If finances are the foundation of a quality family program, then record-keeping is the glue or mortar that holds the foundation together.
Record Keeping
Record keeping is the practice of tracking information, including needed documentation, in a systematic way.
Providers should be keeping a variety of documents to track of variety of events regarding finance. For example, it is prudent to maintain a family ledger that indicates tuition owed and tuition paid. With this practice, you will always know when a family's balance is overdue. A good practice regarding overdue tuition as it relates to record-keeping is to make copies of any correspondence you have with families regarding the overdue tuition. If you send a notice home, be sure to keep a dated copy of that notice.
Providers should develop a system for themselves on where and how to keep track of receipts and invoices. Relating this to your home budget, many adults have an envelope system with one envelope for each category. For example, all receipts related to house improvements or home repairs go ithe envelope labeled 'house'. Other adults simply put all their receipts for the year into a shoebox...this is NOT a recommended practice for a small or large business. Whatever system you develop to keeping track of your receipts/invoices, be sure it is efficient and effective to meet your needs. You might ask your accountant for suggestions.
Providers should be keeping a variety of documents to track of variety of events regarding finance. For example, it is prudent to maintain a family ledger that indicates tuition owed and tuition paid. With this practice, you will always know when a family's balance is overdue. A good practice regarding overdue tuition as it relates to record-keeping is to make copies of any correspondence you have with families regarding the overdue tuition. If you send a notice home, be sure to keep a dated copy of that notice.
Providers should develop a system for themselves on where and how to keep track of receipts and invoices. Relating this to your home budget, many adults have an envelope system with one envelope for each category. For example, all receipts related to house improvements or home repairs go ithe envelope labeled 'house'. Other adults simply put all their receipts for the year into a shoebox...this is NOT a recommended practice for a small or large business. Whatever system you develop to keeping track of your receipts/invoices, be sure it is efficient and effective to meet your needs. You might ask your accountant for suggestions.
The key to good record keeping is having a system that is efficient and effective, so you can find the document or file that you need, when you need it.
If you would like to learn more about how to create an organized filing system for your program, watch the following video: File Drawer Organizing at http://www.youtube.com/watch?v=ItSighEKfiw (This web link will NOT open in a new window so you will need to click on the back arrow in the upper left corner or your screen to get back to this tutorial.) If you prefer to organize your files on a computer rather than in a file drawer, remember that your computer desktop should reflect a clean, organized system. That means you do not want too many folders or file icons on it. A clean, well-organized desktop ~ either your office desktop or your computer desktop ~ will help you manage all your paperwork. Whether you choose to utilize a file cabinet system or a computer system you will want to create one file (folder) labeled 'Budget (and the year) to store all of your budget documents included in this tutorial.
If you would like to learn more about how to create an organized filing system for your program, watch the following video: File Drawer Organizing at http://www.youtube.com/watch?v=ItSighEKfiw (This web link will NOT open in a new window so you will need to click on the back arrow in the upper left corner or your screen to get back to this tutorial.) If you prefer to organize your files on a computer rather than in a file drawer, remember that your computer desktop should reflect a clean, organized system. That means you do not want too many folders or file icons on it. A clean, well-organized desktop ~ either your office desktop or your computer desktop ~ will help you manage all your paperwork. Whether you choose to utilize a file cabinet system or a computer system you will want to create one file (folder) labeled 'Budget (and the year) to store all of your budget documents included in this tutorial.
Click on the "Record-Keeping" PowerPoint below to open. For this document, you can simply open to view or save to your computer and then view. This document does not open in a new window, so you will have to click on the 'back arrow' in the upper
left corner of your computer screen to go back to the tutorial.
record_keeping_fcc.pdf | |
File Size: | 8306 kb |
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Paperwork! Rarely is this a Family Child Care Provider's favorite part of their job! But without careful tracking of hours worked, income received, meals tracked (among lots of other bits of information), it's impossible to make the most of your business. - Tom Copeland, national expert on family child care business issues
Tracking Income and Expenses
Providers should develop a system that tracks income for the business. Keep track of this through a separate method from other income. You can use a receipt book, financial log book, computer software, or some other method that works for you. At tax time, you will need to know what money was earned by the business and what money came from other sources, like other jobs.
Some expenses are completely personal expenses. You may find it useful to track them for your own understanding of your spending habits. Examples of personal expenses might be cosmetics, personal clothing, or a gym membership.
