How to Prepare a Profit/Loss Daycare Financial Statement?
Small or big, no business can be run without efficient financial management. Whatever they are saying on their websites, every business is started with two goals in mind – profit and growth. Now there are more people talking about your business; but how much are you making? It is important to know whether you are making a significant profit or you are on a losing end.
Just like any other business, same goes for child care business. So, let’s see what is a child care profit/loss statement and how you can make use of this daycare financial statements.
It is one of the daycare financial statements and it summarizes the incomes and expenses of the daycare for a specific period of time. For example, there can be a monthly financial statement, quarterly financial statement or an annual financial statement.
How can a daycare use this profit/loss statement?
You want to borrow some money to expand your business. You want to refinance or buy a new facility or make some improvements in your existing facilities. Whether you are borrowing this money from a bank or some other lender, the lender wants to make sure that you can pay off the loan. If your profit is too small, you will have to struggle to get a loan. You need to demonstrate that you are making enough profit and you are able to pay off the loan on time. So, this statement actually reflects your ability to pay off a loan.
It is good for your business if you are preparing monthly or quarterly profit/loss financial statements. This will keep you informed of your expenses and income during that span of time. By putting your monthly loan installment to the list of your monthly expenses, you can show that you are financially stable enough to pay back the loan.
Sometimes, you need to provide this statement when you are applying for some grant. Producing this statement might also be a requirement when you are participating in a training program. Your daycare financial statements will also help in preparing a general business plan.
Even when you are not applying for some loan, grant or some training program, daycare financial statements also help in keeping a track of your financial progress. You can spot some problems such as too many expenses or too little income. So, you can be proactive and take early steps to address.
It is always helpful when you compare the daycare financial statements of the previous year with daycare financial statements of this year. You want to decrease your expenses and increase your income over time. Your financial statements can be a source of very useful inputs when you are creating a financial plan for the next year. You can define new financial goals, get bigger profits and curtail your expenses. Although you need to do a little additional work for preparing a monthly statement, but it always pays off.
What is the basic content of a profit/loss financial statement? It is simply the breakdown of the sources of your expenses and incomes. Recording income for a particular month is very easy. Excluding other sources of income, include parent tuition and fee, grants and subsidy payments.
Similarly, you can track some of your expenses very easily. There are some expenses that are more infrequent. Include these expenses by spreading over each month. For example, you are paying your property tax semi-annually. Divide your annual tax by twelve months and include one month’s tax in your monthly daycare financial statement. Do the same with your annual depreciation deductions. Similarly, include food expenses, utility bills, car expenses and other expenses in the daycare financial statements.