Monthly Financial Review for Childcare Centers: Checklist
Running a focused monthly financial review transforms numbers into decisions. For childcare directors and owners, a consistent month-end process keeps enrollment, staffing, cash flow, and compliance aligned so small issues are caught before they become big problems. Below is a practical playbook you can use every month to review your P&L, track expenses, and follow up with concrete actions.
What a monthly financial review should achieve
A monthly review is not just about closing books — it should help you answer three questions:
- Are we meeting revenue expectations from tuition, subsidies, and other income?
- Are expenses (especially payroll) in line with enrollment and budget?
- What immediate actions do we need to take to protect cash and improve profitability?
Structure the meeting so it lasts 30–60 minutes: quick financial snapshot, variance and problem areas, action items with owners and deadlines.
Key reports to prepare before the meeting
- Profit & Loss (P&L) year-to-date and month view — include budget columns and last year for context.
- Balance sheet snapshot — cash, accounts receivable (AR), and accounts payable (AP).
- Enrollment report — active children, openings, occupancy % (current month and trend).
- Receivables aging — families past due, payment method, collections notes.
- Payroll summary — wages, payroll taxes, benefits, overtime, substitutes.
- Major vendor invoices — rent/mortgage, utilities, insurance, food/CACFP reconciliations.
- Cash flow forecast for next 60–90 days if you expect significant changes.
Generate these consistently each month so trends are easy to spot.
Monthly review checklist: 12 practical steps
- Confirm revenue recognition and deposits
- Verify bank deposits match tuition and other income recorded on the P&L.
- Reconcile subsidy, voucher, and CACFP reimbursements to claims.
- Compare actuals to budget and prior month
- Highlight variances larger than a threshold you set (e.g., 5–10%).
- Note whether variances are timing or structural (one-off vs recurring).
- Check enrollment and revenue per child
- Confirm active enrollments match your billing roster.
- Calculate revenue per child and compare to budgeted amount.
- Review payroll and staffing costs
- Check payroll as a percentage of revenue and staffing by classroom.
- Flag overtime, frequent substitute use, or unbudgeted raises.
- Inspect accounts receivable and collections activity
- Review aged balances and next-step actions (reminder, plan, hold services).
- Document payment promises and follow up dates.
- Reconcile bank accounts and petty cash
- Ensure bank reconciliations are complete and cleared items are reviewed.
- Verify petty cash counts and receipts for small purchases.
- Audit major expense categories
- Spot-check invoices for rent, utilities, insurance, food, supplies, and maintenance.
- Confirm any one-time or seasonal expenses are marked as such.
- Verify payroll tax and benefit accruals
- Confirm payroll tax liabilities and benefit obligations are recorded.
- Prepare for any upcoming deposits or filings.
- Review vendor contracts and upcoming renewals
- Note price increases, service changes, or renewal dates that impact next quarter.
- Update cash flow forecast
- Adjust for known large payments, deposits (tuition cycles), payroll dates, and capital needs.
- Confirm compliance-related expenses
- Verify licensing fees, background check costs, and required insurance payments are paid or accrued.
- Create action items and assign owners
- For each material variance or risk, decide on next steps, owner, and deadline.
KPIs to track every month (and how to use them)
- Occupancy rate: children enrolled divided by available spots. Use it to forecast revenue.
- Revenue per child (monthly): total revenue ÷ enrolled children. Useful for pricing and subsidy impact.
- Payroll % of revenue: total payroll costs ÷ total revenue. Compare to your target range.
- Other expense % of revenue: supplies, food, rent as a % of revenue to identify inflation or waste.
- AR days / aging buckets: how long families take to pay on average; long collection cycles indicate cash risk.
- Cash on hand (days): operating cash divided by average daily burn — helps with short-term planning.
Track these KPIs month-to-month and flag significant shifts. Small but persistent changes (e.g., payroll creeping up 2–3% each month) are more important than one-time blips.
How to investigate common red flags
Payroll rising faster than enrollment: Check scheduling, overtime, substitute use, and misclassification of staff. Consider whether programs are under-staffed (leading to overtime) or overstaffed relative to current enrollment.
Tuition revenue below budget: Confirm that billing ran correctly, check tuition discounts or credits, verify family cancellations vs planned schedule changes, and review collection efforts on past-due accounts.
Spike in supplies or food costs: Check for one-time purchases (e.g., major classroom refresh), seasonal programs, or vendor price changes. For food, reconcile CACFP claims and meal counts.
Increasing AR days: Confirm if it's a few large family accounts, a common payment date shift, or a systemic billing issue (e.g., autopay failures). Tighten collections steps and communicate clearly about late fees or service holds if you use them.
Presenting findings to staff or owners
Keep the meeting focused and visual: 3–5 slides or a one-page dashboard.
Suggested 30–40 minute agenda:
- 5 min: Snapshot (P&L, cash, occupancy).
- 10 min: Variances and root causes (top 3 items).
- 10 min: Risks and cash forecast (next 60–90 days).
- 10–15 min: Action items, owners, and deadlines.
Be concrete: instead of saying "costs are high," point to the exact expense line and propose options (negotiate vendor, adjust staffing, increase marketing to fill spots).
Practical tips to speed up month-end
- Standardize report templates so you don't rebuild the same reports each month.
- Automate enrollment sync with billing to reduce reconciliation work.
- Keep a running issues log so one-off problems aren’t forgotten next month.
- Use checklists for reconciliations and approvals so nothing slips through.
Checklist: What to bring to your monthly review meeting
- Latest P&L (month and YTD) with budget and prior-year columns.
- Balance sheet with cash and AR detail.
- Enrollment roster and occupancy report.
- Receivables aging and collection notes.
- Payroll summary and staffing by room.
- Bank reconciliation report.
- List of upcoming vendor renewals and capital needs.
- Cash flow forecast for the next 60–90 days.
- Action-item tracker from last month with status updates.
Bring these on paper or in a shared folder before the meeting so everyone reviews ahead of time.
FAQ
How often should I update my budget and forecast?
Review the budget at least quarterly and update your cash flow forecast monthly (or more often if enrollment or expenses are changing quickly). Monthly forecasts let you anticipate payroll and rent obligations in advance.
What payroll percentage of revenue is acceptable for daycare centers?
Acceptable payroll percentage varies by program type, location, and services offered. Track your historical range and compare month-to-month — changes are more informative than a single target number. Many centers use payroll % trends to decide staffing or pricing adjustments.
How should I handle overdue family accounts without damaging relationships?
Start with clear, consistent communication: reminders, payment plans, and a written policy that families received at enrollment. If nonpayment continues, escalate to holds on new services or enrollment changes per your handbook. Document everything and apply policies consistently.
Do I need an accountant to run monthly reviews?
You can handle basic monthly reviews in-house with clear processes and good software. An accountant or bookkeeper is helpful for reconciliations, tax and payroll filings, and complex items — consider external help for month-end close or quarterly checks if you’re short on time.
Reviewing finances each month turns bookkeeping into management: you’ll spot trends earlier, make better staffing and enrollment decisions, and avoid cash surprises. Use the checklist above to standardize your process until it becomes routine.
Hivelee can help automate attendance, billing, tuition payments, CACFP tracking, and reporting so your monthly financial review takes less time and gives you clearer insights. Learn more at Hivelee.