Fiscal Check-Up Part 1: When a Budget Isn’t Actually a Budget

A woman wearing glasses and a suit is smiling in front of a flag.

Sim Loh is a family partnership coordinator at Children’s Village, a nationally-accredited Keystone 4 STARS early learning and school-age enrichment program in Philadelphia, Pennsylvania, serving about 350 children. She supports children and families, including non-English speaking families of immigrant status, by ensuring equitable access to education, health, employment, and legal information and resources on a day-to-day basis. She is a member of the Children First Racial Equity Early Childhood Education Provider Council, a community member representative of Philadelphia School District Multilingual Advisory Council, and a board member of Historic Philadelphia.


Sim explains, “I ensure families know their rights and educate them on ways to speak up for themselves and request for interpretation/translation services. I share families’ stories and experiences with legislators and decision-makers so that their needs are understood. Attending Leadership Connections will help me strengthen and grow my skills in all domains by interacting with and hearing from experienced leaders in different positions. With newly acquired skills, I seek to learn about the systems level while paying close attention to the accessibility and barriers of different systems and resources and their impacts on young children and their families.”

This document may be printed, photocopied, and disseminated freely with attribution. All content is the property of the McCormick Center for Early Childhood Leadership.

Warning: we are about to shine a spotlight on money, a topic that many of us do not like to think, much less talk about. But as a business owner, it’s imperative that you have a solid understanding of the financial health of your business. If you don’t, you run the risk of actually paying to run your business rather than making money on it.


The 2018 reliability and validity study of the Business Administration Scale for Family Child Care (BAS) found that 44% of family child care providers do not have a budget (Talan and Bloom, 2018). This number is shocking, and is also reflective of what I have seen in the field when conducting formal BAS assessments as well as when informally conversing with family child care providers. I think one of the reasons this number is so low is confusion related to terminology. What I often see is that providers mistake their actuals for their budget. Let’s take a moment to clarify the two terms:


Money Talk


The BAS defines a budget as is a projection, or a plan for the amount of money that will be made (revenue) by the child care business and the amount of money that will be spent (expenditures) to operate the child care business during the fiscal year (Talan and Bloom, 2018). It is important to note two key words: plan and projection. A budget is a document for the future, it captures what you plan to earn and what you plan to spend, it does not reflect the money you have actually spent or earned. It is also not an accurate reflection of the money in your bank account or pocket at any given time. Rather, it captures your financial goals and aspirations.


Actuals reflect how much money (income) has actually been received and how much money (expenses) has been paid out at a given point in time during a fiscal year (Talan and Bloom, 2018). Your actuals reflect how much money you actually earned and how much you actually spent, but they do not tell you how much you will earn next month or how much you will spend over the course of the year. These are sometimes referred to as “income and expense statements.” According to the BAS reliability study, 64% of providers keep track of income they receive and 60% keep track of business expenses (Talan and Bloom, 2018).


When I am talking with providers, they often say they have a budget. However, when I begin to ask more about it, or when we look at their documentation, what commonly happens is that we discover what they thought was a budget is really their actuals. They have records that have tracked their income and expenses so that they can see money coming in and going out, but they haven’t made the leap yet to crafting a budget which serves as a guide or plan for the future.


Making the Leap


So how does one make the leap to a budget? One option is to start by looking at the past. Closely tracking all your income and expenses for a month or more (ideally more) allows you to predict what your financial habits might look like in the future. The following steps can be used to develop a budget:


  1. Track all your income and expenses by collecting receipts and referring to paid bills.
  2. Categorize all business-related income and expenses by type (e.g., rent/mortgage, food, supplies, insurance, utilities, parent payment, Food Program reimbursement). I find it easiest to do this in an Excel document making each row a line-item and each column a month. There are also numerous resources available to help you create a budget ranging from computer software to books—find whatever way works best for you.
  3. Summarize the totals for each category so that you can clearly see how much you spent and earned in each area. Each category is called a line item.
  4. Use those totals to predict how much you will spend and earn in each of the twelve months of the year. At this point you should also take a moment to think about any other money that you might earn or spend related to your business that may not have been captured in the month(s) you tracked. Examples might include business liability insurance payments or tax payments, or extra money spent during holidays. Add any of these additional items into the totals or create new line items for anything that was missing. You should have an estimated total for each line-item or type of expense of income you have. Do this for each month in the upcoming year.
  5. After you have made your line-item estimates for each month, summarize the totals for the end of the year. This is your budget! It clearly communicates how much you plan to earn and how much you plan to spend for the year.
  6. One last thing: is your total projected revenue higher than your total projected expenditures? If so, this means you are planning to make a profit! If not, are there places you can make adjustments, like reducing your expenses or generating additional revenue? The beauty of having a budget is that you can plan in advance to make sure that you are operating your business in a way to make money.


Benefits of Both


The beneficial relationship between actuals and a budget is bi-directional, having one helps you navigate the other and vice versa. Having both is your first step to financial peace of mind. Tracking your actual income and expenses helps you keep tabs on your current fiscal status and helps you predict your budget for the future. Your budget then helps you plan long-term as well as make better spending decisions in the moment. Both documents are critical to sound financial health and having one without the other leaves you with only half the picture. You might be a family child care provider because you love children, but you need to make sure you are operating your business so you are not losing money by doing what you love!


Looking for more information on financial operations? Part 2: Tips for Tracking Actuals and Budgeting is forthcoming.

