Your Guide to Efficient Childcare Billing and Accounting

Preschool and daycare owners are well aware that accounting and child care billing can be difficult at times. Keeping track of invoices and payments can get tricky when most of their attention is on the day-to-day operations, making sure all the children are taken care of, and the parents are appropriately satisfied.

Effectively managing the cash flows is the key to the success of any business. But, it is often a practice amongst small business owners to ignore cash flows in the early days. This could not just complicate things, but also might lead to the downfall of businesses.

As the owners of child care centers, one has several responsibilities to take care of and multiple operations to supervise. In this scenario, deploying a childcare invoice software for managing all the finances of the institute becomes the reasonable and wise thing to do. A preschool accounting software can ease the load by making the process much faster and straightforward for owners, their employees, and their customers. A good childcare management software generally comes with a specialised module for childcare billing.

Above all, if preschool and daycare owners are manually handling all the billing operations, they are not just wasting valuable time but are also exposing themselves to the high risks of human error that could often lead to confusion and complications. Hence, optimising and automating the financial processes is not just recommended, but has become necessary in today’s fast-moving world by using a accounting software for daycare business.

What is child care billing?

Child care billing is the process through which daycare or preschool owners levy a fee on the parents of children admitted to their institutions. Child care billing usually takes place weekly, or monthly, or even monthly at some daycares and preschools.

There are certain things one needs to consider while setting up billing practices in their organisation. These things include how much to charge, how to receive payments, and how frequently to charge.

In this particular article, we’ll talk about some best business practices that daycare owners need to take into consideration to properly and successfully manage the billings and payments operations in their preschools and daycares.

Fixing a rate

Establishing how much to charge their customers is probably one of the most complex tasks preschool owners have to go through. Although ideally, one naturally wants to charge high but is unsure if their customers will be comfortable with those rates. Anyhow, the rates have to be set at a level that helps the owners recover from all their operating expenses, pay the salaries of their employees, and earn enough themselves to make their hard work worthwhile.

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. 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.

Aspects to consider while fixing the rates of the preschool

  • Rent: Space rented out for a preschool or daycare to operate from, forms a major chunk of the expenses. One could either rent out space or take it upon lease. Many owners often opt for the option of buying the spaces if they have the capital to do so.
  • Insurance: Having the organisation insured, helps safeguard the interests of stakeholders from uncertainties. Although this expense does not contribute to generating income, it enables businesses to manage their risks, which in turn, helps them run smoothly.
  • Supplies: While establishing a business, another area that takes up costs is setting up the institute with the essential supplies. These supplies include things such as desks, chairs, art supplies, blocks and puzzles, stationeries, rest mats, reading material, etc.
  • Salaries: Paying up the income of the employees and workers in the organisation is another major expense to be born by preschool and daycare owners. These expenses also include additional employee benefits such as subsidies that vary from institution to institution, ranging from insurance, utility money, travel expenses, etc,
  • Bank Interest: If owners choose to take a loan to kick start their businesses, there is a certain amount of money that goes into paying the bank back.

For more information on the average small business loan rates, please read here.

  • Capacity: The size of the institution determines the number of children and teachers that can be enrolled as students and employees respectively at a given period of time. The larger the capacity, the higher the operational expenses.
  • Taxes: Preschool and daycare owners, like all other self-employed taxpayers, need to pay the self-employment taxes. This tax is constituted by Social Security tax of 12.4% on the first $132,900 (2019) of surplus from the business and a 2.9% Medicare tax on all of the profits being made. Additionally, a 0.9% Medicare tax is also levied when the profits made by the business exceeds $200,000 for single taxpayers, $250,000 for married taxpayers filing jointly, and $125,000 for married taxpayers filing separately. On top of that, half of the portion of this tax can also be subtracted from one’s gross income.
  • Medical supplies: Operating a preschool means one needs to be prepared for any sensitive situation that might arrive with children. Therefore, it is always advisable to be pre-equipped with basic medical paraphernalia.
  • Expenses for various events: Extra-curricular activities need to be taken into consideration while charting out the extra costs. These activities can include any events or functions that one might host at their child care centers.

Another area to focus on while setting up the rates is taking into consideration how much are their competitors charging. This is crucial because parents while looking out for the best options for preschools for their kids generally compare the annual costs. If they feel the costs are unnecessarily high compared to the other preschool offering the same facilities, they might not get the gig.

It is also important to decide upon the frequency of charging the customers. This process determines the cycle the school receives payments from parents. Although most child care centers charge on a weekly or monthly basis, there are some who offer their services at an hourly rate as well.

Illumine’s child care payment software automatically records every transaction being made. It notifies the finance department admin of the daycare payment log report while also sending the parents their payment receipts online in a PDF format.


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 timely payments. Automating these processes helps get recurring tasks done, which can take up extra time and energy every month.

With regards to billing, digitalising 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. Illumine, considered to be one of the best daycare billing software, lets daycare owners make a framework that enables them to do so. This child care management software allows the child care centers to generate automated invoices and send them to each parent separately. The invoices can be scheduled on a weekly, monthly, quarterly, or yearly basis.

As payments are deducted automatically from parents’ cards, the working capital needs are satisfied as well as efforts in the collection go down. Illumine uses stripe as a billing partner, which is one of the best in the world.

With Illumine’s child care billing app, preschool owners and their customers can get access to an even cash flow. This way, parents will always get notified when payment will be deducted from their account beforehand and the preschool owners will have the satisfaction of on-time payments.


The desktop helps you track payments, create recurring billing and give you overview of your daycare’s billing

Mediums of accepting payments

To be as flexible as possible, various child care centers try to accommodate several mediums of payments. But the flexibility comes with a price – more the mediums, more the complexity. Accepting money in all forms including cheques, cash, online transfer, cash, and credit cards – can make it extremely difficult to keep a 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 centers to manage the payments. It supports credit, debit cards, ACH transfers, and Netbanking. Illumine childcare bookkeeping software for payments and invoicing offers financial summary as well as ability to create invoices on the fly. The billing software is available in Mac, Ios as well as android.

teacher billing app

The mobile app has all the functionalities and is available for parents and teachers across all platforms

Sending 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 bring things to a disorder. This problem can be tackled by having a system in place which sends out payment reminders to parents. Illumine’s child care invoice software 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 day care billing software sends payment reminders to parents with bill summary 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 child care 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.

All in all, since businesses are based on and work with the help of money – making the right choice in terms of how to handle finances in one’s preschool, plays a major role in determining how smooth the institution will operate overall.

Digitalising the payment records and processes is the smart and easy way of managing finances as it does not just save time but also avoids any sort of errors being made. If you are thinking about revolutionising the way you handle your billings and payments – Illumine’s got your back!

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