Preschool running at a loss

[Ilovehotchoc]

I work for a preschool and last financial year we ended in a significant deficit. Looking at the profit and loss forecast the same thing will happen again year on year - income isn't covering expenditure. Is there anyone here who can offer any advice? We are run by a Committee of parents. TIA.

Are you members of the pre-school learning alliance?

Why aren't you charging more?

Sorry Ilovehotchoc, this happens a lot; I was going to do a proposal for a Preschool earlier in the year - but I didn't as I couldn't make it economically viable

Are you full?

What are the main contributors to the deficit?

Yes, it's very difficult for preschools to make ends meet. To be blunt, you will need to cut costs (renegotiate rent, reduce expenditure on consumables, cut staff) and increase income (raise fees, increase the number of children and do lots of fundraising). Our preschool was in serious trouble a few years ago and managed to get out of a deep financial hole by doing a combination of these things.

Have your LEA put the voucher allocation up lately? We may be in financial trouble soon because of the fact that the minimum wage has gone up and the vouchers have not.

Putting the price up seems the only option if you are already running at capacity.

I feel that fundraising should not be used to cover wages.

Increase fees and/or reduce expenditure is all you can do really.

So put up fees or have more children in (unless you are up to your max)

The biggest way we reduced outgoings was by shopping around for stuff we needed. I do it for my home life so was quite shocked that everything we wanted was ordered from GLS or similar. So now we buy for example anti-bac spray when it's on a good offer at the supermarket and stock up. Lots of little stuff like that makes quite a difference over time.

We also do other fundraisers, like a jumble sale, sponsored nature trail/treasure hunt, open morning where we sell drinks and cakes, maybe have a cake sale and raffle....

It's hard keeping those books balanced isn't it? Good luck

Childcare is often uneconomic - I found out recently that in Sweden the cost of childcare is almost identical to that of the UK but that the premises were funded separately. So the amount we use to fund premises, wages and equipment is used to fund just wages and equipment in Sweden.

I agree in prinipal Humphrey. Our fundraising was generally earmarked for capital expenditure; however at one point we were in the position that we would have needed to close within months without using it for immediate expenses (in large part due to poor accounting by a previous committee).

Blimey I'm a slow typer!

The other thing we did was apply for a couple of grants as we are a charity. The only thing with that is that you usually have to state to the penny how you have spent it (and our's had to be on equipment, toys etc, not towards rent or wages)

Certainly how we managed was be offering slightly longer sessions than the vouchers cover so we could charge something...

Plus we offered some smaller sessions for those not yet entitled to the vouchers again because you can charge.

Helper rota so you only need the minimum qualified staff?

Fundraising for equipment etc.

Oh, of course MrsMinivers - I see that. It was obviously worth doing to get yourselves out of a hole.

This is a discussion our preschool are having at the moment and people are very resistant to putting up fees whilst having no idea about how to manage the impending crisis. My cynicism is fuelled by the fact that most people don't help out/turn up to fundraising events either.

Thank you so much to all of you who have posted. I wasn't sure anyone would!

Some very interesting points made and its reassuring to know its not an uncommon situation.

I want to put up fees but given the fact that we have only just done so (when we started back in Sept) there is resistance and a fear of alienating parents. The fee increase was 6 months after the rent increase so the two didn't go hand in hand and it will take a while to sort itself out. We are full but we get a lot less from fees (charged to children under 3) than we do from grants (3 & 4 year olds) which is a sticking point because by the time we've paid staff to look after the children under 3 we're barely making any money.

Not having much luck at the moment with obtaining community funding ..... but we're trying! With regard to fundraising, we would't use that for wages or rent we would earmark it for the extras like parties etc., and if necessary, use it for craft materials.

Do you only pay rent when you are running sessions?

I'd say you need to look at your fees then. IME, the money received from FEF is usually less than the fees that would be charged privately.
If you are OFSTED registered, then you should have a person from the Local Authority who can advise you in terms of business things.... here they were called 'Development Workers' and have recently been renamed Early Years Consultants {then another bit that I can't remember!}. They can direct you interms of business advice, in terms of grant applications and so much more.

If you are completely full you are in a good position to put up fees. You can state it's with regret, etc.

However, putting up fees won't increase the LEA grant, which is probably your main income.

Staff training: I hate to say it, but has this run out of control? We had to limit staff courses to so many per year at one point, and extra hours. It wasn't fair because staff end up putting in extra hours for free, but what else could we do?

You'll need to do an audit of ongoing expenditure, otherwise, to find somewhere to cut.

Any chance of moving venue to somewhere cheaper?

Definately match fees to level of LEA grant. If you think there may be a few families who will struggle you can always operate a bursary scheme for those in need who don't get free sessions.

When I was a playgroup chair (7 years ago) we made the decision to match the LEA grant. Then a few families paid for say one session and got 2 free. Fundraising for bursaries seems easier than for staff salaries.

How did you means-test for the bursary?

I think that you really need to put fees up to match the nursery funding grant - under 3s cost more anyway because the staff:child ratios are higher. We came to the conclusion that it was wrong for the nursery grant to be subsidising under-3s as that's not what it is there for.

llkjj we didn't really - just said if you have a problem speak to the treasurer, then treasurer, chair and playgroup leader at their meetings would agree it.

It was never a problem as the numbers were small, playgroup leader would say why the child would benefit from more sessions than parents could afford and we would agree we could afford this.

We did run a big fund raising event each year and always mentally ring fenced about 10% for that sort of thing. The rest went on building/grounds maintenance.

We only pay rent for when we're running sessions. Finding another venue isn't really an option a) there isn't anywhere and b) we're right in the heart of the community.

We have had to pay for staff training but we're going to freeze that now and we're set to freeze pay.

I have approached the Early Years dept at the Council and the Childcare Market Facilitation Manager is looking at the figures for us to see if he can see anything significant. Bit apprehensive about disclosing too much though incase it goes against us.

Interesting to see so many people in favour of putting up fees.

Is possible to negotiate the rent? Delay an increase until September when you can put the fees up?

If you only pay rent when you run sessions then you may be better off running fewer sessions that are completely full?

I have had to pull a pre-school back from the brink (down to the last fourteen hundredd pounds!) in the past, but that was due to too few children. Again there had been resistance to a fees increase but it was necessary as was cutting back staff on slack mornings.

For reference we receive £3.52 an hr for funded children and charge £3.50 for 2 year olds and extra hours over the fifteen.
If you are nearly full and not breaking even there is obviously an issue either with fees, staff wages, number of staff or rent. You should be looking to have reserves of three months expenditure in the bank really. Our LA provide a consultancy service who come out to PVIs every year and go through your finances, forecasts etc which is a big help. How are you priced in comparison to others locally?

Blimey - you are really under Harding if you are in the SE! My local preschool charges £5 an hour for all non-funded sessions.

The last time the fees were £3.50/hr was 6 years ago when my DS2 was there - he's 9yo now!!

The parents draw a SIOB when they hear the prices, but I have yet to meet anyone that it puts off.

For the lowest income families (usually those whose parents are on benefits), the preschool applies for the discretionary funding for 2yo's to have the free 15 hours.

For DS3, I will end up paying from September through till Easter, as his birthday is end January.

Though I may yet get funding early due to my financial situation.

But £5/hr is just what we expect to pay now locally for non-funded preschool hours.

Under Harding = undercharging.