Daycare Accounting in Canada: What You Need to Know in 2025

Running a daycare is a labor of love. You’re shaping little minds, creating safe spaces for kids to grow, and giving parents peace of mind while they work. But let’s be real—behind the finger painting and nap schedules, a lot of paperwork, budgeting, and financial planning needs to happen. That’s where solid accounting comes in.

If you’re running a daycare in Canada, especially in Ontario or Quebec, there are some key accounting rules and funding programs you need to know—like CWELCC and cost-based accounting. Let’s break it down in a way that makes sense.

Why Daycare Accounting Matters More Than Ever

Between inflation, government subsidies, and rising operational costs, 2025 is shaping up to be a complex year for childcare providers. Keeping your books in order isn’t just about tax season—it’s about staying profitable, compliant, and making sure you’re maximizing the funding available to you.

So, how do you stay on top of it all? It starts with understanding your numbers and making smart financial decisions.

The CWELCC Program & Cost-Based Accounting in Ontario

If you run a daycare in Ontario, you’re likely part of the Canada-Wide Early Learning and Child Care (CWELCC) system. The goal? Making child care more affordable by capping parent fees at $10/day by 2026. Sounds great, right? But from an accounting perspective, it’s a whole new world.

CWELCC funding is based on cost-based accounting, meaning the government reimburses daycare operators based on their actual allowable costs. Unlike traditional profit-driven accounting, this system requires you to track every single dollar spent—on staff wages, rent, supplies, training, and more—to ensure your funding aligns with your actual expenses.

Key tips for managing your daycare finances under CWELCC:

• Keep detailed records: Every eligible expense should be meticulously documented. The government requires transparency, and missing documentation could mean funding delays or reductions.
• Separate accounts for funding and operations: If possible, keep your CWELCC funds in a separate account from your regular revenue to track usage clearly.
• Understand staff wage rules: CWELCC has minimum wage and compensation requirements for staff. Make sure your payroll aligns with these rules to avoid compliance issues.
• Plan for audits: Regular financial audits are part of the deal. Having organized records will make these stress-free.

Daycare Accounting in Quebec: Different Rules, Same Challenges

Quebec has a long-established system of subsidized childcare, where CPEs (Centres de la Petite Enfance) and private subsidized daycares receive funding to keep fees low for parents. Unlike CWELCC, where the government sets reimbursement rates based on actual expenses, Quebec uses a mix of subsidies and parental contributions.

Here’s what matters for Quebec daycare accounting:

• Monthly government remittances: Your daycare will receive a set subsidy amount per child. Managing cash flow effectively means ensuring you always have enough to cover salaries, rent, and operational expenses before those payments arrive.
• Tax compliance: Private daycares may charge additional fees for extra services (e.g., specialty programs), but these must be handled carefully to comply with tax laws.
• Harmonizing with federal grants: If you offer services outside the core subsidy model, like extended hours or special programs, you may be eligible for federal business grants. Keeping track of these additional revenue streams is key.

General Accounting Tips for Canadian Daycare Owners

Good accounting habits make all the difference regardless of where you operate in Canada. Here are some things you should be doing right now:

1. Use Cloud Accounting Software
   Systems like Zoho Books, Xero, or QuickBooks can automate invoices, track expenses, and generate reports. Plus, they help you stay compliant with tax rules.
2. Track Payroll & Benefits Accurately
   Incorrect payroll accounting can lead to expensive mistakes, whether it’s sick leave, stat holidays, or staff bonuses. If you’re using CWELCC funding, wages must align with the program’s requirements.
3. Set Aside Taxes
   Even if you get subsidies, your daycare will still have tax obligations. GST/HST in Canada or QST in Quebec must be properly accounted for, and missing payments can lead to hefty fines.
4. Plan for Unexpected Expenses
   The cost of daycare supplies, rent, and utilities fluctuates. Set up a rainy-day fund to handle unexpected price hikes.
5. Consult a Professional Accountant
   This might be the best tip of all. If numbers aren’t your thing, working with an accountant specializing in daycare businesses can save you time, stress, and money in the long run.

Looking Ahead: What’s Changing in 2025?

• More audits for CWELCC daycares: With the program expanding, expect more compliance checks. Staying organized now will save you headaches later.
• Increased wages for ECE staff: New regulations are likely to promote better pay for educators, raising payroll costs. Budget accordingly.
• Tech-driven accounting tools: More providers are using cloud bookkeeping to track subsidies, manage expenses, and ensure compliance.

Let’s Chat About Your Daycare’s Finances

Accounting may not be as fun as planning storytime or crafting, but it’s the foundation of a successful, stress-free daycare business. If you need help understanding CWELCC, managing your books, or just making sure you’re not leaving money on the table, let’s talk.

At Claritel, we specialize in daycare accounting for businesses across Ontario, Quebec, and beyond. We offer everything from one-time consultations to full-service bookkeeping. Let’s make sure your daycare’s finances are as strong as the care you provide.

Book a free consultation today—your future self will thank you!