Your Guide to Efficient Childcare Billing and Accounting
Billing and accounting aren’t usually the first things that come to mind when starting a childcare centre – but they’re more crucial than you think. Ensuring the smooth operation of your facility, while maintaining accurate and efficient financial records is no easy task! You need timeliness and attention to detail when tracking invoices and payments, especially when balancing this alongside your primary focus of providing high quality childcare.
The right technology can transform your childcare billing and accounting systems to make all these tasks much easier. Specialised childcare invoice software streamlines and efficiently manages your centre’s financials. These tools do more than simplify accounting; they meet the specific needs of childcare billing, offering a comprehensive solution that benefits your business, staff, and parents.
Adopting daycare childcare billing software to optimise and automate your financial operations can mean the difference between chaos and clarity. In this guide, we’ll talk about some best business practices that daycare owners need to take into consideration to properly and successfully manage the billings and payment operations in their preschools and daycares.
Read on to learn more!
What you’ll learn in this blog
- What is childcare billing and why it matters
- How to fix a rate for your centre
- How to make childcare billing more efficient with illumine
What is child care billing?
Child care billing is a crucial aspect of running a daycare or preschool, involving the systematic charging of services to parents. This process, typically conducted on a weekly or monthly basis, requires careful consideration of various factors.
As a preschool owner, you need to decide on appropriate charges, select payment methods, and determine billing frequency. The process of deciding on rates is particularly challenging because you must ensure that you cover operational costs, overheads, taxes, employee salaries, and yield a reasonable profit.
Let’s cover all the necessary steps to setting up an efficient childcare billing and accounting system.
Fixing a rate for your childcare centre
Determining the right fees for an early childcare centre is a critical decision to make. This process involves finding a balance that ensures the sustainability of your centre while being mindful of what parents are willing and able to pay.
To come to a reasonable and functional estimate, it’s crucial to calculate all the money that would go into the operational aspects of the business – setup costs, rent of the school grounds, salaries of employees, etc.
Here’s how you can do this:
Step 1: Do a cost analysis
A thorough cost analysis is crucial for setting realistic and sustainable rates.
- Rent/Lease/Purchase of Space: This is often one of the largest expenses. Options include renting, leasing, or purchasing a property, each with its financial implications.
- Insurance: Essential for managing risks and protecting the business, though it doesn’t directly generate income.
- Supplies: Costs for essential supplies like desks, chairs, art materials, blocks, puzzles, stationery, rest mats, and reading materials.
- Staff Salaries and Benefits: A significant expense that includes salaries and additional benefits like insurance, utility allowances, and travel expenses.
- Bank Interest: If the business is started with a loan, the interest payments are an important consideration.
After calculating the total operating costs, adding a profit margin is essential for business growth and owner compensation. A typical margin might be around 20%, which provides room for unexpected expenses and future development.
Step 2: Conduct market research
Understanding the pricing of competitors and the services they offer is vital. This step involves:
- Analysing fees charged by nearby centres
- Comparing included services
- Adjusting pricing or services based on competitive insights
Step 3: Include flexible pricing strategies
Implementing flexible pricing structures can make the centre more appealing to diverse families.
Options include:
- Sibling Discounts: Offering a reduction, such as 10%, for additional children from the same family
- Part-Time Rates: Lower rates for children attending fewer hours or days
Taxes are also to be kept in mind while calculating these costs. Once they have an aggregate amount in their hand, it’ll be quite simple to figure out the amount they’d need to be up and running successfully. For more information on the average small business loan rates, please read here.
Step 4: Make a list of additional costs
Nobody likes unforeseen expenses, so let’s not keep them hidden! In all likelihood, you will end up incurring additional costs over the following:
Size of your centre
The size of the childcare centre directly influences its capacity, which determines the number of children and teachers that can be accommodated. Larger capacities imply higher operational expenses due to the need for more staff and larger facilities.
Self-employment taxes for owners
Daycare and preschool owners are subject to self-employment taxes, which include a Social Security tax of 12.4% on the first $132,900 of profit (as of 2019) and a 2.9% Medicare tax on all profits.
An additional 0.9% Medicare tax applies when profits exceed certain thresholds ($200,000 for single filers, $250,000 for joint filers, and $125,000 for married individuals filing separately). Importantly, half of this tax can be deducted from gross income.
Medical supplies
Running a preschool necessitates being equipped for emergencies, especially those involving children’s health. Investing in basic medical supplies is crucial for ensuring the safety and well-being of the children.
Extra-curricular activities
Extra-curricular activities and special events are an integral part of a childcare centre’s offerings. Budgeting for these events, which can range from simple in-house activities to larger, more elaborate functions, is essential in providing a well-rounded experience for children.
