As the end of the year approaches, child care providers have a lot on their minds, including managing enrollment, schedules, and budgeting for the coming year. However, in addition to making these preparations, caregivers are also likely working on distributing daycare invoices for each family they served throughout the year.
Preparing these invoices can be a daunting task, as providers sift through a year’s worth of data and bills to provide an accurate list of each family’s yearly expenses. As they prepare these year-end receipts, child care providers should also be aware of several tax forms that will be required to track their finances.
Addressing FAQs About Year-End Daycare Invoices
To this end, Procare has compiled this list of frequently asked questions surrounding year-end daycare invoices to help providers navigate this complicated process.
Are Daycare Invoices Required?
While child care providers give this information on a weekly or monthly basis as they are paid, they are not required to provide a year-end receipt to parents.
Though year-end receipts are not required, it is still prudent and professional to prepare and distribute invoices for parents.
What Are the Benefits of Daycare Invoices?
While time consuming, creating these invoices will provide a host of benefits down the road.
First, it is courteous to provide this record to parents, as many of the families your center serves may qualify for tax credits in accordance with the 2441 form from the IRS. As parents seek to take advantage of this credit, care providers should be prepared to give them a comprehensive list of services in a timely manner.
Additionally, preparing the year-end receipt will help to ensure that you and the family are on the same page with how much they owe and have been charged. This will be valuable in the event of an audit, allowing your center to clearly demonstrate exactly how much you made, and that your records match how much each family says they paid you.
What Should Be Included in a Daycare Invoice?
When building out your year-end invoice, you will want to include your name and contact information, as well as the name and contact information of the specific family.
You will then want to include a line that describes what each expense accrued by the child was for, as well as the price. This might include:
- Child care tuition
- Special equipment
- Transportation fees
- Late pickup fees
Once all of these charges are accounted for, you will want to include when the parent paid, and how they paid. For example, did they pay by cash or card, etc.? This will make it easy for parents to confirm each charge by consulting payment confirmation emails, or their checkbooks.
Gathering all of this information can be time consuming. It might take some time to locate each monthly receipt. Providers that use Procare’s child care management software can easily print or email year-end statements to parents based on the data stored in the Family Data and Family Accounting modules.
Who Should Receive an Invoice?
The family of each child you cared for throughout the year should receive an invoice. It can be easy to overlook children that only attended a few times, or who left in the middle of the year; however, accounting for this revenue is equally as important to your financial records.
With Procare, providers can send invoices to families with currently enrolled children, as well as those who had children attend at some point during the year.
Extra Year-End Forms to Be Aware Of
In addition to the statements providers send out, there are also some common tax forms associated with year-end that daycare owners should be aware of.
- 2441 Form: Again, this is the form parents must fill out in order to receive child care credits and deductions.
- W10: Parents are required to have this form filled out by caregivers in order to be considered for child care tax deductions. Providers are required to fill out this form if requested by a parent, and must provide their Employer Identification Number (EIN). The W10 form is accessible within Procare Software.
With the end of the year approaching, we hope these answers and tips help child care providers to create organized daycare invoices in an efficient way.
Learn more about how Procare helps providers track invoices and billing here.
Interested in learning more about tracking your child care expenses? Check out these related blog posts:
The child care billing process at your daycare, preschool, or after school program can be a complicated and time-consuming operation. With staff looking after kids and planning lessons, and busy parents running out the door, it is easy to lose track of billable care hours for each student and any additional fees that may be accrued.
It can even be a challenge to track down parents and guardians to collect their checks or payments. However, having a consistent cash flow is key to running a successful business, which means that no matter what, time has to be made to organize and collect payments from parents.
There are a lot of considerations that go into the child care billing process aside from collection. Child care providers have to thoughtfully choose their billing rates and structure based upon a multitude of factors, as well as come up with a system to track payments, fees, and credits.
How to Manage Child Care Billing
To simplify this process for child care providers, here are some top considerations and tips for child care center owners as they build out their billing protocol.
