The ABCs of Daycare Bookkeeping (Without Noise)
When Faye opened Little Haven, her daycare, she thought the hardest part would be handling the kids. However, she was wrong. Managing the finances of a daycare was the hardest part of running the business.
She needed to keep track of payments, payrolls, and revenue, which turned out to be chaotic. That’s when she realized she needed a daycare bookkeeping service that could streamline her overall financial operation.
If you find yourself in Faye’s shoes, our today’s guide is for you. Here, we’ll break down how daycare bookkeeping can grow your business.
What is Daycare Bookkeeping?
If you are hearing the term “daycare bookkeeping” for the first time, let’s explain what it means in less than 100 words. If you want to dig deeper, you can check our guide, where we explain the functions of a bookkeeper in detail.
Daycare bookkeeping involves managing finances, including income from tuition fees, employees’ wages, school supplies, and taxes. It ensures you have a healthy cash flow and comply with the regulations properly. You can do this through bookkeeping software or by having a professional service.
Step-by-step Guide on Daycare Bookkeeping
Now that you know what daycare bookkeeping is, let’s move to a step-by-step guide on how to grow your daycare business by applying bookkeeping practices.
1. Get Organized
Faye’s bookkeeping was a lot like a child’s painting; it was messy and unstructured, and she had no clue what she was doing. Staying organized in business and life in general is super important.
You need a clear picture of your income and expenses, from tracking daycare payments to employees’ wages. Many small businesses fail because they are not keeping track of their finances. According to Score.org, recent studies show that 20% of businesses fail within a year, mainly due to poor financial management.
So, you need to avoid joining that group and get organized before you can start thinking about daycare bookkeeping.
If you want to get organized, we have an interesting guide on how to organize your receipts.
2. Keep an Eye on Expenses
The daycare business requires frequent purchases of toys, school supplies, snacks, and other necessities. While these expenses can seem small, they become large when they accumulate.
Unless you keep an eye on day-to-day expenses, they can eat up your profits. With bookkeeping for day centers, you can categorize all your spending. In this, no small expense slips through the cracks.
Also, if you can track the expenses, you can claim tax deductions, saving you money in the long run.
3. Budgeting
Budgeting is the best way to keep track of expenses. If you are looking to grow your daycare business (more on that in a while), your expenses will also grow, and soon, you’ll find that budgeting isn’t just for managing daily expenses; it’s part of your business growth.
When you do realistic budgeting, you can invest in kids’ playing equipment, hire more staff, and expand your daycare. The recent Small Business Survey showed that businesses with a structured financial approach experience fewer financial strains.
So, if you are looking to expand and improve your cash flow, setting a clear budget with daycare bookkeeping tools can help you make informed decisions.
4. Daycare Bookkeeping Tools
Speaking of tools, we live in an age where we don’t need to enter receipts or balance our books manually (gosh, we can’t imagine doing that). If you want to stand out and accelerate, use bookkeeping tools. They can automate invoicing, payrolls, expenses, and much more.
You may think, “Oh, Tangent I can do all of them without breaking a sweat.” Sure, you can; however, if you aren’t an accounting genius or don’t have a dedicated CFO service like Tangent Consulting, invoicing, payrolls, receipts, and expenses can give you sleepless nights.
If you are looking to apply software, you can use childcare management software like BrightWheel. If you want to simplify the overall financial process, we recommend using Jobber. It makes invoicing, client payments, scheduling and dispatching, and bookkeeping much easier.
The cool thing is that Tangent has partnered with Jobber to give you 20% off on an annual plan for six months. You can grab the offer here. With all the automation set, you save plenty of time and reduce humor errors.
5. Tax Prep
If there’s one thing more annoying than a room full of kids, it’s tax season. Many daycare owners sometimes overlook the importance of tax preparations. Filing taxes incorrectly can lead to penalties and audits. In fact, according to the IRS report, 1 in 100 small businesses get audited by the IRS every year.
Our friend Faye knew that for the tax prep, she had to do payroll taxes, staff benefits, and income deductions. However, Faye wasn’t ready for all of this. So, with the help of daycare bookkeeping services like Tangent Consulting, she could comfortably sail through the tax season.
6. Cash Flow Management
Cash flow management is an important aspect of running a business, as it tells you the difference between income and expenses. There are two types of cash flow: positive and negative. You need to be on the positive side as if you fall into the negative territory, you won’t be able to avoid debt. If you want to avoid that, you can check out our guide on maintaining a positive cash flow.
Running a daycare comes with fluctuating costs, like Christmas toys or outdoor outfits for summer. Bookkeeping lets you track your cash flow, ensuring you always have cash to cover operational expenses. It can also help you analyze cash flow trends to know when to cut back on costs.
7. Growth
When Faye got a complete picture of her business’s financial health, her business continued to grow. She regained her mojo and became more confident about expanding. Effective bookkeeping practices allowed her to invest and cut down on useless expenses.
Like Faye, with the right bookkeeping services, you’ll know when the right time is to expand your business.
8. Tracking Tuition Payments
Managing tuition payments is the most important aspect of daycare bookkeeping. Missed or delayed payments can create cash flow problems, and you can’t even cover monthly expenses.
With management software like Jobber, you can automate payment reminders and track overdue invoices, ensuring consistent cash flow.
9. Managing Payrolls
Managing payroll can be the most stressful part of running a daycare. If you want to grow your business, you need to make sure that everyone gets paid in a timely manner.
With tools like Jobber, you can automate your payroll, ensuring employees are paid at the right time.
10. Get Professional Help
Even with the best tools and practices, sometimes you need professional help. Tools can be tricky to operate, and you may be unable to do bookkeeping properly. So, you need peace of mind by working with a bookkeeping service that understands your needs.
Tangent Consulting provides bookkeeping for daycare centers, helping you stay on top of your finances without adding more stress to your day.
Final Thoughts
Daycare owners like Faye need to take care of children and manage their business finances. By staying organized, tracking expenses, using tools, or using a pro service, they can expand their business.
With a partner like Tangent Consulting, your daycare bookkeeping becomes easier without the noise.
FAQs
Is daycare bookkeeping worth it?
Bookkeeping is necessary in any business to manage expenses, track cash flow, manage payroll, and expand the business.
Is QuickBooks good for daycare?
QuickBooks allows you to perform bookkeeping tasks without any hassle. You can manage your tuition payments, keep track of invoicing, and much more.
Can I do basic daycare bookkeeping?
You can learn and can do basic bookkeeping. However, it can take time; if you are a startup, it can take time to know the bells and whistles of bookkeeping.
