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The Best Accounting Software for Home Daycare: Take Control of Your Books

Hudson Muchmore

January 12, 2025

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Key Takeaways

• Accounting software automates tasks like billing, invoicing, and payroll to save time and reduce errors
• Look for features like attendance tracking, parent portals, expense tracking, and financial reporting
• Top options include QuickBooks, FreshBooks, Procare, Brightwheel, and Xero
• Benefits include improved accuracy, financial visibility, tax compliance, and streamlined processes
• When choosing software, assess your needs, compare features, and evaluate usability and support

Why Accounting Software is Important for Daycares

Key Features of Daycare Accounting Software

With so many options out there, how do you know which accounting system is right for your home daycare? Here are some of the most important features to look for:

1. Automated billing and invoicing
   • The software should allow you to set up recurring invoices and automatically charge parents’ credit cards or bank accounts. This saves you from having to manually create and send invoices each billing cycle.
2. Attendance tracking
   • Being able to input children’s attendance directly into the software and have it flow into the billing is a huge time-saver. Look for a system where parents can check their kids in and out on an app.
3. Parent portal
   • Give parents the ability to view and pay invoices, message you, and update information through an online portal. This improves communication and makes everyone’s lives easier.
4. Expense tracking
   • Easily record expenses like supplies, food, insurance, home maintenance costs, etc. and categorize them correctly. The ability to snap photos of receipts is very handy.
5. Payroll management
   • If you have any employees, make sure the accounting system can handle processing their paychecks and calculating payroll taxes.
6. Financial reporting
   • Generate profit and loss statements, balance sheets, expense breakdowns, and other useful reports to analyze your daycare’s performance.
7. Tax preparation
   • Features like automatic tax calculations, generating 1099 forms, and exporting data to your tax preparer help make tax season a breeze instead of a headache.
8. Integration capabilities
   • It’s helpful if the accounting software can connect with your other business tools, like childcare management systems, payment processors, and banks. This saves you from duplicate data entry.

Top Accounting Software for Daycare Bookkeeping

With those key features in mind, let’s explore some of the top accounting programs used by home daycare businesses:

1. QuickBooks

As one of the most popular accounting solutions on the market, QuickBooks offers robust features in an user-friendly interface. While not specifically designed for daycares, its flexibility makes it a top choice for many providers.

Pros:

• Comprehensive accounting tools
• Numerous integrations available
• Strong financial reporting
• Accessible from any device

Cons:

• Higher learning curve
• More expensive than some options
• Not daycare-specific

2. FreshBooks

Known for its ease of use, FreshBooks is well-suited for home daycares that want a simpler accounting solution. It has the basic features most small childcare businesses need at an affordable price point.

Pros:

• Very user-friendly
• Excellent customer support
• Affordable for small daycares
• Time tracking feature

Cons:

• Lacks some advanced features
• Limited users on basic plan
• No daycare-specific tools

3. Procare

Procare is an all-in-one childcare management system that contains fully integrated accounting and billing functionality. Its comprehensive features make it a top choice for mid-sized to large centers.

Pros:

• Seamlessly combines childcare & accounting
• Parent engagement features
• Fully CACFP compliant
• Can handle complex billing scenarios

Cons:

• Higher cost than standalone accounting
• More complex implementation
• Steeper learning curve

4. Brightwheel

Brightwheel is a newer entrant that is quickly becoming a favorite of tech-savvy daycare owners. This all-in-one childcare app includes user-friendly billing and expense tracking capabilities.

Pros:

• Intuitive and modern interface
• Parent communication tools
• Easy payment processing
• Affordable plans for small programs

Cons:

• Lacks some accounting features
• Reporting not as robust
• Attendance tracking more manual

5. Xero

Xero is a sleek, cloud-based accounting program that is a good fit for home daycares comfortable with technology. It offers strong accounting and many third-party integrations.

Pros:

• Clean and modern interface
• Unlimited users in basic plans
• Large app ecosystem
• Inventory management

Cons:

• No built-in payroll in starter plan
• Fewer reporting templates
• Not as many integrations as QuickBooks

Benefits of Using Accounting Software for Daycares

I’ve seen firsthand how implementing childcare accounting software can transform a daycare business. Here are some of the biggest benefits you can expect:

1. Save time on administrative work
   • I was spending up to 20 hours per month on billing and bookkeeping tasks when I first started my daycare. Using software cut that down to just a couple hours. This freed me up to focus more on caring for the children and growing my business.
2. Reduce errors and improve accuracy
   • Humans make mistakes, especially when balancing numbers at the end of a long day of childcare. Accounting software greatly reduces the risk of errors in your financial records. Accurate books help you make better business decisions and stay in the good graces of the IRS.
3. Get real-time financial insights
   • Instead of trying to piece together your daycare’s financial health from a patchwork of bank statements and Excel sheets, accounting software provides clear snapshots and reports. See your profits, compare revenue to expenses, identify areas to cut costs, and make data-driven plans.
4. Streamline tax preparation
   • Does the idea of organizing receipts for the year give you a headache? With daycare software, all your income and expenses are tracked digitally and categorized. You can produce reports to send to your accountant or automatically export data to tax prep software. No shoebox of crumpled receipts required.
5. Speed up payment collection
   • Chasing after parents for tuition is no fun. With accounting software, you can collect credit card or bank payments through a parent portal and see which invoices have been viewed and paid. The ability to automatically process payments as soon as an invoice is generated helps keep cash flowing.

