child care accounting
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.
How much time will you save in your child care center?
Procare Software® helps child care professionals across the country save 40+ hours per month of administrative duties they were doing manually. With quicker access to information, point-and-click reporting and built-in processing, Procare helps you easily manage your center and analyze important staff and child information in seconds—giving you the time to develop your business and focus on the children.
- Succinct tracking of enrollment and schedules
- Immunization updates
- Quickly post child tuition fees
- Automatically collect tuition payments
- Print/email statements and balance notifications
- Communicate with parents and employees via messages at check-in, email or text blasts
- Maintain logs for incident reports and milestones
- Deposit reports and end-of-year tax statements
- Roll call and sign in/out sheets, birthday reports, waiting lists, classroom ratios
- Automated check-in for parents and employees
- Accurate time card records and calculations
- Let parents pay at check-in or online
- And so much more!
The new school year is coming!
With the new school year coming up soon, now is the best opportunity to get going with your new system.. Financing is available to work easily within your budget. Please contact Procare at 800-338-3884 or visit us online.
Procare Software, the nation’s leading child care management solution provides an automated tuition collection service called Tuition Express. During our frequent conversations with users and non-users alike, a common theme continues to surface, parents pay late.
The solution to this problem is to make automated tuition collection the only way you collect tuition and fees. With Tuition Express, child care providers make the service mandatory for parents and late payments become a thing of the past.
Automated and integrated tuition collection is easier, safer and more convenient for you and your customers. Today’s parent doesn’t carry a checkbook. They handle all their financial transactions online or set up automatic payments. Additionally, by processing payments automatically—transactions are posted to each parent’s account instantly.
How do you convince parents to accept automated payments?
Some families may be resistant, but directors are simply saying, “Our management software allows us to collect tuition automatically. That gives us more time with the children—and that’s important to all of us!”
Is it affordable and reliable?
Tuition Express is it’s own processor. This means substantial cost savings that we pass on to you with the lowest rates in the industry. We offer rock-solid reliability, handling more than a million transactions each month for nearly 200,000 families across North America.
If you’re currently a Procare user and you’re not using Tuition Express, or if you’re a child care owner or director and would like to learn more, call us at 1-800-338-3884. You can also click here to find more information online.
How do I find the best child care and daycare software program for my needs?
Choosing child care management software is an important investment of your time and financial resources. It requires research and careful consideration of the following items:
- Define your Goals: Which administrative tasks do you want to tackle? What parts of your center need improvement and streamlining? How can software simplify the management of your business?
- Features: Based on your goals, ensure the software includes the most essential modules and can grow with your business… Family Data, Family Accounting, Attendance Tracking and Employee Data are basic essentials which should be included in any package.
- Pricing: Make an educated choice based on value not just price. The smart decision will be the one that meets your goals and yields a return on your investment. Does the software include functionality to save time, money and improve operational processes? Be sure to get a complete understanding of cost, fees and contract obligations.
- Consultation: Knowledgeable software consultants will help you determine how you’ll benefit from automation. Being experienced with daycare and child care management issues, including billing and accounting, your consultant should clearly understand your goals and needs.