Building financial relationships

It's best practice to have a separate checking account for business use. Your business checking account is the account where all your business expenses are taken out of and where all your business income is deposited into. Keeping all your business transactions in one place helps streamline your record-keeping process.  

Consider a separate savings account just for your business. Ideally, your business will regularly allocate some money to savings, so it has its own reserve of emergency funds. The best savings accounts have no fees and no or small minimum amounts needed to open an account. 

Even if you enjoy your experience with the bank that you currently use for personal reasons, research other banking options that may be more beneficial for your business use. 

The benefits of large, national banks are that they have user-friendly, efficient online banking software, both via web and on a mobile app. They probably also have extended customer service hours and more ATMs or branch locations. It's unlikely you'll receive free, personalized recommendations for your financial situation from a national, corporate bank. That one-on-one attention is usually best received at a local bank.  

Some individuals and businesses prefer to use credit unions instead of banks. Credit unions are nonprofits, where banks are for-profit corporations. This means that the financial institution can channel more of its profit into beneficial cost savings for account holders. This could mean that you'll generate higher interest on your account deposits or pay lower fees if you mistakenly overdraw your account.  

Many credit unions offer expanded assistance for small businesses. Sometimes, micro businesses (defined as a business with fewer than ten employees) are excluded from certain services at banks that are available for larger businesses, such as short-term, emergency financing. Credit unions may offer specialized services for micro businesses that are unavailable for those same businesses at banks.

You may want to have access to a line of credit so your business can stay afloat if an unexpected cash flow shortfall happens. When you're researching the financial institution that's best for you, look for short-term credit options. If you need a small loan tomorrow, how much money could you borrow, what rate of interest would you pay, and how quickly would you need to pay it back?  

If you're a micro business, or a small business without a long history of ownership, a credit union may have more options for you than a large bank.  

Business credit cards are another option. Credit lines come with a high interest rate but offer a useful lifeline in times of unexpected hardship. Consider opening a business credit card that will help your business generate rewards, like cash back. Remember that credit cards are intended to help your financial situation, not harm it, and high-interest debt is harmful. Business credit cards should be one of your last options, but they can be an important tool for business survival if you experience unexpected circumstances.  

You may be doing your own financials. If you're leveraging tools like a basic bookkeeping system and following good record-keeping, this might be working well for you. 

As your child care program grows, having a bookkeeper to manage your financial records can be critical to keeping your business’s financials on track. It allows you to focus more of your time managing the business and less time handling financials.

With time, resources, and patience, most sole proprietors can file their own annual taxes. If you contract with a bookkeeper, they may be able to file your taxes for you or with you, depending on their qualifications or you might want to seek out a professional tax preparer to file your taxes for you.  

A qualified, reliable tax preparer with knowledge about child care business taxes can be difficult to find. Child care businesses are a niche in tax law that can be understudied by accountants. The first step is to check with your network of child care providers to see who they use. Work with preparers who are willing to learn about child care business taxes so they can offer you the best service possible.  

Before you start looking for a tax preparer, decide how much you are willing and able to pay for your annual return. Tax preparation services can range from $100 to $1000 depending on the size of your small business and who you choose.  A high-quality tax preparer can help you to mitigate risk and maximize on your annual return. A tax preparer who is underinformed about child care businesses (or a poorer quality tax preparer in general) could put your business at risk of a costly audit or lead you to lose out on returns from deductions you can claim. 

Insurance agencies work with many different insurance companies. Insurance agents will find the cost of different policies with different agencies and offer you the best price for your insurance needs. An independent insurance company can only offer its own products.

The biggest benefit of using an insurance agency is saving time and money. As a small business owner, working with insurance agencies lets you organize your business and personal insurance policies and make sure you're getting the best, most affordable coverage for your needs. Many insurance agencies don't charge fees to the customer, but some do.

Child care businesses have many liability risks. It's beneficial to work with a knowledgeable insurance provider who can connect you to the right insurance products for your business. Finding a well-informed, no-fee insurance agent who offers many different insurance products will provide a lot of financial security and peace of mind, especially for home-based sole owners.

If you have a large, profitable child care business, you might want to hire a financial planner. A financial planner helps you set financial goals, such as paying off debt, saving for retirement or college, or getting insurance. They'll look at your personal income, debt, and savings. They'll also help you stay on track to reach your goals and adjust your goals as your life changes, such as when you have a baby or get ready to retire.

Disclaimer 

The information contained here is for educational purposes only and is not intended to constitute legal, tax, or financial advice.