Setting a Child Care Rate
Setting the price for care at your daycare center can be tricky. Center owners must find the right balance of what is reasonable for parents, and what is required to keep the center running and providing high-quality care.
It is important to remember that many parents will plan their child care budget out far in advance. Therefore, increasing your billing rate, though sometimes necessary, can be a major inconvenience for parents. That said, it is important that providers be as thorough as possible when pricing their services, to avoid unforeseen price hikes in the future.
First, when mapping out your child care billing rate, factor in how much your space and materials cost. To earn a profit, the payments from each family have to cover the cost of your space, utilities, and supplies such as snacks, games, and crafts for the kids. When assessing these costs, keep in mind seasonal expenses such as the cost of heat in the winter and air conditioning in the summer.
Of course, this money will also have to cover payroll for your staff. The number of instructors centers have to employ will depend on the number of children, and the required student to teacher ratio. As such, center owners will have to keep a record of enrollment numbers as well as tracking enrollment projections to ensure they are not overstaffing, resulting in greater expenses.
Finally, owners must also factor in the prices charged by other care providers in their community to ensure their prices are competitive, as well as the average income in the community to ensure they are not be pricing their child care out of range.
Determining Billing Frequency
When it comes to payment structure and how often parents will have to pay, child care centers have many viable options. Among the most popular are weekly, monthly or tiered, which is based on attendance. This might mean paying a flat monthly or weekly rate, or paying on a weekly or monthly basis for the hours of care accrued. A daily tiered, or stepped up rate, means different flat rates for up to a certain number of hours, after which the rate increases.
When deciding how often to bill parents, it’s important that it aligns with how often you pay bills and staff; to ensure your payment structure will support your business on a monthly basis. For example, if you plan to pay staff twice a month, but collect from parents at the end of each month, this could present some issues. To ensure a stable billing structure, you will have to align your enrollment, how often you pay staff and bills, and how often you want to collect from parents.
Tracking Child Care Billing
Regardless of the billing structure chosen by individual child care centers, the most important aspect of billing is that the center is adequately compensated for work on a regular basis. This means keeping track of the number of hours each child attends the center, tracking fees for late pickups or additional costs such as field trips and class outings.
For child care centers to continue to run and be successful, it is necessary that these costs are accounted for, and paid in a timely way. Conversely, maybe your center offers discounts to families that have multiple children enrolled. When tracking costs, it is important that you are as accurate in billing as you want parents to be, so be sure to have a system in place account for these discounts.
Tracking payments manually can be time consuming, and leaves room for error. Child care management software can automatically track billing, while integrating with attendance tracking systems to ensure billed hours are accurate.
Furthermore, statements can automatically be emailed to families to help them track their own finances, while serving as a reminder that their payment is due. The software automatically tracks all transactions and instances of cash leaving and coming into the center, providing center owners with updated reports to ensure the financial needs of the center are being met.
With Procare, child care centers also incorporate automatic billing through Tuition Express. This allows families to pay from their computer or mobile device, or setup recurring payments. This is both convenient for families, and ensures your center is paid on time every time.
For child care providers, high quality child care is always the number one priority. However, neglecting the business and financial aspects of your child care business jeopardizes the ability to provide this car one a regular basis. With child care billing software, caregivers can be sure that their billing and accounting are taken care of, allowing them to spend more time with their kids.
Learn more about streamlining the child care billing process here.
Want more tips on how to run a successful child care business? Check out these related articles.
Starting your own daycare center can be both exciting and daunting. Many of those who choose to pursue this step in their career do so out of passion for helping children develop and reach their full potential.
While passion and child care experience are musts when opening a daycare, it cannot be overlooked that child care and daycare centers need a solid business plan. Therefore, the opening of your daycare center must be approached with a careful strategy in place to ensure success in the early make or break years. This combination of a clear mission and a carefully constructed business plan will greatly increase the success of your child care business.
At Procare, we want to encourage and enable child care professionals with all of the tools they need to enrich the lives of their students. That is why we have created this outline of important business needs to consider when starting a daycare center. The following information will provide aspiring daycare owners with direction throughout this challenging process.
