Record Keeping for Daycare Centers
By Christine Groth
The key to record keeping is to simplify, simplify, simplify. As with any other
repetitive task you want to make it as easy as possible so the main goal is achieved. At
the end of the chapter I will reprint a copy of what the IRS is providing to its auditors
when looking at child care centers. This information will give you some insight.
The end result of keeping accurate records is two-fold. Sometimes we get all caught up
in defending against problems with the IRS and tax return preparation and that we forget
the purpose of record keeping. We should be using the information from the records to
advance our business and allow us to make decisions on how to run the business more effectively.
Good record keeping will allow you to keep track of the health of your business. Again,
seek professional help or read as many books as possible to aid you growing your business
effectively and keeping it on track. Don’t become overwhelmed with everything in your
business and allow this area to be the one that always falls short. Remember the rule –
simplify! Get the information you need to make a proper decision and give the government
the information they need in the form of tax return or reports.
Lets’ get started.
There are a number of logs that are necessary in the preparation of good records. They
are: time, food, auto, and asset. In addition to these logs we need to keep track of
income sources: private pay, government pay, grants, and food program. The other sources
of funding must also be tracked: bank loans, vehicle loans, and loans from others. The
final things that need to be kept track of are the valid expenses of the business.
Lets’ break down each of the above in a little more detail.
Income sources
1. Private pay from parents by child
2. Food Program (USDA)
3. Grants
4. Government Programs
I recommend that you keep track of each source of income separately and then report
them separately on your income tax return. Each source can be verified by the IRS so if
you report it this way there is no question to its accuracy. All money received should be
deposited into a business bank account. This allows you to easily verify the income to the
deposits that were made during the year.
Time, Food, and Auto
Many states provide a calendar for the tracking of these figures. In the end we need to
know how many hours the day care was in operation to calculate the time space percentage
(discussed previously.) Do this daily and weekly, (record on the calendar) to be able to
answer all questions at the end of the year on your tax return. If you’re anything like
me, you can’t explain what you did last week much less what you did eleven months ago.
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