As a childcare business owner, it’s crucial to monitor and manage your finances properly. Not only do you need to make sure that you and your staff get paid, but you also need to keep track of supplies, vendors, and future budgeting efforts that allow your childcare center to thrive.
Since your top priorities every day are caregiving and teaching, it can be easy to let the financial details slide. But come tax season or the end of the school year, all childcare directors must take an honest look at where they stand.
Whether you want to improve your existing accounting process or you desperately need to fix your finances, here’s what you need to consider when getting your childcare accounting in order.
Top 8 elements of childcare accounting:
- Childcare Business Bank Account
- Budgets and Projections
- Receiving Payments
- Tracking Expenses
- Childcare Bookkeeping
- Covering Payroll
- Childcare Accounting Software
Let’s explore each category below.
1. Childcare Business Bank Account
Many childcare directors start as independent providers, sometimes even receiving money under the table. But as your business grows, you need a way to legitimize your income. It’s a good idea to open a business bank account.
There are several reasons to do this:
- It encourages financial responsibility
- It helps you track business expenses
- It makes your accountant’s job easier
- It protects you from legal trouble
If you plan to operate as an LLC (limited liability company), you need a business bank account to guarantee legal separation between you and your business. This protects you and your assets (such as your savings, car, and home) in the event of any lawsuits.
2. Budgets and Projections
When done correctly, accounting enhances your budgets and projections. If you plan to grow your business, you first need to get your books in order. When you can’t seem to reach new business goals, you need to look at previous years to make adjustments.
Setting up healthy accounting habits when you’re starting a childcare business sets you up for success in the future. When you accurately project your finances from the beginning, you’ll also be able to save money for taxes and not face a surprise when it’s time to file.
Unless your childcare business has a way to automatically bill families for services, you risk wasting time and money on managing every invoice. Setting up an automated billing software that links to an accounting system allows you to:
- Send recurring invoices
- Track payments and late fees
- Deliver custom invoices (for special events like field trips, class parties, etc.)
- Adjust tuition when necessary (for government aid, payment plans, or price increases)
Digitally managing all these important details of your business makes life easier and leaves little room for missed payments.
Using a Digital Parent Billing Software like Daily Connect makes it easy to send invoices and collect payments.
4. Receiving Payments
Billing and receiving go hand-in-hand. With so much technology today, there are better ways to accept payments than just cash, card, or check.
You should have a way to accept payments online. Parents often prefer the option to set up automatic payments and keep track of all their childcare bills. Taking online payments allows your childcare business and your customers to manage their finances more responsibly.
There are childcare management apps that help organize everything: attendance, parent billing, teacher communication, learning assessments, and more. This helps childcare centers record and bill appropriately, since everything is in one place.
5. Tracking Expenses
Today, accurately tracking financial information is easier than ever. Business owners no longer have to spend hours manually crunching their numbers in spreadsheets every week. Automatic accounting in your business allows you to see every detail, from total profits to payroll to specific spending budgets.
During tax season, having a well-tracked list of business expenses can help you save. You’re permitted to deduct certain costs including:
- Payment processing fees
- Marketing expenses
- Employee training materials
- Childcare supplies
- Classroom equipment
- Meals and snacks
- Some utilities
You’ll need to talk with an accountant or tax specialist to find out how to properly categorize and deduct your expenses. Having everything tracked year-round is a huge help.
6. Childcare Bookkeeping and Accounting
Some childcare providers handle their own bookkeeping needs; others hire out. Either way, accurate bookkeeping is the first step to business accounting. What’s the difference? And which should you do?
Bookkeeping is when you organize and track all of your business finances. Accounting is when someone interprets and represents all the financial data tracked. Accounting proves the results of your financial decisions. It helps you make more informed choices moving forward.
As with any other business, taxes can be hard. Whether you do your own bookkeeping, automate it with software, or pay someone else to do it for you, you should hire a qualified accountant when it’s time to file your childcare business taxes.
7. Covering Payroll
You know this already: employees have to be paid. Not only paid, but paid accurately for every hour they worked. There need to be systems in place to calculate employees’ wages, hours, time off, and all the other details that come with employing a hardworking staff.
Since you’re a business owner, you also need to be able to pay yourself. Mismanaging or overspending childcare business funds can lead to some ugly financial outcomes.
8. Childcare Accounting Software
To tie all the above points into one, a childcare accounting software makes financial management easier for business owners. When you need to upgrade your childcare accounting, software is a great option.
From bookkeeping every month to accounting come tax season, using a childcare accounting app helps you:
- Organize funds from business accounts
- Manage childcare budgets year after year
- Automate invoices to parents and guardians
- Receive and manage payments online
- Accurately manage your books
- Make sure your staff get paid on time
There are plenty of accounting software options available today. But finding one that specifically caters to childcare centers like yours makes a world of a difference.
Accounting Solution for Childcare Business Owners
There are so many moving pieces at a childcare center. Kids to supervise, incident reports to fill out, parents to call, people to pay— it all needs to get done somehow. And so does the financial side of your business.
To get started with comprehensive childcare and daycare software that includes accounting features, reach out to Daily Connect. We provide childcare centers of all sizes with the digital tools they need to sustain and scale.