This One Habit Will Ensure the Long-Term Success of Your Daycare or Childcare Center
Operating a Daycare/Childcare center often necessitates a multifaceted approach in which you must assume various responsibilities. Meal planning and preparation, running classrooms, complying with regulations, managing parent-teacher relationships, staff administration, organizing virtual or physical tours, marketing, business development, safety and security, and so on are all time-consuming activities.
While you may be enthusiastic about your role as a childcare provider, you must always keep the business’s long-term objectives in mind. This requires a system of recordkeeping that is both credible and efficient. Recordkeeping has been shown to have a positive impact on the long-term profitability of companies. This means that if you have a good recordkeeping system in place, you will have a better chance of staying in business for a long time.
Of course, you are not running your Daycare/Childcare center for the love of it only; you are in it to make a profit. This means that all necessary and ordinary business expenses must be deducted when filing your tax return. That is why it is important to stay organized and follow a set schedule when it comes to recording and storing paperwork for your Daycare/Childcare center.
According to dictionary.com, recordkeeping is the process of keeping track of one’s activities, such as financial transactions, by entering information into ledgers or journals and filing documents. When applied to Daycare/Childcare centers, keeping track of income and expenditure, contracts, and all relevant documents used to run the business activities constitutes recordkeeping.
If you are determined to expand your center in the future, you will need to develop a good recordkeeping habit and a system that goes beyond record storage. The first thing to think about is where you will keep your documents. Both hardcopy and digital storage options are available. Paper copies could serve as backup for you when you do not have access to the digital records. However, all you have to do is to select the best storage method that fits your organizational needs and improves efficiency. Features such as data security, easy access, and retrieval, as well as effectiveness, are essential for an optimal recordkeeping system. In addition, it should allow other members of your team to use such records. Good recordkeeping habits have the overall goal of improving business operations and team performance. Online recordkeeping systems such as Prime childcare and Kidkare are examples of digital storage platforms. Please see the links below for more information.
Second, begin to form good recordkeeping habits as quickly, and as soon as possible. Schedule time for recordkeeping and storage on a daily, weekly, and monthly basis. Third, check to see if your system is scalable. It must be so effective that it can function even when you are not present, such as when you are on vacation or sick, and your staff can take over. I recommend that you train your employees and delegate the recordkeeping responsibility to other employees just in case. Fourth, test the system regularly to ensure it meets your center’s activity levels as well as compliance and regulation requirements.
Do you want to know what good recordkeeping can do for your Daycare/Childcare center? Lawsuits that could cost you hundreds of dollars can be avoided with good recordkeeping. In addition, with a solid recordkeeping portfolio, you will be able to adhere to strict auditing methodologies and defend your financial transactions. Also, by the end of the fiscal year, you will be able to easily provide each parent with a W10, which is the Dependent Care Provider’s Identification and Certification to use when it comes time to file their taxes. Finally, there are numerous advantages, including the ability to save a significant amount of money due to accurate recordkeeping practices that allow you to file your taxes on time.
What will you be tracking? Some documents are mandatory, and some documents are used daily. Forms, logs, and financial records, such as enrollment records, accidents records, injury logs, termination records, contracts details, insurance documents, various consents forms, photographs, sign-in and sign-out sheets, depreciation records, tax returns, records on meals and snacks served, hours worked, and payroll records, among others, are essential to be tracked. Likewise, all records on income, such as grants received, childcare subsidies, parent bonuses, barter services, parent fees, and food program reimbursements, must be kept track of. To maximize efficiency while minimizing resource costs, all receipts must be retained and individually marked to distinguish personal and business expenses such as food, toys, equipment, and car repairs, as well as all bank statements, canceled checks, and proof of bills paid, etc.
How long will you have to keep the record? The length of time that records must be kept varies by state. For more information, see IRS publication 583 (as revised in January 2021 at irs.gov). Publication 583 (Rev. January 2021) (irs.gov)
It is a good idea to keep all your records for as long as possible. You can do this by using Google Drive, One Drive, Dropbox, and iCloud, to name a few. It is also worth noting that minors can file a lawsuit two years after turning (18) eighteen. Kindly check this article https://www.daycareabuse.com/statute-of-limitations/
Is it worthwhile to hire a bookkeeper and/or accountant?
These are your best allies when it comes to improving your recordkeeping. You will not treat yourself or go to a mechanic when you are sick. Instead, you will go to a doctor who specializes in your illness. The same is true here. It is more costly to handle your bookkeeping yourself. You might think it is prudent to do that in the short term. However, in the long term, that will turn out to be costly, especially if you are planning to expand. Bookkeeping requires a set of skills, knowledge, and time that you may not readily have. Consider how much time you would spend managing your bookkeeping as well as the potential for errors. You can focus on your expertise as a childcare provider by delegating your bookkeeping tasks to a professional. Given that, bookkeepers and/or accountants who specialize in your industry may be familiar with your deductions and can guide you throughout the year, they will be very helpful. You will not have to wait until the end of the year to find out how profitable your business is. Instead, you will get this information monthly, which will help you make better decisions for your center. The benefits are clear: more money in your pocket and more time to work on your center’s marketing and expansion strategies. You will get an accurate and well-organized record to back up your tax deductions, as well as protection from lawsuits and audits.
Please visit www.daycareaccountants.com to see how we can help you with recordkeeping.
To help you improve your organization’s capability, we have also developed a checklist of daily and monthly to-do list. If you want to take advantage email us at email@example.com and write CHECKLIST_RK
To Your Success,
Irma Oke, CPA