The Hidden Costs of your Centre's Bookkeeping and What Directors and Operators Need to Know
What is your bookkeeper really costing you? When considering the costs associated with your childcare centre's bookkeeper, you likely focus on their hourly rate, or their expected monthly invoices. However, the true cost of your bookkeeper can be significantly more than what they show on their invoices. Mistakes, inefficiencies, and deferring work to you is likely costing your centre significantly more than you realize.
In this post, we'll explore the real costs of your bookkeeper, including the financial costs of errors and the valuable time that you likely spend doing their work for them.
The Cost of Mistakes
In some industries, bookkeeping mistakes can be easily corrected, and often do you not have significant consequences if caught early. However, Childcare is not one of those industries! Mistakes with funding allocations can have significant financial impacts and often cannot be corrected. Some examples we have seen and heard from Directors:
Miscalculating wages, benefits and grants for staff. We have seen bookkeepers who do not correctly understand workforce grants, leading to miscalculating staff wages and compensation. If staff have been overpaid, you are unlikely to get that money back, especially if they are no longer working at the centre. We have seen cases where these types of errors have cost centres more than $10,000.
Miscategorizing expenses. Bookkeepers often assign expenses to the wrong categories, which means that funding is not properly tracked, and budgets do not make sense. In many industries, whether you categorize something as an Administrative Cost, or an Office Expense does not matter so much. But in Childcare, categorization is crucial and it can impact your funding - both how much funding you receive and how much you may need to return.
Over or under-spending for specific funding. If expenses are not tracked or categorized correctly, you are likely to over or under-spend in certain areas, both of which are bad. If you have over-spent, you will not be able to recover that additional cost, which could have been avoided. If you under-spent, then you did not take full advantage of the available funding that your centre likely needed and could have benefited from.
The Cost of Inefficiency
For bookkeepers, inefficiencies can mean missing deadlines, not preparing financials in a timely manner or being slow to deal with auditor requests. It can also mean not applying for all available funding for the centre, or incorrectly completing applications. Each of these has real costs:
Not preparing financials in a timely manner. Without timely financial reports to help inform decisions, operators and Boards do not have a clear picture of the centre's operations and cannot take the necessary actions to improve performance. Delayed financials can lead to missed opportunities for strategic planning and resource allocation.
Being slow to reply to auditors. The longer and more error-prone an audit, the more it is likely to cost, and the later you will receive your audited financial statements, which are needed for compliance and funding applications.
Incorrectly completing funding applications. Mistakes in funding applications can lead to delays in funding, or receiving less funding than you are entitled to, straining your finances. In some cases, incorrect applications can result in losing eligibility for essential funds, impacting your centre's ability to operate smoothly.
Deferring Work to the Director
One strategy that some bookkeepers use to manage their workload is to transfer tasks to Directors, or limiting their services to a narrow scope of work. This improves their efficiency, but leads to several issues:
Increased workload for Directors. The more bookkeeping and accounting-related tasks you take on, the more of your energy is focused away from managing the centre, your staff and programs for your children. This can lead to Director burnout. Directors should focus on managing the centre, and educational and developmental outcomes, not finance and accounting they weren't trained for.
Reduced quality of financial management. Directors or office staff may not have the background or training in accounting to take on bookkeeping-related tasks. This can lead to errors and inefficiencies as time must be spent correcting errors.
Your Bookkeeper's Real Cost is More Than Just Their Invoice
Beyond cost, evaluating your bookkeeper involves looking at their efficiency, accuracy, and the extent to which they can improve your workload, not add to it. You can read about how to evaluate your bookkeeper, here.
If you're considering a change, or want to discuss how we can help you and your centre, please reach out! You can always email us at hello@childcarecpa.ca.
We customize our services to meet your needs and offer a fixed monthly price to help you avoid surprises.
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