The “Why” Behind Opening Your Daycare Center
Starting a business, especially one as demanding as child care, is a huge time and financial commitment. It’s a good idea to examine the reasons driving your decision to open a daycare center, or “your big why.” Make sure you have a clear understanding of the time you will be required to devote before and after opening.
You should also consider your previous child care experience. If you have been in this field for years and know it is what you want, then you can move on to the business planning stage. However, if you have relatively little experience in the field, it might be prudent to gain more experience at an independently owned center or even franchise. Think about why you want to open a daycare and the specific attributes that make you uniquely qualified for this filed.
Assessing Your Market
Once you are committed to opening your own daycare center, you will have to do research to determine how competitive a marketplace your community currently is, and how sustainable an environment it will be for your business in the future.
First, are there already daycare centers open in your community? If so, you will want to look at things like:
- What kind of center are they?
- What age groups do they accept?
- Where are they located?
Another good indicator of the need in your community is whether these child care centers have waiting lists. This information can help you determine if there is enough demand in your community to open you center there.
Another research strategy is to look at the current demographics in your neighborhood. If there are a lot of young families or newlyweds, this indicates that there will continue to be a need for your services in the future.
Differentiating Your Daycare Center
Once you are familiar with the current child care landscape in your community, you have to think about how you will differentiate your program to fill a need not currently being addressed.
Look at the hours of operations for the other centers in your community. Perhaps there is a timeframe early in the morning or late in the evening during which these centers are not open. Filling this need could make your center a valuable resource for parents.
Additionally, if there is an age group that is not being served, such as daycare for infants (newborns to a year) or after school programs, your center could establish a foothold by filling these needs.
Bonus Tip: Talk to parents in your community to find out what they need most from a daycare, and aim to address these needs at your center.
Once you have done this initial research into whether your daycare business will be viable in your community, you have to begin compiling a comprehensive business plan that maps out your objectives and the strategies by which you will bring them about.
Child Care Center Business Plan Checklist
Here’s a checklist recapping some essential steps of putting together your child care business plan:
- Competitor matrix
- Financial Planning: Funding and budgeting
- Location of your business
- Staffing needs
- Licensing requirements
- Materials, equipment, and program agenda
Bonus Tip: As you go through creating your business plan, it is a good idea to mark down important deadlines and milestones on a calendar. This will ensure you have an accurate timeline for how long planning and preparations will take, and a strong estimate for when your business will be able to open.
There are many legal regulations to consider when opening your center. License requirements are typically determined by states, and therefore will vary based upon where you live. You will have to make sure your business is in compliance with these regulations by acquiring the proper licenses. Child Care Aware offers a licensing resource that directs you to the proper licensing authorities by state.
It is important to note that child care licenses and business licenses are not the same. You will likely have to acquire separate business licenses and child care licenses to legally operate your business.
Starting a business is financially demanding. For your endeavor to be successful, it is essential that you accurately assess how much it will cost for you to open the center, determine where that money will come from, and then budget and plan to ensure your financial structure will sustain your business as it gets off the ground.
During this process, you should consider initial expenses, and how much it will cost to run your business on an annual and monthly basis. Consider how much you will pay your daycare staff, what your tuition structure will be for parents, how late fees will factor in, and how much property rent / cost is in your community.
Potential Costs of Opening a Daycare Center
A few examples of the costs associated with opening a daycare center are:
- Property renovations
It is important that you don’t begin the business process until you know how it will be paid for. This is money can be accrued from a variety of sources including your personal savings, loans from friends, loans from the bank, government programs, or grants.
It is important that you keep track of your expenses and cash flow for multiple reasons. First, it will help you to track and pay back any loans in accordance with the agreement you made with the lending party.
Second, tracking cash flow ensures that you don’t overspend, or create a payment structure that will jeopardize the financial stability of your business on a month-to-month basis.
To be aware of when money comes into and leaves your center monthly, you should be tracking: the number of tuition payments you get per month, how many times a month your center pays employees, how many enrolled children you are permitted to have, and how many of those slots will be filled.
