A Director's Compass

Are you prepared for the new minimum salary rule?

June 16th, 2024
By Stephanie Thompson

UPDATE: The overtime rule, ultimately didn’t pass and the old rules are in place as of January 2025.

While I’m not an expert on legal situations, I felt it was my duty to pass along information that I do know about this new law. Many years ago, a similar law was going to be passed and created quite a stir, so my co-worker at the time and myself invested a lot of time on the subject and even spoke to an employer attorney for extra help. The law ultimately did not go through all those years ago, but I think we all knew it was going to come back around at some point.

My disclaimer is that this information can be used to help bring awareness, but I suggest doing your own research and talking to your legal counsel (which could be expensive). I’m going to lay things out the best I can and include resources for you to do your own research.

On April 26, 2024 the Department of Labor (DOL) announced an increase to the minimum salary for exempt employees. Exempt employees are those who are not eligible to receive overtime. To be an exempt employee, they need to pass 3 tests: (1) be a bona fide executive, administrative or professional (EAP) (2) the job duties test (3) the salary threshold. I’ll explain each to the best of my abilities:

Bona fide EAP (Executive, Administrative, or Professional)

According to the DOL, for an employee to fall within the EAP exemption, an employee generally must:
- Be paid a salary, meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed during the work week
- Be paid at least a specified weekly salary level (salary thresholds – see below)
- Primarily perform executive, administrative, or professional duties (duties test – see below)
*It’s important to note that the duties test should not be thought of based on an employee’s job title, their actual job duties are what the DOL would look at in the case of an audit. Their job description would be a great back up, so make sure you have one in place for all roles.

*For more information about this click here

Duties Test

In most childcare centers, Directors and Assistant Directors would fall under either the Executive or Administrative exemption. It is important to look at each employee who currently receives a salary to determine if one of these classifications apply to them. If one does, you’ll next need to make sure they meet the salary threshold.

*Please refer to this link for details.

Salary Thresholds

Current minimum salary: $684/week or $35,568 per year

Effective July 1, 2024 the minimum salary: $844/week or $43,888/yr

Effective January 1, 2025 the min. salary: $1,128/week or $58,656/yr

Next increase: Every 3 years the minimum salary will also increase, the next one being January 1, 2027.

*These salary thresholds don’t have to be paid out weekly and can include usage of PTO. Additionally, 10% of an employee’s non-discretionary bonus can count towards these salary totals.

**Exceptions to this rule include teachers, however it’s extremely important to understand who the Dept of Labor considers a teacher. While we all disagree, the consensus in the legal world is that preschool teachers are generally NOT considered teachers for this purpose.

Since the announcement

The DOL is being sued because of this rule. Towards the end of June, there are trials and I hear a judgment will be made as to the future of this ruling. I have read many articles and watched webinars recently and the advice is to assume the ruling WILL be in effect July 1st. To not take this seriously, would be a miss. So even though this law might end up being delayed, it’s too risky to assume such a thing right now.

Next steps

Take a deep breath….this is a lot to take in. I’m going to break down your next steps in a simple format:

#1 – Use this format to analyze your current salaried employees:

#2 If you determine an employee’s job duties do not qualify them for an EAP exemption, you have a few options.
- They can become an hourly employee and are eligible for overtime or
- They can remain a salaried employee and also be eligible for overtime. In this situation, their time must be tracked in order to know when overtime must be paid out. This would be a shift in practices and habits, but a very important piece to it.
#3 If you determine that a salaried employee does not meet the salary threshold, determine how much of an increase would need to go into effect by July 1st to be compliant. If an employee needs a few thousand dollar annual raise to keep them as salary exempt employees, I would suggest making that change. If the financial burden is too large, I would decide which of the bullet points you’d like to use in #2.

Once you’ve completed this exercise for the July 1st increase, repeat the exact same process for the January 1st increase.