Other expenses are completely business expenses. It would be useful to budget for and track these expenses for your budgeting purposes. Examples of business expenses might be advertising, continuing education/conference fees, or membership fees. Other expenses could be for items that are used for both your business and personal use. Tracking these items can be trickier, but tracking can be done. One way is the use of computer software to track purchases by having categories (binder with plastic pockets, extension files, etc.) set up for ‘filing’ the different amounts for different items. You can also code the receipts per category of expense. For example: C for cleaning, T for toys, O for office supplies, etc. You will want to code your items based on the categories in your budget, so you will be able to locate and refer to the expenses easier.
Another way to code receipts per item is the following: P for personal, B for business, and S for shared. This provider used T/S for Time‐Space percentage. For a discussion on Time‐Space percentage, consult your tax advisor or Tom Copeland’s Record Keeping Guide.
Some expenses are completely personal expenses. You may find it useful to track them for your own understanding of your spending habits. Examples of personal expenses might be cosmetics, personal clothing, or a gym membership.
Other expenses are completely business expenses. It would be useful to budget for and track these expenses for your budgeting purposes. Examples of business expenses might be advertising, continuing education/conference fees, or membership fees. Other expenses could be for items that are used for both your business and personal use. Tracking these items can be trickier, but tracking can be done. One way is the use of computer software to track purchases by having categories (binder with plastic pockets, extension files, etc.) set up for ‘filing’ the different amounts for different items. You can also code the receipts per category of expense. For example: C for cleaning, T for toys, O for office supplies, etc. You will want to code your items based on the categories in your budget, so you will be able to locate and refer to the expenses easier.
Another way to code receipts per item is the following: P for personal, B for business, and S for shared. This provider used T/S for Time‐Space percentage. For a discussion on Time‐Space percentage, consult your tax advisor or Tom Copeland’s Record Keeping Guide.
As you have more experience in tracking your income and expenses, you will be more likely have a better sense of how and where to make adjustments in your annual budget. But remember, once you set up your budget, don’t make a practice of continually changing the numbers on it, because if you do, you will not have a meaningful comparison at the end of the year. Also remember that some of the expenses are one‐time expenses in the course of a year (e.g., liability insurance) or come up quarterly – and budgets cover an entire year. There will be some places in the budget where it doesn’t always come out evenly immediately.
Each month you will add up the receipts for each line item and enter them on the Tracking Income and Expenses form.
Each month you will add up the receipts for each line item and enter them on the Tracking Income and Expenses form.
Click on the "Tracking Income and Expenses" documents below to open. Save to your computer, then consider printing the 'template'. This document does not open in a new window, so you will have to click on the 'back arrow' in the upper left corner of your computer screen to go back to the tutorial. You may have to 'enable editing' once this document opens, depending on the Office version you have.
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Tracking Meals
Whether your program is participating in the USDA Child and Adult Care Food Program (CACFP) or not, it is important to keep records of menus, number of children served at each meal/snack, the date/time meals/snacks are served.
Menus are often planned a week or a month at a time, or you may use a rotating menu. In either case, you must keep on hand a menu of the food that was actually served on any given day. For example, you may have put strawberries on your menu for today's breakfast, but the strawberries at the grocery store looked old, so you opted to purchase oranges instead. This adjustment in food offering will need to be put on your menu. Simply cross off the strawberries and hand-write in the oranges. Save your old, yet updated, menus for at least one year.
Children need routine, so it is important that meals and snacks are served at approximately the same time every day. The best way to ensure this is
happening, is to have a WRITTEN daily schedule that includes meals and snack times and check yourself on occasion to ensure you are following the scheduled meal times.
Menus are often planned a week or a month at a time, or you may use a rotating menu. In either case, you must keep on hand a menu of the food that was actually served on any given day. For example, you may have put strawberries on your menu for today's breakfast, but the strawberries at the grocery store looked old, so you opted to purchase oranges instead. This adjustment in food offering will need to be put on your menu. Simply cross off the strawberries and hand-write in the oranges. Save your old, yet updated, menus for at least one year.
Children need routine, so it is important that meals and snacks are served at approximately the same time every day. The best way to ensure this is
happening, is to have a WRITTEN daily schedule that includes meals and snack times and check yourself on occasion to ensure you are following the scheduled meal times.
