SmartReads

If you’re suffering from slow payments, late payments and non-payments, the chances are your current invoice and payments system isn’t working as well as it could be. If this is the case, it could be time to develop a new structure. Change is always challenging, for everyone involved, so here’s how to implement things smoothly and keep everyone’s good will.

Your child care business provides an important community service. We all remember the panic when ABC Learning went into administration, as parents – many of them working full time – desperately needed to secure continued child care. Because of this, if your child care centre is struggling due to certain circumstances, there may be government help available. The Federal Government offers information and support to child care services, and this includes grants and financial assistance.

Avoiding late payments and bad debt in the first place is far better than getting stuck in a difficult situation. Creating a culture of prompt payment at your child care service will help avoid some of the issues. Bear in mind that you may be one of the lowest priorities for a family struggling financially, despite the important role you play in their life. After all, how can they go to work and earn an income if they don’t have child care? But the reality is that families tend to expect more time and understanding from a business such as a child care provider than from a bank or electricity provider.

Child care is an intensely customer-facing business and one built on trust. You are looking after people’s children, and you have extensive face-to-face contact with parents. This makes it all the more challenging when parents don’t pay. You still have to greet them each day in a friendly way, and discuss their child’s progress, while knowing that behind the scenes you’re having to escalate measures against them. No one wants to get to the stage of having bad debtors. You should of course do everything you can to avoid it. But at some point, you may have to call in your debts in a more formal way.

You’ve established that you have a slow payment problem at your child care service. While most of your parents pay eventually, a number of them pay so late that you’re struggling to pay your own bills. It feels like you’re always a step behind: you have just enough to pay your staff, then everything else has to wait until the fees finally trickle in. So how can you try and get paid faster? 

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.

Bad debts can run a business into the ground quicker than anything else. No one is immune, not even child care services: there’s currently around $1.2 billion of bad debt across Australia.

Bad debt is a three-pronged nightmare: 

1. The money you need isn’t there when you need it (to pay your own bills)
2. Chasing bad debt and pursuing legal action costs time and money
3. You may never recover the money you’re owed

All businesses suffer the problem of outstanding invoices. Late payments and non payments are a fact of life. There’s often a chain effect: where your customers can’t pay you because they haven’t been paid yet, and in turn you can’t pay your suppliers as a result.

These cash crunches can be deadly. Many good, viable businesses go broke because their customers couldn’t pay on time. So how do you know if your centre is behind the curve when it comes to outstanding invoices? How can you compare yourself against other centres to see how you are doing?

What you can do is try benchmarking. Benchmarking is nothing more complicated than having a consistent way to measure and something to compare it to.

Whether you run a "long day care" or not, your hours as a child care service operator are going to be extensive. It’s the same for any small business, because it’s all down to you, and you can’t afford to hire full time accountants and bookkeepers.