You Can’t Afford to NOT Have a Good Accountant for Your Monthly Financials
When you think about getting accurate and timely monthly financial statements for your childcare center, what comes to mind? For many owners, it’s the assumption that having a qualified accountant requires an overwhelming time commitment and a steep price tag. The reality is every business owner deserves financial clarity, and it is far more reachable than you might think!
If you are currently making business decisions based on gut feeling or by the balance in your bank account, you aren't alone. We’re here to say there is a better, stress-free way!
Not all accounting services are created equal. When evaluating who handles your books, the differences lie in the details:
General accounting firm vs. accounting firm that specializes in childcare: A general accounting firm works across dozens of unrelated industries, whereas a firm specializing in childcare understands the unique operations of a childcare center, enrollment ebbs and flows, and subtle expense details that directly impact the center.
At TLG, that understanding goes a step further. Members of our team have firsthand experience working in the childcare industry, so our knowledge doesn’t come only from working with childcare clients, it also comes from having been inside the industry ourselves. We understand many of the day-to-day realities behind the numbers, which helps us ask better questions, recognize what may be unusual, and provide financial guidance with the context of how childcare centers actually operate.
Bookkeeper vs. Accountant: A bookkeeper records transactions and may only understand basic concepts without deep technical financial insight. An accountant adds in the ability to analyze overall financial health. Partnering with experts who combine accounting precision with childcare expertise gives you the best of all worlds.
Which is best for YOU: an Accounting Firm or In-House Accountant?
The answer depends on your size and your understanding of your own financials. One main advantage of hiring an accounting firm is the cost. Typically, it’s more expensive to hire a qualified accountant in-house than it would be to pay an accounting firm if you are under five locations. As you open more locations, it starts to make financial sense to have an in-house accountant. Five centers is not a hard and fast rule; it’s still important to weigh costs and the value you receive for each.
In addition to the cost, it’s important to look at the processes. For example, an accounting firm should have processes in place to ensure work is done correctly and timely; they should have a review process built into their processes. With an in-house accountant, who will be there to verify accuracy? It often takes a financial skill set of the owner or manager to review financials for accuracy each month, but many are not prepared for such undertakings. It requires knowledge of accounting to point out issues.
No matter your size, it’s important that you look at both options to determine what works best for you and your company.
Questions to ask your accountant
Whether you are auditing your current accountant/bookkeeper or interviewing a prospective new hire/firm, asking the right questions ensures your business gets the service it deserves. Ask your accountant (whether in-house or an accounting firm) the following questions:
1. How often do you work on my account?
Monthly financial health requires ongoing, routine attention, not just a rush at the end of year, when prepping for tax. There should be a monthly financial routine that is not strayed from. You should feel confident you will receive information on how your business performed by a certain date of the following month. Tell/ask your accountant when that date is. Typical would be between the 15th-20th of each month.
2. Are you analyzing actual reports or just importing raw data?
Ensure your partner takes the time to review payroll reports and tuition billing reports rather than relying solely on automated data imports. When these items are imported and then not understood by the accountant, it leads to items being incorrectly categorized. At TLG, we prefer to do these journal entries manually because it helps us catch potential errors but also avoids the dreaded “Miscellaneous” category. We believe that all revenue and expenses should have a real home, not just be thrown to a catch-all category without a common theme.
3. How do you handle unfamiliar or ambiguous transactions?
An accountant should ask clarifying questions monthly, rather than letting uncategorized items accumulate. Additionally, knowing your accountant asks questions is a sign they are paying attention to the details and not guessing, just to avoid asking. At TLG, we believe that asking questions we are unsure about helps us understand your business a little better and will help us to know the answer moving forward. There is nothing wrong with your accountant not knowing all the answers, however, coming to the table with the right questions is key.
4. Do you tie out our quarterly wages in the accounting system to quarterly tax filings completed by the payroll company?
Reconciling wages in your accounting system to the quarterly 941s and state tax filings ensure your payroll numbers are accurate and tax-compliant throughout the year. Not only is this important come tax time, but it’s a very important number to see each month, as wages are likely your largest expense. Keeping a constant tab on your wage to revenue percentage will help you be profitable.
5. How do you handle W-9 tracking and 1099 filings at year end?
The IRS requires business owners to file 1099s for certain companies who provided a service (plumbers, electricians, accountants, lawyers, etc.) and who the business paid $2,000 or more during the calendar year. In order to know if this is applicable to your vendor, a W-9 must be requested to identify their entity type (Individual, S Corp, C Corp, Partnership, etc.). Sending 1099s are a part of the business tax return, but additionally, there are penalties for failure to file if you were to be audited.
6. Do you offer recommendations based on trends you see?
Your financial team should act as an advisor by highlighting opportunities for cost savings and offer suggestions to problems as they arise. Your accountant (whether in-house or an accounting firm) is often not involved in the day-to-day operations of your childcare business. This comes with some benefits and some disadvantages. On the disadvantage side, they may have more questions about how to correctly categorize transactions. On the positive side, they can act as an outsider looking in. Having a fresh perspective is sometimes what a business needs to stay ahead of the curve and agile. The numbers your accountant sees will tell a story. It tells the story of spending habits, payroll costs, and general cash flow (which is not necessarily your profit).
Take Control of Your Financial Future
Investing in specialized financial guidance shouldn’t be looked at as an added expense; it's essential for the sustainability and growth of your childcare center. With the right team in place, you can open yourself up to new information and fresh ideas.
You don't need to be a financial expert from day one, you just need to start somewhere. Having a dedicated team of financial professionals supporting you, especially professionals who understand both the numbers and the realities of the childcare industry, arms you with actionable insights to set realistic goals, plan ahead, and make confident choices.
Remember, this isn’t just for knowledge of your monthly financials, but also for tax preparation. Make yourself audit-proof.
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