If you’re like most childcare CEOs I talk to, you’ve probably heard the advice “Just use QuickBooks and file your own taxes to save money.”
Let me tell you something, my friends—that advice might be costing you thousands of dollars every single year.
Generic bookkeeping software and DIY tax filing might work for some businesses, but the childcare industry comes with unique financial complexities that require specialized expertise.
Here are some telltale signs that it’s time to bring in a childcare-focused CPA:
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1. You're Constantly Stressed About Tax Season
Tax season shouldn’t feel like a quarterly horror movie in your life. If you break into a cold sweat every time April 15th approaches or you’re scrambling to gather receipts from shoeboxes the week before filing, that’s a major red flag.
I’ve worked with countless childcare owners who were using what I call the “Shoebox Accounting System” – literally collecting receipts in boxes or folders and only looking at them during tax season.
This approach creates a chaotic end-of-year scramble and often leads to expensive tax preparation bills because all the bookkeeping that should have been done throughout the year gets crammed into a few stressful weeks.
A childcare-specialized CPA doesn’t just prepare your taxes—we create a comprehensive tax strategy that works year-round, eliminating the last-minute panic and ensuring you’re maximizing every deduction available to your childcare business.
2. Your Bank Balance and Profit Don't Match Up
When your bank account shows $10,000, but your tax return indicates you made $50,000 in profit, something’s not adding up. This disconnect between cash flow and profitability is a common issue I see with childcare business owners, and it can lead to serious financial headaches.
I’ve seen business owners end up with “high profits and no cash.” This happens when you have non-deductible cash outflows like loan payments, owner’s draws, and asset purchases.
For example, when you use your credit card to purchase supplies from Lakeshore Learning, that’s a business expense. But when you pay the credit card bill the following month, that’s not an expense—it’s simply a reduction in your cash and credit card liability.
Without proper tracking of these transactions, you might think your business is less profitable than it actually is. This misunderstanding can lead to poor financial decisions and unexpected tax bills.
A specialized childcare CPA helps you distinguish between cash flow and profitability, ensuring you have a clear picture of your business’s financial health.
3. You're Missing Grant Opportunities and Funding
The childcare industry has unique access to various grants and funding opportunities, but navigating the application process and compliance requirements can be overwhelming.
If you’ve found yourself either missing application deadlines or struggling to track and report funds properly, you’re leaving money on the table.
In one of my webinars, I shared a heartbreaking story from our accounting manager who sits on a grant board in her county.
She had to send money back to the government during the pandemic because childcare business owners didn’t have the financial documentation needed to qualify, while those same businesses were suffering financially.
The saddest part was that the money was available, but without proper financial statements, business owners couldn’t access it.
A childcare-specialized CPA understands the nuances of grant tracking and can help you qualify for funding opportunities while staying compliant with reporting requirements.
4. Your DIY Bookkeeping Isn't Working Anymore
Let me guess—you started with a simple spreadsheet to track your income and expenses, maybe even graduated to basic accounting software.
But as your childcare business grew, your financial tracking didn’t scale with it. Now you’re wondering if you’re capturing all your revenue, properly categorizing expenses, or accurately tracking different revenue streams.
The truth is, childcare businesses have complex finances. It’s essential to track your revenue by source—private pay, state subsidy, food program reimbursements, etc. This helps you understand where your money is coming from and identify potential risks.
For instance, I once had a client who received 90% of their revenue from a Pre-K program. When they lost that program, their business collapsed because they hadn’t diversified their income streams.
When you work with a childcare-focused CPA, you get systems tailored to your industry, ensuring nothing falls through the cracks and you have accurate financial data to make sound business decisions.
5. You're Not Sure If You're Structuring Your Business Correctly
Are you still operating as a sole proprietor when an S-Corporation might save you thousands in self-employment taxes? The way your childcare business is structured has massive implications for your tax liability and long-term financial health.
Let me share Michael’s case study. He was operating as a single-member LLC and paying himself through payroll but was misclassified for tax purposes.
After converting to an S-Corporation, we were able to reduce his tax bill from $36,000 to just $6,000—an 80% savings! By implementing proper entity optimization and creating an accountable plan, Michael saved thousands in taxes that he could reinvest in his business.
A specialized childcare CPA can help determine if your current structure is the most advantageous for your specific situation.
6. Your Financial Reports Don't Help You Make Decisions
If you’re running your childcare business based on gut feelings rather than financial data, you’re flying blind. Maybe you have financial reports, but they’re not giving you actionable insights.
As I’ve shared with my clients, it’s critical to know your numbers to grow your numbers. A financially healthy childcare business typically has:
- Net profit margins between 15-25%
- Payroll expenses ranging from 40-50% of revenue
- Rent or mortgage costs around 15-20% of revenue
Are your numbers in these ranges? Do you even know your percentages? If not, you’re missing vital benchmarks for measuring your business’s health.
During a recent training, I worked with a client who had multiple locations and just assumed her largest center was the most profitable—but our analysis proved otherwise.
Without location-specific financial data, she was making strategic decisions based on false assumptions.
7. You're Dealing with Special Circumstances That Complicate Your Finances
Childcare businesses often face unique challenges that require specialized financial expertise:
- Multiple locations or expanding to new sites: Each location’s profitability needs to be tracked separately to make informed growth decisions.
- Transitioning from in-home childcare to a commercial facility: This major shift changes everything from your tax deductions to your financial reporting requirements.
- Managing government subsidies and vouchers: These income sources come with unique tracking and compliance requirements.
- Planning for retirement or business succession: You need specialized strategies to maximize the value of your childcare business for eventual sale or transfer.
- Cross-state operations: Different state regulations require specialized knowledge to navigate tax implications efficiently.
If your exit strategy is to sell your business someday, you absolutely must have proper financial statements in place. When potential buyers look at your business, they’ll want to see a clear, comprehensive paper trail demonstrating your financial health.
Without proper asset tracking and financial documentation, your business will appear much less valuable than it actually is.
Don't Wait for a Crisis: Take Control of Your Financial Future Now
Remember, Childcare CEOs, it’s never too late to get your financial house in order.
During the pandemic, the childcare businesses that didn’t survive were usually already struggling financially—the crisis just magnified and exposed their existing problems. Don’t wait for a crisis to reveal your financial weaknesses.
The financial clarity and strategic guidance a specialized childcare CPA provides will not only save you money on taxes but will give you the confidence to grow your business, increase your impact on the children and families you serve, and build real wealth for yourself and your family.
Ready to stop overpaying taxes and start gaining financial clarity? Let’s talk! We’ll help you identify specific opportunities to keep more of your hard-earned money and build a more profitable, sustainable childcare business.
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