Owning a small daycare or childcare center can be chaotic. Between planning activities, ensuring your kids are safe, and keeping up with regulations, the work never stops. Add bookkeeping to the mix, and it may often feel impossible to stop working at a reasonable time each day.
At CSI Accounting & Payroll, we've been advising childcare center owners on industry best practices for over 50 years. Here are some of the bookkeeping tips that childcare centers find the most useful, especially when you're doing bookkeeping yourself.
1. Make sure you’re compliant with DHS regulations.
This may not necessarily sound like a bookkeeping tip at first. However, staying in compliance with the Department of Human Services means you can continue to operate - and maybe even participate in certain government programs that can make your books look a little different.
Whether you offer family child care or operate a childcare center, you have important legal obligations to meet. If you operate in Minnesota like we do, here's some licensing help from the Minnesota government. Staying up to date with these regulations will keep you licensed and eliminate bookkeeping headaches down the road.
If you serve families who qualify for Minnesota’s Child Care Assistance Program (CCAP), make sure you have this clearly documented in your books. There are a few things to keep in mind if you have children who participate in similar programs:
- Copays. Families’ copays can vary drastically depending on their income level. Be sure this is clearly documented in your books, and expect government payments.
- Cash flow. The government can sometimes take longer to pay you than your usual customer base. This can affect your cash flow, so be prepared for times when you might have less cash than you expected.
- Revenue stipulation. The government also can enforce stipulations and tuition limits if you work with children in government programs. Keep this in mind so you can stay in compliance if you are planning to adjust your prices for inflation.
2. Separate billing by child age and type of care.
If you serve a variety of age ranges, you probably have a graduated tuition system that may include infants, toddlers, and school-aged children. Younger children or children with special needs require a higher caretaker-to-child ratio, and care at different times of day can also be charged at different rates. Make sure that these different groups are separated in your billing system.
You can also choose to put in extra work on the accounting side of things by separating these groups in your books. This isn't necessary and would require quite a bit extra work to also separate expenses by group, but it could help you pinpoint where most of your revenue is coming in.
If your childcare center also offers summer camps or other short-term programs, you’ll want to designate a separate bookkeeping system for this in advance. Keep in mind that offering these short-term arrangements can be profitable if you have the space and resources to hire seasonal staff, but it may detract from your capacity to accept families with year-round needs.
3. Don’t forget to bill for extras.
You bill for childcare, but if you care for younger children, do you have a regular system for billing for extras like diapers or additional supervision? If your center offers seasonal programs like summer camps, do you bill for special supplies or activities like field trips? Make sure fluctuations in expenses are absorbed into your billing.
Largely, the biggest expenses to businesses like yours will be:
- Payroll
- Food
- Other supplies
Many childcare centers will try to track each of these individually as a percentage of your revenue to identify areas where you're overspending or can afford to spend more.
4. Work with an accountant year-round.
We're not talking about hiring an in-house accountant or even just doing taxes with an annual accountant; you can partner with a monthly accountant to have all of your bookkeeping, taxes, financial statement reviews and advice, and even payroll all in one place!
We know what you're thinking... But yes, you probably can afford to do this! Plus, when it comes to accounting, it’s often less expensive in the end to have some help. Since monthly accountants deal with numbers every day, they can:
- Quickly spot trends in your bookkeeping
- Track your spending
- Cut unnecessary costs
- Help you stay compliant
- Help you avoid costly penalties
Looking For an Accountant With Childcare Industry Expertise?
No one knows better than you do that caring for children is time and energy-consuming! You need to be able to devote your time to the children in your care and to growing your business - not to crunching numbers. Since childcare providers are often open for extended hours, it’s especially important that you can go home to your own family when you shut your doors for the day.
A monthly accountant can provide ongoing, real-time advice to help you make smart financial decisions throughout your fiscal year. If you do go this route, it's important to find a provider with expertise in the childcare industry.
By hiring an accountant, you’ll be able to plan for a successful financial future. Plus, you'll have more time to devote to the children you care for, your own loved ones, and other things you enjoy. If you're interested in monthly accounting, why not consider CSI Accounting & Payroll? After all, we've worked with the childcare industry for more than 50 years.
Click the button below to schedule a free consultation to see if we can be a good fit for each other:
Not ready to talk? That's okay! If you want help continuing to do things yourself, click the image below to download our Small Business Accounting Kit, which includes:
- Year-end payroll checklist
- Tax return calendar
- Tips on how to use your income statement, balance sheet, and cash flow statement
- Advice on when to contact your accountant
