Introduction

Hey there Childcare Provider!

When's the last time you felt unsure of a business decision you had to make?

Are you afraid that you might be making serious financial mistakes when it comes to
running your childcare center? As a center owner, you have to make hundreds of decisions
every week about finances, accounting, taxes, payroll, banking, and more…

And it can be hard to know if you're doing the right thing and making a good decision. The
truth is, a lot of the childcare center owners I talk with struggle with the business side of
things.

If that sounds like you, it's not your fault. As a childcare center owner, you've spent hundreds
of hours of your precious time and thousands of dollars of your own money to get your
business up and running. But through no fault of your own, you probably haven't gotten the
advice you need to leverage your business to create lasting wealth for you and your family.

In fact, I've discovered that most childcare providers make 7 financial mistakes that hurt the
profits and cash flow of their businesses.

The worst part is, making only one or two of these financial mistakes can leave you working
harder than you have to and pocketing much less profit than you should. But don't worry -
all of these mistakes can be fixed with the right help, saving you thousands of dollars and
dozens of precious hours every month.

So let's go over each of the 7 biggest financial mistakes childcare center owners make and
what you can do to fix them today.

2 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 Not Having Your (Financial)
Thermometer On Hand

3 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 Not Having Your (Financial)
Thermometer On Hand

As I’m sure you know, one of the easiest ways to tell if a kid is sick is to take their
temperature. Especially with the smaller children who can’t speak and tell you
how they are feeling.

As the owner of a childcare center, your business should be treated the same
way! When your business isn’t performing as you believe it should, you need to
have a means by which to take your business’s temperature.

So what is this “business thermometer” you can use to see how your business is
doing?

Think of your company’s financial statements as your business’s thermometer.

Your financial statements give you all the data you need to quickly and easily
understand what’s going well - and what’s going wrong - in your business.

Unfortunately, many childcare centers put off bookkeeping and accounting and
simply drop off a box of receipts to a tax preparer they see once a year.

The problem is, that approach doesn’t give you any information about your
business - at least not proactively while there’s still time to do something about it.

To get your thermometer, you must have a good accounting system in place to
track income and expenses. Once your accounting system is set up and is being
kept up-to-date, an experienced CPA can use that information to create your
company’s financial statements.

These financial statements can be used to find trends, project future revenues
and expenses, compare yourself to industry standards, estimate tax payments so
you can plan, and make well-informed decisions with no guesswork.

As a CPA, I can help you set up profit-focused financial systems so you can grow
your business while also being able to pay yourself the salary you want and
deserve.

4 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 2
Not Enforcing the
Give & Take Rule
With Accounts Receivable

5 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 2 Not Enforcing the Give & Take Rule
With Accounts Receivable

When they’re young, many children have trouble learning to share with others.

In time, childcare providers (with the help of parents) can teach children that
you have to give some of what you have (snacks, toys, space, or a turn on the
swings) if you want others to share what they have with you.

It’s only fair. In my life, I’ve seen many childcare professionals successfully
enforce this principle of having children swap toys.

As a result, the children learn that to receive something of value to them, they
must give other children something of value as well.

Unfortunately, some children never do learn that lesson before they grow up,
have children of their own, and enroll those children in your childcare program.
These are the parents who gladly share your time but bicker about paying their
fees. They probably also wait until the last possible moment to do so.

But your time is your most valuable commodity! You put a lot of time, effort,
and emotion into building your dream.

You aren’t just in it for the money, but you still need to make a living for yourself
and your family. You’d probably also like to reinvest some of your profits into
your business. But you simply can’t do this if you aren’t paid in a timely fashion.

I have worked with many highly profitable childcare centers that have cash flow
problems. This can happen even in large corporations. You’ve earned the
money and you’re putting in the work, but you can’t do a thing with the
proceeds if you haven’t collected them yet!

Proper accounts receivable management will ensure you are paid in a timely
fashion. It will allow you to expand, hire staff, and alleviate some of the
uncertainty about what your personal finances will look like.

6 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 This is why it’s so important to
make sure you set the expectation
that you need to be paid in a
timely manner. And once you set
that expectation, stick with it.

So how can you ensure that you

get paid on time?

Late penalties are effective for

some, but others consider it a
small price to pay for the delay.
Instead, you might consider a
discount for those who pay before
a certain date and build the late
fee into the regular price for those
who don’t.

