The Owners and Operators of Childcare Centres know all too well how changes in legislation can take hold of their business at any time. With the recent introduction of the New Childcare Package (formerly known as Jobs for Families package) rolling out on the 2nd July 2018, it makes sense if you’re running a Childcare Centre to arm yourself with the necessary tools so that you, too, can avoid potential financial pitfalls, system issues and staff adjustments that may need to occur. Early preparation for the New Childcare Package in 2018 is far better for your business and your staff so to help you better manage that transition, here are some smart changes that you can make today:
A Roadmap. Everyone needs one.
Christmas is fast approaching and many Childcare Centres are finalising their enrolments for 2018. It’s a good time to now put together a realistic forecast of your business which should include salaries, rent, energy bills, marketing activities as well as expected income. Be sure to add in when you expect each of these to occur on a sequential timeline. This will be your roadmap into the future, which will provide you with definite times and revenue milestones to track.
Use a Subsidy Estimator along with your forecasts and models
If you’re working out how the New Childcare Package will impact your business try incorporating a Subsidy Estimator along with your business forecast model. The subsidy estimator is tool which shows how different scenarios will impact on the families in your centre which will, in turn, impact your business’ bottom line.
It’s worth “modelling” a number of different scenarios using the Family Child Care Subsidy Estimator (https://www.education.gov.au/family-child-care-subsidy-estimator-0). This is a great business estimation tool that Owners and Operators should use to test a Childcare Business’ resilience. It will help you work out the best business model that’ll give you the highest level of profit. Here’s how you can use this modelling estimator to include the New Childcare Package for 2018:
- Adjust your daily session time where you and the majority of the families benefit under the New Child Care Package (this will vary centre to centre).
- Depending on your current fee structure, there might be room for you to apply a slight increase of fees in 2018 to keep your profit margin after the new hourly fee cap of $11.55/hour comes into effect. Bear in mind factoring in the CPI, the hourly fee cap would be slightly higher as in July 2018, the exact increase is unknown so you might like to put in a percentage buffer to prepare for it.
- Extra resources may need to be employed to implement the changes smoothly, it’s expected to increase administration time will represent at least, 10 more hours every week. You may have existing staff who could work more hours. It’s definitely worth investigating this as soon as possible and factoring in the increase in administration costs.
- Add in extra resources to educate families on the changes. For example, forecast for a high level of incoming queries and staff needed to answer and explain the implications to each family.
- Ensure that you have allocated a reasonable level of cash flow above and beyond your base model. If there’s no extra cash this means there’s no extra room for error and it will put an enormous strain on your financial position or worse.
Your forecast tool will produce “flags” like the points above, that will help you identify your particular set of business issues that you need to address, well ahead of time. The team at Target Accounting highly recommend using this tool as it can save you both time and money down the track.
IT System Check. Are your Subsidy and Attendance systems ready?
As of July 2018, current CCMS will become obsolete due to New Child Care Subsidy. As a result, some CCMS software providers might no longer comply with the new Child Care Package requirement. Inevitably this will add pressure to your IT system (extra software and hardware). Check with your current software provider to make sure they can still support your childcare business operation in the coming months.
Another significant change is the digital attendance system, it’s highly likely that a robust system that details children attendance will become compulsory. It’s good idea to explore few different options this year and early next year to be ready to go at the 2nd July 2018 deadline.
How the Childcare Package impacts both families and centres.
The New Childcare Package will have different impacts depending on each family situation. The number of days their child attends, their household income and other special circumstances will impact their rebate, but it will also impact on your profitability and cash flow. That’s why it’s really important that you do your homework on family impacts and the way that those changes will affect margins.
The good news is that you have all the important information at your fingertips already. Start utilising your current CCMS to analyse your customer base. In the system, separate families into those who are eligible for:
- Up to 24 hour per week
- Up to 50 hours per week.
Families who are currently eligible for 24 hrs per week would have bigger impact under the new package. This means that it’s probably time (before the Christmas and holiday season) to connect with those families and discussing with them their plans and how you can best help in preparation for the 2nd July 2018 change.
Retaining existing families within the centre, creating referrals, ensuring the continuance of siblings and additions through extended family members are the guiding principles for all successful centres regardless of legislative changes. That’s why managing expectations and developing ongoing relationships will be key when working through the New Childcare Package.
Streamline your administration
Making administrative tasks part of your daily operation and not all consuming can be done. If your finance is organised effectively enough, it will actually have positive effect on your business.
There are many ways to create an effective and efficient operations and here are some handy tips (if you have not already implemented them):
- Encourage families to pay fees electronically, ideally direct debit arrangement, so you don’t need to have that awkward conversation about outstanding fees.
- Clearly state the payments terms for you Childcare Centre (at reception, in enrolment forms and informally by staff). Be prepared to contact families with outstanding amounts quickly.
- Consider electronic timesheets and sign-in systems which both reduces the manual labour, and will comply with legislative changes. Data can be easily downloaded/exported and collated when using online check-ins.
- Consider employing additional staff (even on a casual basis) if you start seeing the increase in paperwork overwhelming existing staff (or you). If you do not want the cost and responsibility of extra staff internally, consider using the expertise of a Certified Practising Accountant.
- Find a software package specially designed for small business to help you save time and improve how you run your business overall.
Consult the experts
When you have explored all the ways you can prepare your business for the New Childcare Package. it’s a good idea to get in touch with someone who is qualified to check that you have covered all your bases. You may not be aware of some areas in the business which may need your attention, in places that are less obvious, such as your small business loan structure, lease agreement set up and other critical parts of your business that needs an expert eye. The investment of bringing in a consultant will be worth it, as they can act as a sounding board and provide your business with great tips and guidance. You’ll be surprised at how much money they can save in the long run.
The team at Target Accounting, led by Tracy Liang, a Certified Practising Accountant and expert Trainer in the Xero Accounting Package will guide you on how you can stay ahead of the legislative changes as well as show you how to build a sustainable business for years to come. Contact Tracy and the Target Accounting team on 1300 668 088 or visit www.targetaccounting.com.au