Bonus Tip: Doing these calculations by hand leaves room for error, so we recommend a child care accounting solution that will track financial information for the center and the families you serve, as well as tracking bookkeeping, tuition payments, and cash flow.
Choosing a Location
The first thing to determine when choosing a location for your daycare center is if you want to run the center from your own home, or in a commercial space. This will affect your expenses and licensing requirements.
The location of your daycare center will be subject to many licensing regulations, including building safety, zoning, physical space requirements, emergency preparedness, and more. Many of these are to ensure that the environment in which you run you center is healthy and secure. This includes things like proper waste removal and having fire alarms.
Two important location licensing requirements to keep in mind are zoning and physical space requirements. Zoning refers to a permit from the proper authority that allows you to run a business, or be zoned for business. The physical space regulation refers to the requirement that child care centers must have 25 square feet available per student. Therefore, you have to keep in mind that the size of your space will determine how many students are allowed to enroll.
For parents to feel comfortable leaving their children at your center and confident that they will get the developmental stimulation they need, you staff has to be well trained and experienced. Additionally, you must have enough instructors to provide quality group and individual care, as well as meet ratio requirements.
When hiring staff for your center there are three key features to keep in mind:
- The student-to-teacher ratio
- Licensing requirements
The student-to-teacher ratio refers to the number of instructors that must be present based on the number of and age of the students. The National Association for the Education of Young Children provides recommended ratios based on age and group sizes.
Staff Licensing Requirements
Professional certification requirements and licenses vary by state; however, child care providers are often expected to have a high school degree or secondary degree. Common certification requirements are the Child Care Professional certification and the Child Development Associate certification. These require a certain number of hours of experience in different child care fields.
You should also make sure that your staff has training in safety courses such as CPR and first aid, as well as how to asses and document child development to report to parents. Child care instructors can provide important information to parents about where their children are developmentally, and where they may need individualized attention. That is why it is important to have reporting and parent engagement processes defined at your center, to simplify communication between caretakers and parents.
Bonus Tip: The interview and review process to find the perfect candidates for your center can be time consuming, so you will want to start the hiring process at least two months prior to the opening of your center.
With financing, licensing, location, and staffing researched and prepared, you are almost ready to open your child care center. Final steps will be getting the necessary equipment and supplies, and setting an agenda for your daycare programs. You will need kid sized tables, furniture, and cots, as well as toys, crafts, and games. You will also need cleaning and administrative supplies.
When setting the agenda for your program you will want to establish routine daycare schedules for each age group. These schedules should incorporate activities that promote early child care development in major areas such as cognitive, emotional, and physical development.
As you get to know your students better, you will be able to cater the activities and learning programs to their specific interests.
The processes and planning that go into starting a daycare center can be overwhelming. However, with a defined mission and strategic business plan in place, it can be a successful and worthwhile endeavor. Following the guidelines above will give you the structure you need to build a thriving daycare center with an environment that fosters healthy, happy kids.
Looking for ways to automate and organize administrative and business functions at your daycare center? Learn how Procare can help!
Want more tips and resources to help start your daycare center? Check out these related articles:
Do you want to know how effective your fund-raising efforts are? With Procare Software® you can track donations to your childcare center, preschool or other child-centered business a couple of different ways, depending on your needs. Track detailed contributions for individual families in the Family Accounting module, with amounts included in deposit reports or, if you don’t need family-level tracking and reporting, you could use the Expenses and Ledger module to record this revenue as a simple journal entry. We’ll examine both of these options in this article. Continue reading
$500 towards your school’s fund raising efforts!
ProCare Software wanted to start the New Year right, so we’re beginning with a HUGE giveaway!
Consider the following scenario,
Jimmy is enrolled in your child care center for Tuesday and Thursday, full days. But once a month, his mom brings him on Mondays as well. It was so infrequent, and you’ve been so busy, that you barely noticed when Jimmy started showing up more. It took you a couple months to notice, and now that you have, you realize you should probably mention it to Jimmy’s mom. Continue reading