#4 Talk to your affected employees. This can be a challenge if you financially cannot meet the salary threshold. Some employees might feel that becoming an hourly employee might feel like a demotion. In a way, this change would benefit them, as they would get paid for their actual hours worked (you’ll want to talk to them about how many hours they can work each week, as paying overtime can lead to increased costs). How many hours on average is this person working? If it’s between paying this person overtime or having to hire another employee to cover their hours past 40, it might cost you even more money to go that route.

If the solution is to keep them salaried and pay overtime, their habits will need to be switched to a time tracking one, similar to what is done for teachers.

Areas of caution

This blog does not constitute legal advice, as I am not an attorney. Speak with your attorney if you have questions! Additionally it’s important to note that I’m only talking about federal law changes, check into your own state laws on salary requirements and overtime requirements.

If you are a director reading this and have not heard from leadership about this topic, please pass this information along to them! I would not assume everyone is up to date on the laws unless you have a dedicated HR person!

You can find more details about the ruling on the DOL’s website here
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How to Handle Difficult Parents

June 3rd, 2024
Written by: Brynn Carrell

As leaders in the field of early childhood education, I’m sure it is safe to say we all have had our fair share of experiences with challenging parents and dealing with conflict resolution. The question is how do we maintain professionalism and demonstrate strong leadership skills all while still meeting the specific needs of our families?

There are two specific topics to address in this area: the high maintenance parent and conflict resolution. Both can be extremely challenging and definitely the less glamorous aspects of our job as Director. When faced with these challenges I consistently try to remind myself that there is nothing in the world more important to these parents than their children. With that being said, leading the conversation with the child’s best interest at heart will always help find a common ground with parents. Let’s break this down a little…

The High Maintenance Parent

We have all had them! My experience with the high maintenance parent is typically one that requires a lot of additional TIME. I have found that the best way to handle this is to support your educators. Help them to create clear and concise boundaries from the beginning. What should their drop off and pick up procedures look like? What is a reasonable amount of parent communication that teachers can provide during these times of the day? The same boundaries apply for administration.

High maintenance parents are seeking connection. The more we can do to build trust with these families and help them to feel connected to the school and the classrooms throughout the day, the sooner you will see them backing away from their high maintenance requests. Connection is everything! If teachers can take an extra moment to send a picture or quick email on their terms it will go a long way.

Another area of focus for these families is attention to detail. These are the parents that want to know everything, such as, how much their child ate at lunch, what time their diaper was changed, and who they played with on the playground. Knowing these details will be important to building the connection that will foster a trusting relationship.

Conflict resolution

There is nothing worse than receiving a tough email or having a parent come to the front desk angry about something that happened. There are a few steps that I always try to follow when addressing problems with parents: Disarm, Support, and Resolve.

Disarm

First and foremost always do what you can to disarm a parent. Address the problem directly. This means calling them on the phone or discussing the problem in person. I never respond to a problem in an email. I find that tone can be misconstrued and it is a lot easier to find resolve if you are having a direct conversation.

Always, try to find a private space to have a conversation. Whether this be in an office or conference room, you want to make sure that the parents’ concerns are private and respected. If possible, sit down. It is so much easier to keep things calm and collected if you are sitting and having a conversation.

Support

Support is the most important part of conflict resolution. The very best way to do this is to listen unconditionally and truly hear what they have to say. Acknowledge what they are feeling and what they are experiencing. Provide any insight you may have. Be careful not to provide excuses, but more so an explanation of what or how the situation could have occurred. Always support your educators, and never place blame.

Resolve

Make a plan to fix the problem. Maybe this is a classroom change for a child, maybe this is additional training for a new teacher, maybe this is communicating with a teaching team then having a follow up with the family in a couple of weeks to monitor the progress. Whatever the plan is, follow through is key. The family wants to know they can trust your leadership and that you are capable of resolving their issue.

Handling difficult parents will always be a part of this industry. The key to success is to always focus on the child first!

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Prior blog posts:
The Importance of Strong Financials – Part 2

May 10th, 2024

Written by: Stephanie Thompson

This is Part 2 of a 3 part blog. If you haven’t read Part 1, you can find it here. This blog is recommended to childcare business owners who want to learn more about accounting for their business.