Another solution is to make it

easier for parents to pay you in the
first place. You can start using
online payments and even set up
automatic payments if possible -
again using that early payment
discount as an incentive.

7 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 3
Not Taking Advantage
of Proactive Tax Reduction
Strategies

8 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 3 Not Taking Advantage of
Proactive Tax Reduction Strategies

Benjamin Franklin once said, “Failing to plan is planning to fail.” Clearly, Ben
Franklin spent a lot of time around small children!

Studies have shown that children and adults alike feel and function better
when they have a routine. That’s because having a routine promotes feelings of
stability and structure. In fact, when your day is planned out and your plan is
followed, you’ll generally have less stress than you would if you didn’t have a
plan.

Even if you just take a few minutes at the start of the day and mentally map out
your daily agenda and don’t physically write it out on a to-do list, things will still
flow much more smoothly when there is a plan in plan to follow.

Really, your tax situation is no different!

At the very start of your business, you should meet with an accountant to help
you ensure that you’re on the right track to be profitable and plan out together
what that path looks like.

Another reason having a tax plan is so important is because as a childcare

center owner, your federal funding and licenses both have requirements that
are based off of the tax information you provide. So falling behind in your tax
filing can cost your business thousands of dollars in potential grants, or even
worse, your business license!

A tax plan not only helps you remain in compliance with the IRS, it helps to
eliminate nasty surprises at tax time, keeps you on track with estimated
payments, and planning ahead lets you see the after-tax implications of
decisions you make which in return shows the real money spent or gained in
the long-run.

9 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 If you opt to manage your accounting yourself, my advice is to get periodic
checkups. Schedule a wellness visit for yourself. As your business grows, the
structure may need to grow with it and you don’t want to miss out on those
savings you get by changing your agenda.

On average, I help my clients reduce their tax bills by $10,000-20,000 by helping

them implement proactive tax reduction strategies.

10 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 4
Failing to Classify
Your Employees
Correctly - Payroll vs 1099

11 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 4 Failing to Classify Your Employees
Correctly - Payroll vs 1099

As a service-based business, payroll is probably one of your largest expenses.

Unfortunately, if you’re like most people, you might have been given poor
advice as to how to keep payroll expenses down.

One of the most popular myths we work to dispel is the thought that business
owners can decide whether to put their employees on payroll or pay them as
contractors.

According to the IRS, we do not get to choose how to classify our workers. The
IRS has set forth strict guidelines that have to be considered in making the
determination. There are 3 basic categories the IRS reviews to determine
employee status. There’s the behavioral, financial, and relationship tests. You
can read more about them on the IRS website.

You should also be aware of your own states’ tests.

So why is this important for helping you keep your payroll expenses down?

In a nutshell, if you pay someone “under the table” or improperly classify

someone as a contractor that is actually an employee, you may become liable
for all of the employer taxes that should have been paid as well as a portion of
the taxes the employee should have paid.

That’s because payroll tax penalties are among the stiffest there are.

I’ve talked to countless business owners who have all said they had no idea they
were doing anything wrong or how costly their mistakes actually were.

Most business owners are hard-working, honest people that just want to do the
right thing and would also like to save a little money in the process.

12 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 Even if you were improperly advised and did not know the right way to handle
payroll in the beginning, it isn’t too late !

One of the Payroll Specialists on our team will be more than happy to get you
up to speed and compliant so this can be one less thing for you to worry about.
We can also help you budget for these expenses to avoid any issues going
forward.

13 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 5
Not Separating
Personal Finances
And Business Finances

14 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 5 Not Separating Personal Finances
And Business Finances

To put it simply, commingling of funds is a fancy term to explain the combining

of business and personal funds.

It’s more common than you might think. Have you ever paid for personal
expenses from our business bank accounts or paid for business expenses from
our personal bank accounts? Then you might have commingled funds without
even knowing it. There are many reasons why this is a bad idea.

In some cases, co-mingling can make you personally responsible for business
liabilities. Co-Mingling of funds makes tax preparation less accurate because
there is always the chance that important deductions can be missed because
they happened within the wrong account.

It can also cause you to incorrectly deduct things that may not necessarily be
deductible or usable in an audit. This can lead to even more trouble in the long
run.

One final reason why commingling of funds is a problem is because when all of
the funds from your business and personal life are intertwined, there is no way
for you to know how much money you, as the business owner, can afford to
keep for yourself. This may lead you to a snowball effect where you’re
continuously pulling from different funds to pay yourself.

