In 2011, 32.7 million U.S. children spent time in childcare regularly while their parents worked or spent time outside the home; 13 percent of preschoolers were cared for by non-relatives (not including organized daycare facilities), according to the U.S. Census Bureau.
These non-relatives are often friends or neighbors who love children and open up their homes to provide a safe environment for parents to leave their kids. And while they might be great at supervising youngsters, these at-home providers don't always excel at the non-kid-related parts of their job.
"Unfortunately, many providers don't understand that there is a business side to childcare," says Tom Copeland. "They don't realize that failing to pay attention to this will cost them later in time and money."
Tom is a consultant, trainer, author and advocate for the business of family childcare.
He has several recommendations for new providers:
- Save all receipts associated with their home.
- Establish a written contract with parents that requires them to pay at least one week advance and pay for the last two weeks of care in advance.
- Identify at least three benefits of their program they can use to promote their business to parents.
- Track all the meals/snacks they serve each day.
- Record carefully for two months all of the hours they work in their home after the daycare children are gone.
We recently checked in with Tom, who offered his insight and advice on at-home providers and what they can do to manage their businesses better. Here's what he had to say:
Tell us about your site, Tom Copeland's Taking Care of Business...when and why did you start it?
I started it in September 2010 after I left a childcare agency I had worked for 28 years. I wanted to continue my national work helping family childcare providers with the business side of their work, but I needed to create an independent presence on the Internet. So, I hired a social media consultant and launched my blog.
The purpose of my blog is to provide a comprehensive resource on the business of family childcare. I've written hundreds of articles, posted an insurance and tax preparer directory, linked to every IRS document dealing with family childcare and much more. I make myself available to answer business questions at no cost (email@example.com). I've been conducting workshops, seminars and webinars across the country for the past 30 years, and my goal is to help make family childcare providers become more successful as a business.
How did you become interested in helping family childcare providers?
My lifelong interest has been in writing, speaking and communicating. I happened upon the family childcare field and decided to apply myself when I saw how much providers needed business assistance. Family childcare providers go into business because they love children. Financial reasons are secondary. Most providers know little about the business side of their work and are appreciative of my work to help them. I enjoy helping providers who work so hard for so little financial reward.
How common are family childcare providers today compared with 10 years ago? Are there any challenges today's providers are facing compared with years ago?
There has been a decline in the number of state licensed family childcare providers over the past 10 years. At the same time, there has been an increase in the number of unregulated caregivers working out of their home. Competition from commercial childcare centers has also increased.
Today, family childcare providers face multiple challenges: low payments from state-subsidized childcare make it difficult to make a living caring for low-income families; lack of business skills (marketing, record keeping, budgeting, etc.) makes is hard for some providers to compete against childcare centers (who have more financial resources) and against unregulated caregivers (who charge less).
What are the advantages of being a childcare provider?
The ability to be at home caring for their own children; the ability to be their own boss and create their own career; and most importantly, the opportunity to help young children grow and learn. Providers are proud to be making a positive impact on the lives of young children.
What are some of the difficulties of running a childcare business out of your home?
Isolation, frustration with parents who don't appreciate the hard work they do, low pay and no benefits.
Providers work an average of 11 hours a day, five days a week caring for children. They work an additional 13 hours a week, on average, on business activities in their home (cleaning, activity preparation, record keeping, etc.).
Many low-income parents can't afford the cost of high-quality childcare and states do not provide enough subsidy to adequately reward many providers. Even middle-class families find childcare to be expensive, yet many providers make less than minimum wage (after subtracting their many business expenses).
What are the most common concerns or questions your readers come to you with?
The most common questions I receive are about record keeping and taxes:
- What can I deduct?
- Should I file quarterly estimated taxes?
- Over how many years should I depreciate my fence?
- What do I do when my receipt fades and I can't read them?
- What should I do when I disagree with my tax preparer?
I also handle many questions about contracts with parents (A parent left owing me money, now what?), marketing (How do I compete against a childcare center?), legal and insurance issues (What should I do when a parent shows up without a car seat?), money management and retirement (Where can I get a loan to refinance my home?).
What about legal basics that these business owners should be aware of?
The vast majority of providers should operate a sole proprietor (also known as self-employed). The only time providers should consider the other alternatives of a partnership or corporation is if they have a ton of personal assets, don't mind doing additional record keeping and plan to be in business for many years. Because this is decision is complicated, I strongly recommend providers consult with both an attorney and tax preparer who is familiar with their business before taking this step.
A partnership or corporation is also no substitute for a provider purchasing an adequate amount of business liability insurance (with coverage of $1 million per occurrence and $2 million aggregate).
What are your favorite resources/tools/books/organizations that you recommend to providers?
All providers should join the Child and Adult Care Food Program. This program provides reimbursements for serving nutritious food to children, and providers can expect to receive either $550 or $1,140 a year per child.
Providers can receive valuable training and support from their local Child Care Resource and Referral Agency and from the National Association for Family Child Care and their local family childcare association. The best record keeping software for providers is Minute Menu Kids Pro. The most popular business book in the field is the Family Child Care Record Keeping Guide by Tom Copeland. I've written 10 books on the business of family childcare and sold almost half a million copies.
What do you think are the most common business mistakes or oversights childcare providers make?
Failing to keep receipts for all household items (light bulbs, paper towels, detergent, cleaning supplies, furniture, appliances, carpet, snow removal, utilities, etc.). Not enforcing the rules in their contract with parents. Failing to purchase adequate home/car/business liability insurance. Not saving for retirement.
What do you think is a good routine providers get into for managing their finances? How often should they be dealing with the money side (daily/weekly/monthly)? What sorts of numbers should they look at?
The last thing most providers want to do is record keeping or managing their finances! There is no one way to do this. I recommend providers review their records at least monthly to be sure they have tracked: attendance records, payments received, miles driven, hours worked and receipts saved.
It's easier to reconstruct records at the end of the month rather than the end of the year. Many providers do keep good records, and the financial benefits of doing so are lower taxes and the ability to meet financial goals.
I greatly appreciate the work that family childcare providers do. Their dedication to helping children learn should be an inspiration to everyone.
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