This blog is about your Profit & Loss (P&L), otherwise known as an Income Statement. Your P&L is made up of 2 sections, your revenue and your expenses and this statement can be looked at for any period of time, as opposed to the Balance Sheet, which is for a particular point in time (not a date range). Revenues minus expenses equals your Net Income, which tells you whether you have a profit or a loss. Simple enough, right? Well I’m going to go into more detail!

Revenue

Revenue is always at the top of the P&L. It’s important to look closely at your revenue accounts to ensure accuracy. Each month, you should look at your General Ledger report for all revenue accounts to make sure nothing seems out of place. Regarding revenue accounts, it’s recommended to separate out your private pay tuition and your subsidy income (if applicable). Separating them out will give you a good idea of how much of your income is coming from each revenue source.

It is recommended that you break out your revenue into categories that you bill for in your billing system (not necessarily by age group), for example: discounts, registration fees, ACH/credit card fees paid by families, late payment fees, etc. This can be done as a journal entry after each month has ended. To break it out, you would run a detailed report from your billing system. Please note that security deposits collected is not something that should be reported on your P&L, it belongs on your Balance Sheet as a liability, because those monies will ultimately get returned to families (in most situations). If a family leaves and does not get their security deposit returned (they didn’t give enough notice of their withdrawal, if that’s your policy), you would clear out the liability and recognize that family’s security deposit on the P&L, with an account named Forfeited Security Deposits. At that point, the money belongs to the company and should be recognized as revenue.

After running the billing reports for the month, you would make the following journal entries to break out your revenue:

Registration Fees (credit)

Discounts (credit)

Late Payment Fees (credit)

Security Deposits Refunded – Liability (debit)

Security Deposits Collected – Liability (credit)

Tuition – plug # to balance the entry (could be a debit or a credit)

* Note about security deposits collected: when you refund the security deposit to the family (or apply it to their last month’s tuition payment) you’ll want to make sure to reduce the account balance of your Security Deposit account on your Balance Sheet. A good way to record this would be to run a report at the end of the month to see how much in security deposits were refunded and collected. It’s important to know how much you owe to families in total, as you’ll want to make sure you always have the cash in your bank account to return those funds.

Funds received from Grants

One-time grants (or grants that have an end date) should NOT be accounted for at the top of your P&L with your normal revenue, they should be “below the line” and coded as Other Revenue. This is important because you do not want grant money to distort your normal revenue line, which might make you think your revenue is higher than it really is.

Expenses

You have to spend money to make money, right? While that’s true, it’s also very important to keep a close eye on your expenses so you come out with a profit at the end of each month.

Payroll will be your largest expense, so it’s important to staff your school as efficiently as possible. Staff turnover has a huge impact on this expense category, so not only is having a good staffing model and good staff you can count on is important, but it helps save you money in the long run in staffing costs. The better your teachers, the better your school culture, the lower your staff costs will be and not to mention the happier your families will be (you can use those savings to increase teacher wages!).

At the end of each month, you should review your expenses in detail, by looking at the General Ledger report. Do you see any recurring expense items that you could cut out or find alternatives for? Perhaps shopping out vendors for items that you always need (gloves, toilet paper, paper towels, etc.) would find you savings. Using delivery services such as Instacart, while convenient, comes at a premium (fees to Instacart and tips to drivers).

Net Operating Income and Net Income

You will find your Net Operating Income under your operating expenses and is your normal revenue minus operating expenses. Net Income is found at the very bottom of your P&L and includes Other Income (Grants, Interest Income, etc.) and Other Expenses (Depreciation). It’s important to look at both numbers.

Net Operating Income is good to look at because that is your normal operating profit or loss before any grants. Looking at Net Income is also important because it gives you the true numbers (which is important for your tax strategy), however some of the items in it cannot be counted on moving forward, so it’s best to use Net Operating Income when evaluating your center’s performance and decision making.

