Childcare centres in Australia are still open and educating young minds. This pandemic won’t stop us because we’re essential.
However, now more than ever minimising costs in our centre(s) is critical. And if we can minimise costs through automation, it frees us to provide better education to children - achieving two objectives at one go.
It brings us to the central message of this article, although it may seem small, traditional ways of processing expenses are costing childcare providers more than they realise.
There’s a saying by entrepreneur Peter Baskerville that goes, ‘The ignorant are ignorant of their ignorance.’
It sums up traditional childcare expense management in a nutshell. Unfortunately, many childcare business owners stick to their old methods of processing expenses not because they want to, but because they simply are unaware that a better way exists.
Most childcare centres would be familiar with using these usual methods (that are set by their approved provider) in managing day to day expenses.
- Petty Cash
This is by far the most common day to day expense method in childcare. Directors, Centre Managers and/or Administrators will use a company’s pre-existing cash fund for small purchases and produce the relevant receipts after purchase.
For example, it could be an unexpected “Woolies run” where they might need to grab some extra nappies from the baby store, or even stationary for kids’ art class. While this seems straightforward, employees are limited to smaller purchases, and there’s also the endless manual work in reconciling the purchases.
- Cash Advances
Sometimes the Centre Manager or Director are given cash in advance and the expenses must be accounted for after the transaction occurs. Besides the tedious work of reconciling the exact transaction amount, employees are often dealt with either a surplus which they will have to return to the company, or a shortage in cash advance which they will have to pay out-of-pocket.
- Employee Reimbursement
Perhaps one of the worst ways of handling expense management - employees would have to pay for company expenses using their own money and be reimbursed for it later. Not only is it frustrating for staff to use their own money, but it’s also prone to loss of receipts and unnecessary manual work in submitting claims. This is rare in childcare but it does happen.
- Corporate or Business cards
Employees use corporate or business cards for business-related expenses and do not have to claim or use their own money. While this may seem like the ‘gold standard’ in expense management, it really isn’t. Childcare centers need to meet revenue requirements to qualify for corporate credit cards, and business cards do not give much budgeting control to the center. Plus, banks will only provide a limited number of cards, resulting in a messy, not to mention “against-bank-policy” card-sharing system for many centres.
Sticking to what we know may seem harmless; after all, why fix what’s not broken? But if you could implement a better system, where all purchases came out of pre-allocated budgets and those same purchases were categorised and reconciled back against those same budgets, without lifting a finger - you’d probably want to know more, right?
Things to Consider About Your Centres’ Expense Management Process.
Process and Efficiency
The traditional ways of managing childcare centre expenses can be like fire-fighting. They are highly prone to error, i.e. losing receipts, reaching the business’s credit limit, wrongly keying in costs on the company ledger. Centre Managers are often trying to right wrongs and put out fires instead of improving the early education experience their centre provides. Let’s face it, no one gets into early years education to fill out paperwork.
Isn’t this process unnecessary? You bet. 56% of companies report that their most significant pain point in expense management is losing expense receipts. An expense management process is supposed to be efficient, safe, and doesn’t require much effort to put in place.
Indirect Costs
There’s a reason why automation is becoming so popular in running a childcare centre. You’ve now got admin platforms that automate CCS submissions and billing of parents, tablets with digital sign-ins that automate marking attendances, and apps that share observations and learning with parents instantly. Your day to day expenses should be no different. Besides saving time, it also saves the approved provider money, and it costs less than you think. Most businesses that embraced finance automation have managed to save almost 70% of finance operation costs, and it’s not hard to see why.
Indirect costs usually include the cost of inefficiencies stemming from loss of receipts, loss of time spent on manual work, and loss of money from expense fraud. In fact, only 27% of businesses have systems in place to flag out-of-company expenses, which gives way to a multitude of expense fraud from employees.
Staff Workload
Most companies are hesitant to automate because they believe that their employees might not welcome the change. We know our directors, admins and educators can be a little resistant to change (aren’t we all) but once you rip the bandaid off, it’s easier than you think. Just like the rapid adoption of apps for observations, learning documentation, and parent engagement.
In Australian business as a sample, current statistics show that 26% of finance teams feel overburdened with manual work, and 97% of employees believe that automation can help their organisation. Minimising manual workload for staff decreases their burden and allows them to focus on what matters - educating our young minds during this critical time in their life.
Expense Management - Doing More with Less
For child care providers, the right expense management system should be able to achieve the following goals:
- Eliminate all expenses paperwork
- Capture receipts so that it never gets lost
- Reconcile all transactions with banks
- Set and allocate budgets
- Easily track where money is being spent
- Synchronise with accounting software
- Eliminate hours of manual tasks and no firefighting involved
A prepaid corporate card does that and more. For example, Budgetly’s software and prepaid corporate cards for childcare automatically reconciles the transaction as it happens, eliminating the need for manual accounting of expenses. Besides that, the Budgetly app also allows employees to capture and store receipts for each transaction, ensuring that receipts are never lost again.
By simply making small changes to the way expenses are handled, childcare centres would immediately see its positive effects on processes, costs, and employee morale. Some things may not be broken, but it doesn’t mean that they can’t be improved.
