Managing Childcare Subsidy Payments for Your Early Childhood Education Business

May 23, 2022

For millions of families, government assistance fills a critical need for childcare in the form of subsidy payments. As a childcare provider who accepts subsidy payments, you are probably well aware of the extra administrative and financial complications that childcare subsidies can present. In the following guide, we offer practical advice for managing childcare subsidy payments for your Early Childhood Education business. Read on to learn more.

Different Types of Childcare Financial Assistance

A variety of government programs offer financial support for childcare expenses to families who may qualify based on their household income or other criteria. Here are a few types, as outlined by

Government-Funded Childcare Financial Assistance – Given in the form of vouchers, certificates, or subsidies to low-income families who qualify; the federal government provides funding to states and local territories as they offer programs for families within their jurisdiction who need assistance. Families can check with their local government website for more information.

Head Start and Early Head Start Programs – These programs are specifically designed to support early learning and child development in children from birth to age 5 and are available at no cost to low-income families who qualify.

State-Funded Prekindergarten – These programs are specifically designed to support early learning and child development in children ages 3 to 5 as they prepare to enter kindergarten and are available at no cost to low-income families who qualify.

Military Childcare Financial Assistance – These programs help military families pay for childcare where they are stationed.

Native Hawaiian, Native Alaskan, and American Indian Programs – Many Tribes and Tribal organizations receive funding from the federal government to provide childcare financial assistance to Tribal families. In addition, there are many Head Start and Early Head Start programs that serve American Indian or Native Alaskan children. Also, there are programs dedicated to serving children of Indigenous People of Hawai’i and other Pacific Islands by offering financial support to qualifying families.

Government Tax Credits – This form of childcare financial assistance includes a variety of tax breaks for families who qualify, including the Child and Dependent Care Tax Credit, the Earned Income Tax Credit, and IRS Volunteer Income Tax Assistance.

In addition, childcare financial assistance may be offered in a variety of local contexts:

Local Assistance and Scholarships – Provided by nonprofit organizations or even childcare providers themselves in the form of tuition assistance and scholarships.

Sibling Discount – Offered by individual childcare providers who may serve multiple children within the same family.

Employer-Sponsored Dependent Care Flexible Spending Account – Some employers may offer a Flexible Spending Account that employees can contribute to specifically for childcare payments. In addition, employers may have partnerships with local childcare providers that allow them to offer a special discount on services to their employees.

College or University Childcare Assistance – Some higher learning institutions have an onsite early learning center that may offer discounted rates to students, faculty, and staff.

All of these forms of financial assistance for families in need help ensure that the need for childcare in the community is being met for all. As you have probably experienced firsthand, while subsidy programs provide great assistance to those who need them, they can also pose several challenges to childcare providers who accept them as a form of payment.

Challenges Posed by Childcare Subsidy Payments

Does your Early Childhood Education program accept childcare subsidy payments? If so, you may need to overcome the following obstacles:

  • Keeping track of family subsidy payments to figure out how much the parents owe every month and how much the subsidy owes
  • Keeping track of when parents make payments and when subsidy payments are made on their behalf
  • Managing all administrative paperwork related to family financial assistance programs
  • Keeping track of money owed on a monthly basis, adjusting the subsidy amount when necessary, and billing the parents the difference as needed
  • Managing student attendance and meal tracking

If you regularly see subsidy payments come through your childcare business, then you know it can become pretty overwhelming to stay on top of everything!

What’s the best way to manage childcare subsidy payments for your Early Childhood Education center?

How to Effectively Manage Childcare Subsidy Payments

One of the easiest ways to manage childcare subsidy payments is with childcare management software. A quality childcare management software program, such as Kangarootime, Procare, or Sandbox Software, will offer a built-in tool to help you manage subsidy payments. With childcare management software, you can accomplish the following:

  • Automate the subsidy billing process
  • Save time and eliminate manual work
  • Prevent gaps in care for children using subsidy payments with contract expiration notifications
  • Gain access to more accurate financial projections for your childcare business
  • Avoid revenue loss with the ability to track subsidy payments

Using childcare management software to help you stay on top of subsidy payments will save you hours of weekly administrative work and frustration for you and your childcare team, strengthen the relationships you have with families you serve, and reduce unnecessary missed payments that impact your bottom line.

Feeling overwhelmed by subsidy payments for your childcare business? Honest Buck Accounting can help. We specialize in professional accounting services for Early Childhood Education businesses. We can help you streamline your payment processing, optimize your business finances, and increase profitability. Schedule a call with us to learn more.

Share this article