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Income statements can be a vital tool in your daycare center’s road to success. They are crucial in ensuring the financial health of your business, and enable you to make informed, data-driven decisions.
Knowing your options, from manual tracking to automated software solutions, is key to making the process of recording your income and expenses easier, faster and more accurate. In this article, we will explore what income statements are, why they are important to daycare centers, as well as different options available to your business.
Table of contents
- What is an income statement?
- What is the difference between a balance sheet and an income statement?
- What is the purpose of an income statement?
- The 3 key income statement components
- How to keep track of business expenses
- Daycare income statement examples
What is an income statement?
An income statement presents the financial results of your business over a stated period of time. It summarizes all income, such as tuition, subsidies and additional services offered, and all expenses, including salaries, rent or mortgage payments, and learning materials.
Often also called Profit & Loss statements, or P&L statements, they are essential for your business to clearly declare its net profit or net loss over a period of time.
Producing income statements as monthly, quarterly or annual reports enables you to identify financial trends and comparisons over time.
What is the difference between a balance sheet and an income statement?
Your daycare income statement complements the balance sheet of your business. The balance sheet shows your assets, liabilities and equity at a specific point in time. An income statement on the other hand, will reflect your revenue, expenses, gains and losses in more detail and over a longer period of time.
Together, a balance sheet and an income statement, will provide you with an overview of the financial health of your daycare business, and invaluable insights on how to thrive.
What is the purpose of an income statement?
An up-to-date, error-free, and readily available income statement can be your guide in making smart spending decisions and crafting strategies for growth for your daycare. The purpose of an income statement is to support you in making smart, informed decisions about your business:
Highlight opportunities and challenges
An income statement can provide you with the overview to make informed decisions of when and where you should cut, and when and where you should invest.
Income statements enable you to identify areas where the costs are increasing. Identifying rising supply, or insurance costs, means you can stay on top of your spending. Demonstrating which of your services are showing a pattern of being high-profit opportunities, means you can make data-driven strategic decisions about expanding your operations in the most profitable directions.
These insights can also be vital in identifying higher short-term costs which can lead to significant savings in the medium and long term. For example, investing in higher quality toys, or improving your facilities, can actually limit the overall expenses by requiring less replacement or maintenance in the future.
A detailed and accurate income statement will ensure you stay on top of your spending and adhere to your budget. Importantly, it enables you to keep up with all the little costs that can add up. Brightwheel’s expense tracking product ensures this is done accurately while also saving you time.
Stay on top of fluctuations in your business
Daycare income and spending can vary significantly throughout the year, especially during summer and winter breaks. Looking at your daycare’s annual income statement will help you plan for the busier and slower months, and to identify opportunities for potential additional income through supplementary services, such as summer camps.
Transparency and accuracy
Ensuring your income and expenses are reflected in your income statement accurately is vital when seeking investments or loans. Income statements provide a clear indicator of profitability and building trust in the financial management of your daycare business.
The 3 key income statement components
There are three main components that are essential in an income statement for any daycare:
1. Revenue
Your revenue includes the total earnings from the daycare services you offer:
- Tuition and fees, including any discounts for siblings or variations in fees according to age group and days of attendance;
- Government funding and grants, such as subsidies for low-income families or grants for facility improvements and teacher training programs;
- Additional income from services such as after-hours care, dance classes, or learning materials.
Brightwheel’s billing product for childcare providers can support you in this process, helping you record your different revenue streams.
2. Operating expenses
This includes all the direct costs that you incur in order to deliver your daycare’s services. A daycare’s operating costs include but not limited to:
- Staff salaries and benefits, including expenses for wages, health benefits, and training. You can find out more about maintaining payroll reports in our recent blog post.
- Insurance, to protect you from financial losses that can occur due to unexpected events.
- Cost of facilities, including rent or mortgage payments, maintenance and upgrade costs.
- Utilities, to cover electricity, heating and water.
- Toys and learning materials that are essential to provide an educational and fun experience for the children.
- Snacks and meals, to keep children well-nourished and healthy.
- Marketing, to help you run your daycare at capacity.
3. Net income
Your net income is, simply put, the amount of money left from your revenue after all your operating expenses have been paid. The goal of any business is primarily to have a net profit, and not a net loss.
An income statement will help your business thrive, by enabling you to identify over time that you are maintaining a healthy net profit margin.
You can find more information on how to successfully build your childcare budget, and what other income streams and operating expenses to consider.
How to keep track of business expenses
Maintaining accurate, up-to-date income statements is vitally important, but can also seem like a daunting task.
The following key steps will help you stay on top of business expenses over time:
1. Maintain clear records of your business spending
To stay on top of your finances, consider:
- Having a business bank account and credit card will help you clearly delineate any personal finances and spending from your business expenses.
- Creating a clear expense policy for your business, to ensure that both you and your employees avoid overspending, and facilitate reimbursements.
- Maintain a filing system for receipts and bank records, to have an accurate record of your daycare’s expenses, while also fulfilling your book-keeping obligations to the IRS.
2. Use a daycare income and expenses tracking software
Keeping track of all of your daycare’s expenses can be overwhelming. Doing this manually is time-consuming and labor-intensive and can lead to outdated financial records. When you need to keep track of multiple income and expense flows, manual record keeping can also be prone to human error.
A specialized software can significantly streamline the process of keeping track of your income and expenses, and support you or your accountant in keeping accurate records.
3. Automate accounting process in an integrated platform
Automating your transactions and accounting in an all-in-one platform can reduce errors and protect you from costly mistakes, while simplifying the process.
Opting for a software solution for your daycare income statement can also give you a clearer overview of your financials, and enable you to look at different categories of income and spending when making decisions.
Daycare income statement examples
Below are two income statement examples, to give you an idea of what they entail and how you might apply them to your business. 
Source: CFI’s Financial Modeling Courses
Source: Harvard Business School online
You can also download an daycare income and expense worksheet template from brightwheel for free, to support you in this process.
A roadmap to financial success
Accurate income statements are a vital part of your daycare’s road to success. They ensure the day-to-day running of your daycare facility is on budget; but they also open up new opportunities for business development and growth. Income statements are your roadmap to making well-informed decisions.
Brightwheel is the complete solution for early education providers, enabling you to streamline your center’s operations and build a stand-out reputation. Brightwheel connects the most critical aspects of running your center—including sign in and out, parent communications, tuition billing, and licensing and compliance—in one easy-to-use tool, along with providing best-in-class customer support and coaching. Brightwheel is trusted by thousands of early education centers and millions of parents. Learn more at mybrightwheel.com.
