With your child care service running on tight margins, you can’t afford to let payments lapse and come in weeks or months late. It’s very important that parents realise this, so you need to create a policy for slow payers.
If you’re the business owner and sole or primary decision maker, you can do what you want in terms of introducing a policy. But if you have a management committee or there are other decision makers on board, you’ll first need to win their support. Doing so should be fairly easy if you set the scene for them.
Step 1: Make a case for having a policy on slow payers
If you’ve already created documents such as an Aged Debtor’s report, and have a benchmark for comparison, you have most of the information you need to explain why you need a policy.
Be sure to highlight the very serious consequences of not getting paid, as well as the benefit of being paid early. To do this, create a list of all your outgoings and costs, both ongoing and ad hoc or emergency:
1. Ongoing costs
- Staff salaries
- Utilities
- Rent
- Food
- Cleaning
- Play materials
- Licenses
2. Ad hoc/Emergency
- Repairs
- Renovation
- Expansion
- Staff training
- Investment in new toys
If your monthly incomings – the amount of fees you’re collecting – doesn’t cover at least the first, you’re already in serious trouble. Make it clear to the committee, calmly and firmly, that unless people pay more quickly, your centre cannot pay its own bills on time.
Step 2: Agree together on the settings
Once you’ve won everyone’s support for having a policy on slow payers, you need to decide what it’s going to be. What will your actions be for debts over 90 days and for debts that need to be written off? When will it become necessary to expel the child?
You might choose to have a sliding scale, similar to your pick up fees.
60 days late – 1% penalty surcharge
90 days late – 5% penalty surcharge
120 days late – child’s place removed, debt collection process in place
All this depends on how much leeway your centre has. If your rent and other costs are particularly high, you have no choice but to set stricter terms. You can't continue to provide a service for long running at a loss and just breaking even leaves no room to cope with unplanned events.
If there’s resistance to introducing a late payment policy, consider whether you already have a late pick up policy. It’s rare to find a child care organisation that doesn’t. Parents are used to the idea of penalties for late pick up, and as such most respect the policy and change their behaviour to avoid fines. This is a help argument to help you explain to your committee why a late policy is both reasonable and necessary.
If chasing parents for payments really isn't your thing then consider getting outside help rather than letting it slide. Having support in this area can reduce headaches and pay for itself and a professional outfit will work within your policy guidelines.
While it can be hard to meet and greet parents at the door and then have to send the same friendly faces final demands, it’s a fact of business life. Being pleasant and personable in business doesn’t mean being a pushover. Your plumber doesn’t waive your bill just because you had a friendly chat with him, and parents can’t expect you to either.
For more tips on how to be more effective and efficient, download our free ebook ‘Child care services: Getting smart with fee payments’ by clicking the button below.