If you are a childcare center business owner and this blog makes you feel a bit lost, look no further! We’d be happy to set up a free consultation for our financial coaching or accounting services where we can learn more about your business and explain how we can help. Please email Stephanie at Sthompson@hingeadvisors.com or visit https://hingeadvisors.com/success-services and click on Financial Coaching services to learn more!

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Keep Calm and Comply On… Licensing Is Here!

March 17th, 2024
Written by: Katey Suits

Ace Your Next Licensing Visit in 5 Easy Steps

It happens at least once a year and can make even the most experienced directors break out into a cold sweat… the state licensing rep has walked through the door! The good news is this is something we can anticipate and prepare for, so take some deep breaths, chug that coffee and read on for how to make this as stress-free as possible. You got this!
1. Treat every day like licensing is coming. It is very easy to get lenient on policies when you’re not under a microscope everyday however, that’s exactly how to start learning bad habits and feel panicked when it’s time to shape up. Learn the regulations like the back of your hand and make it standard practice at your center so when someone is watching, it’s just another day and everyone is prepared!
1. Build a relationship with your rep. While it may seem awkward to get to know the person who tells you everything you’re doing wrong, they are a person doing their job, which is to make your center as safe as possible. Smile, make them feel welcome, and encourage your staff to greet them while in the classrooms. When little non-compliances arise, they are more likely to use it as a learning opportunity and worry more about the big stuff.
1. ASK QUESTIONS! Don’t be afraid to ask your rep exactly what they are looking for. Many will have templates and lists they use and are happy to tell you word-for-word what they need to see so you can be 100% compliant. If a particular rule is confusing to you, ask them to walk you through it so it will be correct next time. Get their contact information so you can communicate in between visits, ensuring clarity on anything you’re not sure about. They are there to help you!
1. Make things as easy as possible. The quicker you can send the rep on their way, the better! Save them time by keeping all your needed documentation in one convenient place. A binder can easily organize your state-required forms and licenses for your program. Keep a separate file for each staff member containing all of their needed documentation so your rep can quickly pull and review them. Student files should have the state forms in the front to save time from sorting through permission slips and incident reports.
1. Communicate licensing feedback with staff as a team-oriented goal. It takes a whole team to run a compliant center. The day after your visit, treat your staff to donuts or pizza for doing their best while being observed. They will feel appreciated for helping you look good as a school! Once you receive the final report, hold a staff meeting to recognize the things they did well and retrain on the things that need to improve. You can even allow them to share feedback and ideas of ways to meet compliance next time!
1. BONUS TIP: Designate an employee as the Licensing Coordinator! You have so much on your plate, it can sometimes be too overwhelming to ensure compliance throughout your entire program with everything else going on. Delegate some of the responsibility to either another administrator or even one of your best teachers to help be that second set of eyes and a secondary resource for teachers still learning the rules and procedures. The coordinator can do mock walk-throughs, organize documents, train staff and more!
I hope these tips have helped you feel more empowered to successfully pass your annual licensing visits, and maybe even impress your rep! Putting in the effort on a daily basis will make the big day feel a little less scary, and your staff will feel prepared to show off what your school is all about. Now go treat yourself to that second coffee, you’ve earned it!

Our past blogs:
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The Importance of Strong Financials – Part 1

February 17th, 2024
Written by: Stephanie Thompson

Business owners know financial statements are an important part of every business, but why? A company’s financials tell a story. From an overview, they show whether you are profitable or not, they can tell how much debt you have and how much cash you have in the bank. From a detailed perspective, financial statements tell the story of the company’s spending habits. It shows how much money has been spent on certain categories and those spending trends can give insight into areas that can be improved to help your bottom line, and therefore improve cash flow.

Understanding your company’s financial statements will open up a world of understanding. It is important to have this understanding, after all, this is how informed business decisions can be made! For example, do you have extra cash that you could be investing (money market or other safe place), do you expand your business, do you improve upon your current business, do you spend money on improving your internal practices and policies (perhaps become more automated, which might free up time to focus your time on other areas of the business)?