How do you make childcare billing more efficient?
Here’s one way of doing it – using a streamlined, centralised software for billing and accounting. illumine’s childcare payment software enhances the financial operations of early childcare centres by automating repetitive processes, providing invoice tracking and templates, generating financial reports, and so much more! Illumine efficiently tracks every payment and expense, providing valuable insights for financial planning and decision-making.
Plus, it simplifies communication with parents by automatically sending digital receipts in PDF format for every transaction. This feature ensures transparency and convenience for both the childcare centre and parents.
Here are some ways that illumine can make daycare and nursery billing easier and more efficient:
Simplified bookkeeping
With a software like illumine, you can maintain an up-to-date record of parent billings and keeping track of the payment statuses will let school owners stay in touch with their financial operations at all times. While they could update all their finances manually in paper ledges, or spreadsheets, it is highly time-consuming and laborious.
Therefore, going digital with daycare bookkeeping software will help owners save time and make them more efficient in handling all their financial activities. Additionally, digital records make it very easy to search for information and also enable them to efficiently analyse it.
Automating invoices and billing
Sending timely invoices leads to receiving timely fee payments. But when these processes are manual, delays happen. That’s why automating invoices and reminders helps you save time and energy every month.
For example, you can set up a repetitive instalment plan for families using illumine. It also allows you to generate automated invoices and send them to each parent separately. The invoices can be scheduled on a weekly, monthly, quarterly, or yearly basis.
Bookkeeping
Maintaining an up-to-date record of parent billings and keeping track of the payment statuses will let school owners stay in touch with their financial operations at all times. While they could update all their finances manually in paper ledges, or spreadsheets, it is highly time-consuming and laborious.
Therefore, going digital with daycare bookkeeping software will help owners save time and make them more efficient in handling all their financial activities. Additionally, digital records make it very easy to search for information and also enable them to efficiently analyse it.
Automating invoices and billing
Sending timely invoices of these fees to parents plays a key role in the collection of payments. Automating these processes helps get recurring tasks done, which can take up extra time and energy every month.
With regards to billing, digitalizing invoices can be a low-lift approach to smoothen out the authoritative processes that save time at whatever point an instalment is expected. One approach to do this is to set up a repetitive instalment plan for families.
You can get a bird eye view of your centre’s financial health and plan your cash flow using smart dashboards that help you track payments, create recurring billing, and customise invoices.
Flexible payment options
To be as flexible as possible, childcare centres try to accommodate several mediums of payment. But the flexibility comes with a price – the more the mediums, the more the complexity.
Accepting money in all forms including cheques, cash, online transfers through a payment gateway, cash, and credit cards – can make it extremely difficult to keep track of finances. Therefore, it is usually recommended to go with electronic transfers as they are both fast and convenient.
With illumine’s child care payment software, every financial transaction can be done online, making it much more convenient for the centres to manage the payments. It supports credit, debit cards, ACH transfers, and Netbanking.
illumine’s childcare billing software for payments and invoicing offers financial summary as well as the ability to create invoices on the fly. The billing software is available on Mac, iOS as well and Android.
The mobile app has all the functionalities and is available for parents and teachers across all platforms
Easy payment reminders
Getting payments on time is necessary to maintain a well-functioning business structure. Late fees can impact the daycare’s payment cycle and cause undue stress for those managing the finances. This problem can be tackled by having a system in place which sends out payment reminders to parents.
Illumine’s enables school owners to configure late fees, which automatically get added to invoices if they are not settled past the due date. With illumine, one can get this task done with no effort at all. This daycare billing software sends payment reminders to parents with bill summaries and due date reminders through notification alerts. This way the preschool owners can have their peace of mind and not fret about falling behind on receiving payments.
Refunds and credits
A school may have a refundable fee component like a security deposit which ideally needs to be refunded when a child leaves the institution. Additionally, a school may also give credits/ discounts to students to promote their business. As both of these have tax and profit implications, it is important to have a record of it and manage it using childcare billing software.
illumine provides owners access to data of all refunds and credits added to a child’s account and consequently makes it incredibly easy to manage and monitor these cash flows.
Switching to illumine’s child care billing software is a smart move for your centre. It’s not just about tracking payments or automating invoices; it’s about making your life easier. With illumine, you get real-time financial reports, automated transaction records, and digital receipts sent straight to parents.
This means less time spent on paperwork and more time focused on providing great childcare. Plus, it handles various payment methods and manages everything from refunds to late fees, all on one user-friendly platform. illumine is designed specifically for childcare centres like yours, making financial management a breeze.
Book a demo to learn more today!