One of the first things we help our clients with is how to pay themselves so that
the need to commingle is minimized or stopped all together.

15 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 6
Working For Free:
You Deserve to Pay Yourself!

16 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 6 Working For Free:
You Deserve to Pay Yourself!

I don’t have to tell you that running a business is hard!

Yes, it looks glamorous and the thought of being your own boss is exciting but
once the excitement has worn off and all the bills are due it can get very scary
very fast.

But before you can deal with those bills, you have to pay yourself!

Far too often, we meet with childcare providers that confess they are so busy
working that they forget to pay themselves or they just simply don’t know how.

When we pay everything else before we pay ourselves, we are often forced to
cut corners and commingle funds to survive.

As we’ve already covered the fact that commingling funds is never good and
can have long lasting and far reaching adverse consequences.

You can always increase and decrease your pay as needed but paying yourself
should be a formalized and intentional part of your business.

Now how you pay yourself will depend on your business structure, whether it’s
via payroll or a draw from the business.

You might be thinking, “This all sounds great but I don’t know where to start
even when it comes to paying myself.” That’s okay! We do.

We’ve helped so many hard-working business owners get the pay they deserve
and we can help you too.

You wouldn’t dream of having your staff work for free, so why should you?

17 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 7
Not Preparing and
Analyzing Your Budget to
Accurately Forecast Your
Income and Expenses

18 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 7
Not Preparing and Analyzing
Your Budget to Accurately
Forecast Your Income and Expenses

How can we measure what we do not count? How can we count what we do
not track?

One of the most commonly requested services we perform is budget

preparation and budget review.

Many people think the purpose of a budget is to restrict our spending. This is
not always the case.

Your budget is a powerful tool.

Without a budget, there is no way for you to know how you actually performed
compared to how you planned on performing.

You can use your budget to help you increase your profits, decrease your
expenses, pick the right time to hire, or even to plan for expansion. The
possibilities and benefits of budgeting are endless.

One key component of the budgeting process is to review your historical

information, which includes your prior accounting history.

This is yet another reason why it’s important to have your accounting done
timely and accurately. Because in order to better project and plan, we need to
spend some time looking at what has happened in the past and use that
information combined with what we know about upcoming changes and
plans.

Clients that participate in our Accountant and Outsourced CFO subscription

programs get our expert assistance in their budget preparation and analysis.

Don’t worry about missing out, you can always opt to upgrade or add this
service on.

19 The 7 Biggest Financial Mistakes Childcare Center Owners Make

 CONCLUSION
Certainly, you already keep a thermometer on hand, enforce the sharing
rule, and have a curriculum for your children in your childcare center.

Why not do the same for your business?

If you want to see if your childcare business is in good health, schedule

your FREE Discovery Call with me now.

During this call, we will ask one another questions to discover if and how
we should work together, and how your business would benefit.

You’ve never kept your books or implemented tax planning before? No

worries, we can do as little or as much of the accounting as you want.

We have monthly and quarterly packages to meet your needs whether

you are a childcare center with multiple locations or a family child care
provider just getting started operating from your home.

We are always happy to hear from industry professionals, so what are you
waiting for?

Book your FREE Discovery Call today!

IT JUST MAY CHANGE YOUR LIFE!

20 The 7 Biggest Financial Mistakes Childcare Center Owners Make

2
 ABOUT THE AUTHOR
SHANITA JONES, CPA, MBA
Hello! My name is Shanita Jones, CPA,
MBA, and I am the founder and CEO of
Jones Taxes & Financial Services, LLC.
I love taxes and accounting, and my life’s
passion is helping child care providers
reach their maximum potential and
decrease their tax liability.
If you feel overwhelmed in your child care
practice and you’re not really sure where
to even start on your financials..
That’s okay! It’s actually why I decided to
write this ebook, because I want to help
child care providers like you avoid these
mistakes and achieve the financial
freedom you crave, while reducing your
tax liability.
The Discovery Call I offer is complimentary, and
there’s no obligation whatsoever. I won’t hold
anything back.
When we’re done talking about your business
and your goals, you’ll have total clarity and peace
of mind about where you’re at and where you’re
going in your business.
If you want my help implementing the plan we
design on the call, then I’ll be happy to talk with
you about working together, but you absolutely
don’t have to become my client to get massive
value out of our conversation…
If you want to take control of your future and
keep more of your hard-earned money.
Book your FREE Discovery Call today!
WWW.JONESTAXESONLINE.COM