Record keeping In Your Daycare Business

Pointers on record keeping

It is very important for a business owner to have comprehensive and accurate records. Aside from the fact that record keeping is a necessity for the Internal Revenue Service it is also a guide in order to lessen your taxes and save money.

Always ask for a receipt for all the things you procure and put them together inside an envelope. A weekly inspection of your receipts and your checkbook is greatly advised.

Recording all your business transactions weekly is also a good habit. This will help you maintain the orderliness of your records. In addition this will prepare and make you ready for an audit.

It is recommended for you to have your own system of filing. You can use loose-leaf paper and manila folders wherein the folders are categorized and marked by month. Put 8 ½” by 11” sheets of paper at the front of every folder. This is where the transactions are recorded. All supporting documents on your transactions are placed inside the folder. Make sure that you have two sheets of paper indicating your income and expenses.

For each income, here are the things that should be listed on your paper:
• Date received
• Source
• Amount received
• Payment method
• Reason for payment
• Reference number

For each expense you need to include these in your list
• Date
• Who you paid
• What you paid for/ item procured
• Amount paid
• Payment method

Remember to sort your receipts in each category you made and put your put them in the correct folder.

Get the total amount of income and expenses every month by summing up all the values on your paper. Furthermore, add the monthly income and expenses to arrive to your annual income and expenses.

When the year has ended you can put your records in a 10” by 13” envelope and label the tax year. Remember to store it in a secure place so you could check them again if you need to.

How to Determine your Tax Deductions – Direct Expenses

Your expenses in the venture of your daycare business can be deducted from your income tax. So it is very important for you to have your records of all the business transactions you have undertaken. Having these and other supporting documents in the occasion of an audit will confirm to the Internal Revenue Service that the expense was valid.

Valid direct expenses get deducted totally from your income. For these expenses to be deducted, they need to be ordinary and necessary. The expense which is usual in your business is ordinary. The expense which is really needed in order to manage your business is necessary.

Written below is a list of the common expenses concerning your daycare enterprise. Take note however, that there are other expenses that you will incur in the venture of your business.

Advertisement fees
Bookkeeping fees
Books for the daycare
Car expenses
Daycare Furniture
Diapers and Wipes
Education
Entertainment for the children
Equipment purchase
Equipment rental fees
Food for the children
Insurance
Legal Fees
Magazines for the daycare
Maintenance
Office supplies
Other taxes
Payroll
Printing charges
Seminars
Telephone bills for the business line
Toys for the daycare
Truck Expenses

See: How to start a day care business