Record Keeping

Part Three



Hello:

Who didn’t think that accountant’s make good daycare providers? Well I do of course.

During the summer I often take off Friday’s with the agreement at the office that I work 4 ten hour day’s. But often what happens is I help out at my wives daycare, and today was the day. I would say that I had a good time, I’m a firm believer of reading books so that’s exactly what I did, and they all really loved it.

Let’s get back to business, we need to talk some bean counting lingo, so here you go.

In part two we discussed how to keep track of the flow of money leaving your business.

Controlling the flow of money out is essential.

Equally important is making sure that you are receiving all of the revenue that you work so hard for. You do daycare for the love of the children but you have chosen to provide a very valuable service in today’s society and should be compensated for your efforts.

I am once again going to take us back to large corporate America and show you what they are doing and bring it back down to the level of small business. By understanding the process that large companies engage in you can get a better understanding of how to proceed in your business.

One of the largest concerns of any business is to make sure that you are getting paid for the product or service that you provide. How do you make sure that you are getting paid for all the services you provide? Corporate America breaks it down into several steps. Different people or departments because of concern of fraud or simple employee error provide these steps. In your business you are the one responsible for ensuring that all the steps are followed.

Step One: Order Taking
Step Two: Invoicing
Step Three Receiving Payment and Recording Payment
Step Four: Reconciling payment to deposits in bank
Step Five: Collecting outstanding Bills not paid

In step one an order is taken for products or services. This can be in person or over the phone. When that order is taken it must be recorded to start the process of fulfilling the order. In the world of daycare, you meet with a prospective parent and agree on a specific price that the parent is willing to pay for your services. That child will be full-time or part-time, and according to your policy will pay a certain price. Once that has happened you will need to record the specifics of that order. This can be agreed upon once in the beginning of the relationship but more realistically will happen weekly when planning out your next week.

In step two the company has fulfilled the order and needs to let the customer know that their obligation has been meet. The company tells the customer by sending an invoice. Many times in daycare this invoice is handled verbally. The system you have in place will record how much money you are expecting this will help you to plan your cash flow much better. You should also have a system in place to verify the types of sales you are making.

Each provider has a couple of types of income that need to be tracked: Parent Fees, Food Program reimbursements, and State payments. By recording each of these types of income on invoices you be able to make sure that you are receiving all the money you have worked so hard for.
In step three you are receiving the payments from your clients. These payments must be matched to the invoices that were generated in step two. Once the payments are recorded a deposit must be made at the bank. This same thing is done in corporate America, the deposits are slightly larger, but the concept is the same.

In step four the corporation’s accountant will reconcile the deposits recorded in step three to the information provided by the bank. This process was formally handled once a month but in today’s world it is handled many times more frequently. It is very important to verify, at least monthly, that the money you have collected and sent to the bank has actually been recorded at the bank. The bank is not perfect and too many people are trusting that the bank has not made errors. This is a dangerous assumption and can be corrected by simply checking your records against what the bank has in their records.

In step five the big bad side of corporations comes alive. Many times a corporation will get a bad name from their attempt to collect the money that is due to them. There are many ways to collect overdue bills but the end result is the money is needed to fulfill the obligation of the business. You will have these same issues to grapple with in your business. In order for you to pay your bills, you will need money to do it.

By following the above steps you will be able to see how much is due you for services provided and how much you will need to collect. I you don’t record the invoices systematically; the payments systematically and match them to the bank you will never be able to get a handle on whether you have been paid for all you have done.

This brings up a point as to what the proper system is to use for accomplishing this vital task. There are numerous different solutions out there. One of the most popular and one I personally use and recommend is QuickBooks. This is an online software solution that allows you to know where you are in your business up to the minute, while also allowing me as your accountant to help you to make sense of the numbers.

QuickBooks allows me to be an advisor to you in your business not simply a historian who puts numbers on the tax return. The second option is Calendar Keeper software or the manual book. Redleaf press has come up with a way to truly organize your business life and helps you to keep track of your business on a month to month basis. No one solution is the best for everyone. The key is to start your system today so you can start the process of taking control of your business now.

Are you looking to pass this information along to a fellow daycare provider? Just send me an email at mailto:bob@grothcpa.com



Saving You Money,


Robert Groth E.A.
bob@grothcpa.com





© 2006 CG Groth Inc.