Click on the "Tracking Income and Expenses" documents below to open. Save to your computer, then consider printing the 'template'. This document does not open in a new window, so you will have to click on the 'back arrow' in the upper left corner of your computer screen to go back to the tutorial. You may have to 'enable editing' once this document opens, depending on the Office version you have.
meal_tracker.xls | |
File Size: | 31 kb |
File Type: | xls |
"A SYSTEM is working for you if you can find what you need, pretty much immediately when you need it!" - Kelly Matthews, Family Child Care Business Specialist
Hours Worked in the Home
Tracking carefully all the hours you care for children as well as all the hours you are conducting business activities in your home when
children are not present is an important thing you can do as a family child care provider for YoungStar and for reducing taxes. Keeping careful records of the number of hours you work in your home on business activities will demonstrate record-keeping practices in YoungStar Business Practices.
These are hours that are spent on activities that support your family child care business and are done when children are not present. Any time for activities done while children are present are already calculated in your Child Care hours and do not get counted here. These hours must be done in your home or on your property. Going to the coffee shop to do lesson planning would not be counted as it is not in your home.
If you and your spouse/child are working on activities together, like fixing toys, for two hours, you may only count the two hours, even though you are both working. If you fix toys for two hours and then your spouse/child does other child care maintenance for two hours, then you may count four hours total. If you are working on separate tasks in different areas of the house/yard, then you may count them separately.
Example of Hours Worked in the Home
children are not present is an important thing you can do as a family child care provider for YoungStar and for reducing taxes. Keeping careful records of the number of hours you work in your home on business activities will demonstrate record-keeping practices in YoungStar Business Practices.
These are hours that are spent on activities that support your family child care business and are done when children are not present. Any time for activities done while children are present are already calculated in your Child Care hours and do not get counted here. These hours must be done in your home or on your property. Going to the coffee shop to do lesson planning would not be counted as it is not in your home.
If you and your spouse/child are working on activities together, like fixing toys, for two hours, you may only count the two hours, even though you are both working. If you fix toys for two hours and then your spouse/child does other child care maintenance for two hours, then you may count four hours total. If you are working on separate tasks in different areas of the house/yard, then you may count them separately.
Example of Hours Worked in the Home
* menu planning for child care program
* unpacking groceries for child care program * phone calls with current or prospective clients * working on child portfolios * rotating toys * professional reading * maintenance directly related to the child care program (painting a wall a child marked on) |
* lesson planning
* updating child care files * interviews * online classes * sanitizing toys * record keeping and CACFP records |
Best Practice says to also track your 'personal' cleaning time -- for areas not used by the child care program and cleaning needed as a direct result of your own family -- to show the IRS that you are not counting all cleaning as child care cleaning.
Keeping Track of Hours is critical to getting the most out of your tax deductions, so it is prudent to keep track of the details. This tracking will help aid in filling out the Schedule C (more on that later). The more hours you claim, the more exact your records should be to support your claim. You are entitled to use every hour that is actually spent for Hours Worked in the Home to support your tax documents, but be sure that your records are clear, easy to understand and accurate.
Keeping track of Hours Worked in the Home can be done a number of ways.
a) Providers can keep a log book of all Hours Worked in the Home which is updated daily. Records should include date, time spent on activity and what activity was performed. This log could be a calendar, a journal, a ledger, etc ~ whatever works best for you to write down the number of hours you worked in the home on business-related activities.
OR
b) Providers can keep track of all Hours Worked in the Home on an average basis. This requires that the provider keep careful daily records like listed above for 2 months. This would include all regularly scheduled activities (weekly cleaning, menu planning, etc) and irregular activities (phone calls, interview, etc). The provider could then total these hours for regular activities and irregular activities and come up with a weekly average for each category.
Questions to consider...
Consider how you would answer these questions - use your answer to develop and implement record keeping practices that will strengthen your business practices, make tax time easier, and possibly increase your bottom line.
1. How do I keep track of all income received? Is it in writing? What information do I track for each income transaction? Do I offer parents receipts for each of their payments? Do I offer end-of-the-year statements to parents? What information do I include on receipts and/or end-of-the-year statements? Would I be able to prove where all my income comes from if audited? Does this system of tracking work for me?
2. How do I keep track of the meals and snacks I serve to children? Is it in writing? What information do I track for each mean/snack served? If I am on CACFP, do I track non-reimbursable meals/snacks? How do I use menus in my program? Does this system of tracking meals and snacks work for me?
