published | 2/22/2011

Daycare Business Planning

If your daycare center or preschool is like most other small businesses you probably find that using credit cards for day to day expenses is not only a convenience, but a necessity. As a child care business owner you also know the importance of using credit wisely. That means you’ll need an easy and efficient way to track not only your expenses, but the balance due, payments made and interest paid on each card.

In this article, we’ll take a look at how to better manage your credit cards, including how to reconcile the charges on your statement, using Daycare Expense Tracking Software from Procare.

Set Up Credit Cards as Assets

A good way to stay on top of your credit cards is to treat them as though they were bank accounts, using what is known as a contra asset. The term “contra” means it works in the opposite way. So, rather than having a positive balance, like a regular bank account, it carries, on paper, a negative balance. For example, if you owed a hundred dollars that would be shown as minus one hundred (-100).

This approach has several key advantages:

  1. First, you can track expenses by vendor. This way you’ll know how much you spent on snacks at the grocery store, office and teacher supplies at the stationary store, and other items at your favorite discount store.
  2. Second, you can reconcile the items that appear on your statement to those recorded in the computer, just as you might reconcile a regular bank account.
  3. And third, there’s no need to make a manual journal entry to itemize purchases or record interest paid.

Just set up each credit card used for your child care business as an asset in your Chart of Accounts then add them to your list of Bank Accounts marking them as “checkbooks”. You’ll also want an expense account to record any interest or finance charges paid. If you owed money at the start of the year enter your Beginning Balances as negative amounts.

Procare Software: Credit Card Contra Assets Example

Receipts, Reconciliation, Payments and Reports

Entering Credit Card Receipts:

Each time you make a purchase with your credit card you’ll keep the receipt and use it to record the purchase just as though it were a check (see: Issue Check to a Vendor). The only difference is you’ll select your contra asset as the Checkbook. This increases the amount you owe, which will show as a negative number on reports. You’ll also be able to itemize your purchase breaking it into different expense categories (like office supplies, school supplies, snacks, etc.). You can even show how much of the expense applies to each of your child care centers.

Procare Software: Credit Card Purchase Example

Reconciling to Your Statement:

When you receive your credit card statement use the Bank Statement Reconciliation feature to confirm the items that appear on the statement have been entered into Procare. At the same time you may record any interest, finance charges or fees charged to your account.

Making Credit Card Payments:

You’ll add the credit card company as a vendor (see: Adding Vendors) and record any payments you make, either as an actual check or an electronic transaction (again see: Issue Check to a Vendor). This time your bank account will be the Checkbook and you’ll pay down the amount owed on the contra asset.

Procare Software: Credit Card Payment Example

Check Your Credit Card Balance:

You can see how much you own on a card at any time using one of the built-in reports, like the Balance Sheet. Go to Reports > Standard Reports > Expenses & Ledger > General Ledger Reports – Regional > Balance Sheet.

Procare Software: Credit Card Balance Report Example

The Beginning Balance will show what you owed at the start of the period (like the start of the month), while the Report Period column will show how much that has changed during the month and the Ending Balance, of course, shows the amount owed at the end of the period. This would be your current balance due, assuming you record each purchase in Procare, and run the report for the current month. Remember, the amount you owe appears as a negative number.

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