What is it about numbers that makes them so unappealing to many nursery owners and managers? Just the mention of break even points, ratios, turnover and balance sheets causes many eyes to glaze over and heads to fall. I get it, no-one ever really went into early years to get bogged down with accounts, invoicing, funding reconciliations and balancing the books.
1. But knowing your numbers can give you so much more - than well - the numbers!
Getting to grips with numbers can change your whole outlook and support you
making the right decisions at the right time. And if ever there was a time to need to do that it is right now. There is a definite process to go through in order to get a handle on all this though. Developing your own knowledge is a part of that process. Finding ways in which you can actually do that is not quite so easy. I have found that there are not that many good sources from which you can learn and develop the sector specific knowledge for numbers in our industry.
We are not like other industries. Early years has an unusual and unique make-up as far as our numbers go. I’ve sat in front of many a finance expert and bank manager who just didn’t comprehend how my business ran and were looking for ‘traditional’
numbers in the business – which of course just aren’t there in the same way.
So there have been some costly learning curves along the way but I hope now, after 21 years of running my own nurseries, that I pretty much have a handle on the most
important numbers that I want to be looking at in my early years business. My mission now is to share this knowledge and expertise with others and to help them learn more about what they should be looking at in their own businesses.
One of my biggest bugbears was that occupancy seemed to be the only measure of how well the business was doing. Whilst I appreciate in principle, the more children you have should mean the more profitable you are, in early years, that isn’t always the case. When it comes to looking at children attending for your funded (or more
precisely underfunded) hours, then this can make a mockery of that number as a measure of the success of the business overall. But how can you work out what is right and what numbers to look for?
2. Through effective budgeting and reporting!
In my experience, and as I alluded to in the opening paragraph, not many early years owners and managers have quick access to the financials of their business. That part actually isn’t unique to our sector – it is common to many business owners! So if you are waiting until your accountant has done the annual figures to find out how well the business has done – then this will be far too late to react to any issues that may have occurred during the year. I’m not saying these historic figures aren’t needed, of course they are, and indeed they help inform us and build our knowledge of the business performance over a period of time. However, unless you can get some of these key numbers more regularly, then it’s like driving in the dark with no lights on.
3. So how do you create these numbers?
Well you have to start by being able to gather the relevant information into one place that can then report back to you the numbers which will inform you about
performance. This should happen on at least a monthly or termly basis. Creating this can be as easy or as complicated as you want. A simple spreadsheet in Excel can give you the key aspects of what you need. A software accounting package is a much more professional way to do this but does require more knowledge and
accurate input. If you don’t have the skills to do these things, then you should find someone within, or external to the
organisation, to do it. And if you think you can’t afford to do this, then you need to do it even more than you know!
4. But what will the numbers tell me?
So whilst occupancy does measure how many children we have, if these children are mainly government funded children, who are not buying additional resources, then they are possibly more of a drain on the business than an asset. Many of us have just had to look at these numbers for the Coronavirus Job Retention Scheme recently. How did you do in that? Were you able to claim the majority of your furloughed staff or maybe you came into the 50% or less category? Knowing what percentage your funding is, compared to your private income is a valuable number to indicate whether you can improve on your profitability. Just tweaking that one number can then increase your income
considerably. By tweaking different
numbers, then you can literally change the direction of your business over time.
5. What will that ultimately give me?
With an increased income, or decreased costs, comes more freedom for you.
Freedom to employ other people to support specific functions in the business, freedom to improve your provision in any way you might choose. Freedom even to actually take some time for yourself, rather than working all the time, because there are not enough hours in the day.
6. So, what next?
As a sector, we are going to go through some challenging times in the next few months and so now is the time to take action and find ways in which you can
develop and grow your knowledge and skills in this area.
About the author
Tricia is an experienced early years expert, known within the industry for the support and training she has provided over the last 21 years. Tricia has ‘hands on’ specialist knowledge and is recognised for her prowess with finance and funding in the industry, having achieved a £2 million business that includes five “Bright Kids” day nurseries. This powerful combination of knowledge and expertise puts Tricia in this authoritative position, enabling her to put herself in the shoes of other nursery owners/businesses, truly understanding the nuances of the childcare industry, from staffing levels, safeguarding, employment law, the EYFS, Ofsted and through to managing the finances.
Tricia’s passion to help others has meant she has developed a library of training and education materials, alongside the policies and procedures necessary to run a successful day nursery and is now able to share these with you through the recently established MBK Group.
Tricia understands all too well that finding the right information can be challenging and she is offering a free 20 minute strategic call to help point you in the right direction. For urgent, crisis or consultation packages, please register with her at www.mbktraining.co.uk/support.