Like most businesses, the end of the year is a busy time for childcare business owners. Before the rush of the holidays begins, it is important to take stock – reviewing, analyzing, and planning for the new year—five suggestions to consider.
- In-depth review of business financials. It is important to review your childcare financial information throughout the year and end the year with a more thorough review as you prepare for filing your year-end business employment records and federal and state tax returns. End-of-the-year planning can ensure that you are ready to submit all information to your accountant in early January to ensure your tax returns are accurate and filed on time.
- Understandable financial records and reports. Does your financial information make sense? Financial statements that do not provide a clear picture of the business performance are useless. When providing financial management consulting to childcare business owners, it is common to discover inaccurate charting of accounts, categories that do not include all associated expenses, and inconsistencies from one year to the next. In general, financial information and reports that the childcare business owner cannot understand and cannot effectively use to make important business decisions. Review every line-item expense (category) and ensure you know everything included in the totals. Is the charting of accounts appropriate for a childcare business? If not, work with your accountant to make the necessary changes to your financial record keeping and reports to make them easier to understand and use in making business decisions.
- Tax Planning. “It is not how much you make that counts, but how much you get to keep.” As a childcare business mergers and acquisitions specialist, I spend lots of time reviewing childcare business financial statements and tax returns. Although I do not provide any tax advice to childcare owners, I often find that childcare business owners do not have their corporate business structure and real property holdings (building and land) set up in the most tax-advantageous manner. I always recommend that childcare business owners seek expert accounting and tax advice to ensure their corporate structure and how their business and real property assets are owned results in the best tax savings. If you’ve never had this conversation with your accountant or it’s been several years, I recommend you schedule time for this discussion before the end of the year. You may need to do some corporate restructuring in the new year to ensure you take advantage of applicable tax breaks and keep more of what you earn.
- Exit Planning or Retirement. Have you thought about how you will exit your childcare business someday? Exit Planning is a process, not an event. Therefore, it takes time to complete advanced Exit Planning to ensure your financial needs are met after you no longer own your childcare business. The end of the year is a good time to reevaluate your Exit Plan, and should you not have an Exit Plan, you should make it a priority to start diligently working on your Exit Plan in the new year.
- Business Goals and Strategy. It’s normal to spend more time at the end of the year reflecting on how things went. Did your childcare business achieve the financial goals you set – gross revenue, net profit, personal earnings, and other goals you hoped to achieve? If not, why not? What business plans and strategies can you implement next year to ensure you reach your childcare business goals?
So, before the holiday rush begins, reflect on this year and plan for next year. Should you need assistance with the financial management of your childcare business, or need help with your business Exit Plan, or thinking about selling your childcare business, give me a call at 336-617-3181. I am happy to help – all conversations confidential.