3. How do I keep track of the hours I work? Is it in writing? Which hours do I include? How much detail do I add to my records to document what I was doing? Does this system of tracking my care giving hours and hours working in the home supporting my business work for me?
4. How do I track my spending? Is it in writing? How do I separate my business spending from my personal spending? How do I store my receipts? If I needed to locate a receipt for a purchase from 6 months ago, could I find it? Would I be able to tell how much of that purchase was for personal items and how much of that purchase was for business items? Does this system of tracking my spending work for me?
5. How do I ensure that children's files are current and complete? How about my file? Is that system of staying current and complete working for me?
6. How do I track my business miles? Is it in writing? Is this system working for me?
1. How do I keep track of all income received? Is it in writing? What information do I track for each income transaction? Do I offer parents receipts for each of their payments? Do I offer end-of-the-year statements to parents? What information do I include on receipts and/or end-of-the-year statements? Would I be able to prove where all my income comes from if audited? Does this system of tracking work for me?
2. How do I keep track of the meals and snacks I serve to children? Is it in writing? What information do I track for each mean/snack served? If I am on CACFP, do I track non-reimbursable meals/snacks? How do I use menus in my program? Does this system of tracking meals and snacks work for me?
3. How do I keep track of the hours I work? Is it in writing? Which hours do I include? How much detail do I add to my records to document what I was doing? Does this system of tracking my care giving hours and hours working in the home supporting my business work for me?
4. How do I track my spending? Is it in writing? How do I separate my business spending from my personal spending? How do I store my receipts? If I needed to locate a receipt for a purchase from 6 months ago, could I find it? Would I be able to tell how much of that purchase was for personal items and how much of that purchase was for business items? Does this system of tracking my spending work for me?
5. How do I ensure that children's files are current and complete? How about my file? Is that system of staying current and complete working for me?
6. How do I track my business miles? Is it in writing? Is this system working for me?
YoungStar Requirements
Requirements for 3, 4, and 5 star programs.
Tracking Income and Expense
Under the Business and Professional Practices section of YoungStar, providers are required to demonstrate record-keeping practices that track income and expenses including tracking meals and snacks.
Programs must be able to verify through documentation that their program is keeping track of income received and expenses paid within categories for the line item budget, through evidence of one month's worth of records/documentation.
Tracking Meals and Snacks
Programs must also show that they are tracking meals and snacks. CACFP claims (last 2 months and an in-progress claim) would satisfy this requirement. Programs not on CACFP must be able to provide documented proof over the past 3 months that they are tracking the number of meals and snacks served. Documentation must include:
- Menus
- Meal/Snack components (what was actually served; which may not match menu)
- Number of children served that meal/snack
- Date meal/snack was served
- Time meal/snack was served, as noted either on a daily schedule or lesson plan
Tracking Hours worked in the Home
For YoungStar purposes, in each 6 month period in a calendar year, one month must be chosen for review, so it would be necessary to ensure that records are kept in a timeframe to meet this requirement. The provider will have documents that demonstrate hours worked in the home caring for children and for business hours working in the home.
Tracking Income and Expense
Under the Business and Professional Practices section of YoungStar, providers are required to demonstrate record-keeping practices that track income and expenses including tracking meals and snacks.
Programs must be able to verify through documentation that their program is keeping track of income received and expenses paid within categories for the line item budget, through evidence of one month's worth of records/documentation.
Tracking Meals and Snacks
Programs must also show that they are tracking meals and snacks. CACFP claims (last 2 months and an in-progress claim) would satisfy this requirement. Programs not on CACFP must be able to provide documented proof over the past 3 months that they are tracking the number of meals and snacks served. Documentation must include:
- Menus
- Meal/Snack components (what was actually served; which may not match menu)
- Number of children served that meal/snack
- Date meal/snack was served
- Time meal/snack was served, as noted either on a daily schedule or lesson plan
Tracking Hours worked in the Home
For YoungStar purposes, in each 6 month period in a calendar year, one month must be chosen for review, so it would be necessary to ensure that records are kept in a timeframe to meet this requirement. The provider will have documents that demonstrate hours worked in the home caring for children and for business hours working in the home.
Disclaimer: Materials and links provided by WECA on this tutorial do not constitute legal, accounting, tax or finance advice. Participants seeking professional business advice about specific aspects of their program should consult a professional such as a lawyer, accountant, etc.