If you are interested in receiving training on the BAS, the McCormick Center for Early Childhood Leadership offers several opportunities including an upcoming BAS Reliability Training, March 24-27, 2020. More information is available here: https://mccormickcenter.nl.edu/events/business-administration-scale-bas-reliability-training-032419/.


Interested in learning more about financial operations for center-based child care administrators? Attend the PAS Reliability Training March 9-13, 2020 at the McCormick Center! More information is available here: https://mccormickcenter.nl.edu/event-type/reliability-training/.


References

Talan, T.T. & Bloom, P.J. (2018). Business Administration Scale for Family Child Care (2nd ed.). New York: NY: Teachers College Press.


Robyn Kelton, M.A., is a Quality Training Specialist for the McCormick Center for Early Childhood Leadership at National Louis University (NLU). Robyn conducts training and research on the Business Administration Scale for Family Child Care (BAS) and the Program Administration Scale (PAS) and serves as a national reliability anchor for both tools. In addition, Robyn reviews BAS and PAS assessments for the assessor certification system. Robyn holds a Bachelor of Arts degree in Psychology from the University of Kansas and a Master of Arts degree in Psychology with an advanced certificate of study in Organizational Psychology from NLU. Robyn is currently a doctoral student in the brain, behavior, and quantitative science psychology program at the University of Kansas. Prior to joining the McCormick Center, Robyn spent three years as a lead teacher in a kindergarten classroom for an after-school program. Robyn’s research interests include leadership in early care and education, family child care, child development, and autobiographical memory.

By Robyn Kelton, M.A. June 27, 2025
INTRODUCTION Turnover rates in child care are among the highest in education, with over 160,000 workforce openings predicted annually (Bassok et al., 2014; Doromal et al., 2022; Joughin, 2021; U.S. Bureau of Labor Statistics, 2025). While some turnover is expected and even necessary, the levels of turnover experienced in the field of early childhood education and care (ECEC) are not only alarmingly high but deeply problematic. In 2021, a national survey conducted by the National Association for the Education of Young Children found that over 80% of child care centers were experiencing a staffing shortage, with the majority of those programs reporting one-to-five open roles, but 15% reporting between six and 15 open roles (NAEYC, 2021). Staffing shortages result in lost revenue, financial uncertainty, and program instability, often forcing administrators to operate below capacity and/or under reduced hours (NAEYC, 2021; NAEYC, 2024; Zero to Three, 2024). Limited enrollment slots and classroom and program closures lead to increased waiting lists (Zero to Three, 2024; Carrazana, 2023). In turn, families are placed in a highly vulnerable position of needing to leave the workforce to stay home with their child or turn to potentially unsafe or unregulated child care. Moreover, increased turnover in classrooms interrupts continuity of care and disrupts the relationships built between children and their educators (Reidt-Parker, J., & Chainski, M. J. (2015). Research has begun to highlight some of the programmatic and personnel characteristics predictive of increased staff turnover in ECEC programs. Low wages are most commonly identified as a strong predictor of turnover (Amadon et al., 2023; Bryant et al., 2023; Fee, 2024; Guevara, 2022; Totenhagen et al., 2016). However, workforce advocates and some researchers have begun to expand conversations on compensation to explore the impact the profession’s general lack of benefits such as paid time off, access to health insurance, and retirement benefits has on retention (e.g., Amadon et al., 2023; Bryant et al., 2023; Fee, 2024; Lucas, 2023). While informative, this body of work has typically approached benefits as binary variables (i.e., have or do not have) rather than reflect the spectrum on which benefits are commonly offered (e.g., the number of days off, the percent of insurance covered by the employer, and levels of retirement matching funds). This Research Note aims to expand on previous work investigating the relationship between benefits and turnover by exploring the possibility of a more nuanced relationship between the variables to determine if the level of benefits offered impacts turnover rates. METHOD This study used data collected via formal Program Administration Scale, 3rd Edition (PAS-3) assessments conducted by Certified PAS-3 Assessors between 2023 and 2025. To become certified, PAS-3 assessors must first achieve reliability (a score of at least 86%) on a test conducted after four days of training on the tool. Next, they must conduct two PAS assessments within three months of reliability training. PAS-3 national anchors reviewed the completed assessments for consistency, accuracy, and completeness. The study analyzed data from 133 PAS-3 assessments collected during the certification process across 12 states, the District of Columbia, and the U.S. Mariana Islands.  Measures Data for this study were collected using the PAS-3, a valid and reliable tool used to measure and improve Whole Leadership practices in center-based programs (Talan, Bella, Jorde Bloom, 2022). The PAS-3 includes 25 items, each composed of 2-5 indicator strands and scored on a 7-point Likert scale (1 = inadequate, 3 = minimal, 5 = good, and 7 = excellent). Item scores are averaged to determine a mean PAS-3 score. Of particular interest to this study is Item 5: Benefits. Item 5 measures employee access to health insurance and considers what percentage of the cost is paid by the employer, the total number of paid time off days within the first and fifth years of employment, access to a retirement plan, and the percentage at which the employer will match the employee’s contribution. Last, Item 5 explores provisions made to cover the costs of staff’s professional development. Non-applicable is allowed as a response for indicators related to health insurance and retirement if there are no full-time staff employed by the program. Sample Program enrollment ranged in size from four children to 285, with a mean enrollment of 65 and a median of 55. Total program staff for the sample ranged from two to 44 staff, with an average of just under 14 staff (13.93) and a standard deviation of 8.80. Table 1 below provides a detailed breakdown of staff by role and full-time and part-time status.
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