How to Choose the Best Accounting Software

With the benefits clear, how do you actually choose the best bookkeeping system for your home childcare business? Start by considering these key factors:

1. Understand your daycare’s needs
   • Think about how many children you serve, your monthly expenses, number of employees, growth plans, etc. This will help determine if you need a basic system or more advanced capabilities.
2. Set a realistic budget
   • Accounting tools range in price from $10 per month up to several hundred dollars monthly. In addition to the base price, factor in costs for extra users, add-on features, or set-up fees. Recall that this is an investment that will save you time and stress!
3. Compare features
   • Using the list of key features we discussed earlier, create a checklist of your must-haves, nice-to-haves, and unneeded functions. Carefully compare plans, as some limit features for lower-tier subscribers.
4. Assess ease-of-use
   • As a busy daycare owner, you want a system that is intuitive to learn and use. Take advantage of free trials and demos to click around and see how user-friendly each interface is. Consider online reviews from other providers too.
5. Evaluate support and training
   • While DIY-setup can work for the tech-savvy, most will want solid customer support to help them get started and troubleshoot issues. Check if the provider offers phone support, live chat, tutorials, and training resources.
6. Make sure data is secure
   • You’ll be trusting this system with sensitive financial information about your business and clients. Ensure potential providers use industry-standard security practices like password protection and encryption.

How to Train Staff to Use Daycare Accounting Software Effectively

Congrats, you’ve chosen an accounting system! Now, how do you get your whole team comfortable using it? Even if you don’t have other teachers or assistants, YOU need to get familiar with the program to maximize its benefits.

Start by taking time to click through all the buttons and menus yourself. Most programs today have very user-friendly interfaces, but the finance terminology may take some getting used to for childcare professionals. Don’t worry, they’re designed for non-accountants!

Create a plan for implementing the new system:

1. Gather your current accounting data like family info, attendance records, outstanding bills, etc.
2. Block off a day to input all this data and familiarize yourself further. You might make some mistakes at first, but this is part of the learning process.
3. If you have any staff, hold a training day where you walk them through the basics. Start with the functions they’ll use most, like checking kids in/out and logging payments.
4. Compile resources like how-to guides or training videos. Designate a tech-savvy “expert user” who others can go to for help.
5. Set a launch date to go live with the software and communicate it to families. They’ll likely be thrilled to access an online portal!
6. Expect an adjustment period and be patient with your team. Continue coaching and offer refreshers as needed.

Remember, your accounting software provider wants you to use their program successfully. Take advantage of their help site, live support chat, and even 1-on-1 training sessions if offered. Getting set up right from the start will make things so much smoother in the long run.

Common Bookkeeping Mistakes Daycares Make and How to Avoid Them

Even with a helpful software program, it’s still possible to make accounting errors that can cause big headaches down the road. Here are some of the most common mistakes daycare providers make and how you can prevent them:

1. Mixing business and personal expenses
   • It’s easy to whip out the same credit card for groceries as playground mulch, but this complicates accounting. Use a separate, dedicated business bank account and credit card to keep records clean.
2. Forgetting to track petty cash
   • Those runs to the dollar store for art supplies add up. Create a log and always get receipts for any cash purchases. Enter them into the software regularly so nothing gets lost.
3. Not reconciling books to bank statements
   • Make a habit to regularly check that your daycare accounting records align with your actual bank account. Discrepancies can signal errors, omissions, or even fraud.
4. Miscategorizing expenses
   • Be as specific as possible when categorizing expenses and be consistent. Was that a “snack” or “meals and entertainment?” References like the IRS childcare center expense categories can provide guidance.
5. Not keeping adequate records
   • While software greatly cuts down on physical paperwork, some documents like receipts, sign-in sheets, and certifications still need to be saved. Use your software’s digital receipt storage when you can and maintain an organized filing system.
6. Procrastinating and falling behind
   • When you’re exhausted from a day full of kiddos, it’s tempting to put off bookkeeping tasks. But like most things, they’re much easier to face in small bites rather than a big overwhelming mass. Set a weekly admin time and don’t let yourself fall more than a month behind.

Final Thoughts

Managing finances as a home daycare owner doesn’t have to be a struggle. Investing in the right childcare accounting software and committing to using it consistently can save you hours of tedious work and mountains of stress. Just imagine being able to see your daycare’s financial health at a glance and make just a couple clicks to get your child in and out of care.

Remember, you’re not alone in this journey. Join some online communities of fellow providers to swap tips and support. And of course, lean on the expert advice from your software provider – they’re there to help your daycare succeed! Here’s to many more years of snack times, circle times, and simplified accounting times.