffing ratios, and the unpredictable rhythm of daily operations.
Labor costs lead the list.
Staffing often consumes 60–90 percent of a center’s budget. Because state-mandated ratios dictate how many teachers must be in each classroom, cutting staff isn’t a real option without affecting quality or compliance. In Massachusetts, for example, ratios can be as strict as one teacher per four children, meaning even a small bump in enrollment could require hiring another full-time educator.
Nonprofits manage extra complexity. If your center operates as a nonprofit, tuition is only part of the story. Unlike for-profit care centers, nonprofits must meet restricted fund requirements—not every grant dollar can be used for general operations. Grants, donations, and program restrictions add a new reporting layer that requires accuracy and attention.
Enrichment programs add hidden costs.
Enrichment programs—like music classes, field trips, or guest instructors—are often what make your center stand out. But without planning, their costs can quietly drain your reserves through extra staffing, materials, or transportation fees.
The takeaway: A one-size-fits-all business template won’t work. The most successful programs build budgets that flex with reality—anchored by ratios, aligned with your mission, and designed to adapt to the rhythm of the school year.
Budget Busters: Common Pitfalls to Watch For
Even a strong plan can go off track without the right guardrails. These are the issues we see most often—and what you can do about them.
Payroll Surprises
Staffing is your biggest investment and often the hardest to predict. Sick days, substitutes, and seasonal hires can quickly push payroll beyond projections. Studies show turnover in childcare is significantly higher than in most other industries, adding even more uncertainty.
Tip: Many centers underestimate the true cost of turnover. Recruitment, onboarding, and overtime coverage can add up to 15–25% of annual payroll for each position replaced. Track substitute costs separately—over time, you’ll see clear patterns that help you anticipate and budget for staffing fluctuations.
Supply and Food Fluctuations
From snacks and cleaning supplies to art materials and diapers, everyday items make up a bigger share of childcare budgets than many expect. Inflation in food and paper goods has averaged 6–8% annually since 2022, and even small price shifts can throw off monthly cash flow. Enrollment changes add another variable—ten more children can mean hundreds more in weekly expenses.
Tip: Build a buffer into your consumable supply categories rather than budgeting to the dollar. This cushion helps absorb seasonal spikes or vendor increases and keeps you from scrambling mid-month. Consistent tracking also helps you spot trends and negotiate smarter with suppliers over time.
Facilities and Maintenance Issues
A leaky roof or a broken A/C unit can throw off your budget faster than you’d expect. Even a minor plumbing fix or a last-minute inspection adds up when reserves are thin.
Tip: Building systems have predictable lifespans: HVAC (15–20 years), playground equipment (8–25 years), roofing (20-30 years). Planning for these reduces crisis spending. Try putting aside a consistent amount each month into a separate facility fund. By the end of the year, that small habit can make the next surprise repair a lot less stressful.
The “Miscellaneous” Trap
When every unplanned expense gets tossed into “miscellaneous,” your financial picture starts to blur. It’s harder to see what’s actually driving costs or where you can make smart cuts.
Tip: Keep your chart of accounts specific and review it regularly. The clearer your categories, the easier it is to make confident financial decisions—and tax season will thank you. More granular expense categories is a best practice among nonprofit accounting literature.
H3: Multiple Income Streams, Poorly Managed
When tuition, grants, and donations all flow into the same account, it’s nearly impossible to see where your money is really coming from or where it’s going. Mixing funds can lead to compliance issues for nonprofits and confusion when reconciling revenue reports.
Tip: Tag or code each income source in your accounting system. Separating tuition, grants, and fundraising revenue makes reporting cleaner, simplifies audits, and gives you a clearer view of your financial health at a glance.
Balancing Quality Care and Financial Stability
You don’t want to cut corners, and the good news is, you don’t have to.
Budgeting isn’t about taking away from the experience you provide—it’s about protecting it.
Aligning Budget Decisions with Your Mission
Maybe your goal is to expand your infant care program. Perhaps it’s time to invest in staff development or renovate your playground. A well-structured budget helps you plan for those goals rather than push them off.
Tools like benchmarking and financial ratios can show you where your program stands compared to similar centers. Tracking numbers like labor costs as a percentage of revenue helps you see what’s sustainable and what needs adjustment.
As the National Association for the Education of Young Children (NAEYC) notes, budgets aren’t just financial documents. They’re reflections of your priorities. Tracking actual results versus projections over time helps ensure that your decisions are responsible, values-driven, and aligned with your long-term mission.
If your daycare is a nonprofit, clean bookkeeping becomes even more critical. Accurate grant reporting and expense classification keep you compliant and strengthen your credibility with funders.
You Don’t Have to Do This Alone
Most child-care providers wear multiple hats: educator, business owner, communicator, leader. Feeling overwhelmed by finances doesn’t mean you’re failing—it means you’re juggling a lot.
Budgeting might not be your passion, but it doesn’t have to be a burden. With the right systems and support, your finances can move from a source of stress to a source of confidence.
At Harmoney, we’ve helped childcare centers with 50+ employees find that clarity. We understand your unique challenges and know what works in your world. Our goal is to make your financial systems simple, transparent, and sustainable.
One Story That Might Sound Familiar
A preschool director reached out to Harmoney feeling overwhelmed. Enrollment was strong, but behind the scenes, the books were months behind. In his role as director, he was managing late tuition, payroll delays, and rising costs—all creating stress—and teachers were starting to leave. On top of that, he was preparing to open a second location for the coming school year.
Through a GleamUP cleanup, we brought his books up to date and built a simple, sustainable budget alongside him. Together, we implemented systems for tuition tracking, payroll, and monthly reviews, making cash flow predictable again. We also established the accounting file for his new location, ensuring he’d never again fall behind in bookkeeping for either center.
The results went far beyond the numbers. Paychecks ran on time, staff felt supported, and turnover dropped. As Teaching Strategies notes, when teachers stay, children thrive—and this center is proof that financial clarity helps make that happen.
With your center’s finances in order, you can focus your energy where it belongs—on helping children grow.
Final Thoughts: Budgeting Is a Tool, Not a Burden
A healthy budget gives you clarity, not constraint. It shows you where your money is going and gives you the power to make confident, informed choices that align with your values.
Budgeting well means protecting the mission that brought you here: providing children with care, stability, and growth. Whether you’re just getting started or looking to rebuild structure after a chaotic year, progress begins with one intentional step.
If staying on top of your daycare budget feels overwhelming, Harmoney can help. Our team specializes in child-care bookkeeping and financial systems that work in the real world. You handle the care—we’ll help you handle the numbers. Book a call with us today!