If you are reading this and want to have a better understanding of the financials in front of you, you’re in the right place. My goal is to strengthen each Business Owner and Director’s understanding of their financial statements. There are simple ways to look at your financial statements and gain an understanding about what they are telling you.

Your Balance Sheet breakdown

Let’s start with your balance sheet. The balance sheet is an important part of the financial statement package. Not only is an accurate balance sheet important to current/potential investors or your bank, but it also tells a lot about your business and how it’s run.

Assets

The balance sheet starts with your assets. At the top are your bank account balances as of the ending date you choose to look at. Then there are your receivables (who owes you money), security deposits you paid for rent, and fixed assets you own (buildings, land, vehicles, furniture and equipment, etc.). The amounts recorded for your assets are the purchase values and over time, these assets will be depreciated or amortized over certain period of time. If you or your accountant are not accounting for depreciation and/or amortization each month, your tax or accounting professional SHOULD be giving you these amounts).

Liabilities

Your liabilities are monies owed to others. Examples are payroll tax taxes (you withhold money from employees’ paychecks, which you then pay to the state or federal government). That money is considered a liability until you pay those taxes. Another example is short and long-term debts, which could be could be credit cards, bank loans, mortgages, etc. As you make principal payments for loans, the amount on the balance sheet will be reduced, therefore showing your current amount owed.

Equity

The Equity section is the last section of the balance sheet. This is where you’ll find the total profit of your business that has accumulated over the years, as well as what funds you have put into the business (called Owner Contributions) and money taken out of the business (called Owner Distributions).

What story is YOUR balance sheet telling you?

At any point in time, you should be able to run your balance sheet report to a see if you have enough cash in the bank to pay off your debts. Even if you did have that much cash in the bank, the suggestion isn’t to necessarily pay the debts off all at once. There are strategies for paying off debt early and still retaining a healthy cash balance.

The goal is to make sure you have a cash reserve. The recommended cushion of cash to have is at least 3-6 months of operational expenses and the cost of at least 3-6 payroll runs (include payroll taxes, employer sponsored health plans, and retirement matches in this amount). Utilizing a bank account for each center’s operational expenses and a separate payroll account for payroll costs (all centers can use one payroll account), will make it easy to see, at a glance, where you are at with your cash cushion. Of course, if you don’t quite have the recommended savings, that should be your goal to work towards. The more savings you have, the less stressful the day-to-day operations become and certainly helps in a scary scenario of another pandemic or recession. If there’s one lesson COVID-19 taught us, it’s the importance of a maintaining a cash reserve!

Thanks for reading! Be sure to look out for Part 2 of this blog!

Be sure to check out our other posts!
- Are you prepared for the new minimum salary rule?June 16, 2024
- How to Handle Difficult ParentsJune 3, 2024
- The Importance of Strong Financials – Part 2May 10, 2024
- Keep Calm and Comply On… Licensing Is Here!March 17, 2024
- The Importance of Strong Financials – Part 1February 17, 2024
- Welcome!January 28, 2024
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Welcome!

January 28th, 2024

Hello and welcome to our blog for childcare business owners and directors! We are excited to share what we’ve learned over the years (and sometimes through our own mistakes!). We hope you find value in our posts which will vary from day to-day-operations, staffing, a little HR, and financial information, all specifically for those managing ECE centers.

The writers on this blog are 8 former co-workers (some still are co-workers) who worked at a multi-state childcare business. Most of us started out as teachers and worked our way up to the Executive Director role, so we’ve lived that life and know the challenges! Visit our “About Us” page to read our bios.

So often, we as directors and owners have to learn through trial and error but what if you had a toolkit created by those who been on this journey before to help set you up for success? There will still be mistakes along the way but navigating those moments become a lot easier when there’s a compass to guide the way. That’s why we’re here and we thank you for joining us!

Please follow us on Instagram and Facebook. We’d love to hear from you and learn what suggestions you’d like to learn more about!

Fun fact: As many of us are no longer co-workers , we have vowed to keep in touch and go on an annual trip. We call the trip the “Loose Parts” trip 🙂 #reggioemilia #ashevilleNC #thebiltmore

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