In The Red – What Settings Should Do If Parents Are Late With Payments
Lorraine Jenkin offers some advice for early years practitioners on how to respond if parents fall behind in paying their fees…
When parents are choosing a nursery, they have many avenues of research to call upon – word of mouth, inspection reports, setting visits and online resources, to name but four. Unfortunately for nurseries, however, prospective parents don’t come with the same information trail… Every business that supplies a service can suffer from bad debts. The difficulty with a nursery debt is that you can’t withhold the debtor’s property – i.e. the child – until the bill is paid!
I have researched the difficulties faced by nurseries and found startling similarities. Firstly, many owners said that the reason they ran a nursery was because they enjoyed, and were good at, looking after children. That didn’t necessarily mean that they had good financial skills (their words not mine!), and they certainly weren’t skills that many felt fell naturally together.
Larger nurseries tended to fare better, because they had dedicated administrators with the skills required – but in smaller settings, the owners tended to deal with debts only when they’d dealt with everything else.
Be lucky, or get serious
The fact that so many parents become ‘friends’ with practitioners due to the nature of the service can also be a problem. It can feel difficult to swap from “Poor Billy’s teeth have been hurting” to, “Oh, and by the way, you owe me £500”.
At the end of a session it feels right to discuss the child, not administration. Then there’s the fact that because childcare is so expensive, debts can build very quickly. One deferred payment can easily mean that the next bill is for £1,000 or more, which can be unmanageable for many families. If you stop the service, the debtor’s ability to earn money to pay the debt can also be stopped, which can feel counter-productive. In addition, that child’s place in the nursery might not be able to be filled straight away; you’ll likely have the same costs but without any possibility of income, even if it’s going to arrive late.
Be aware, however, that these companies will want ‘fresh debts’, and are less likely to take on a debt if you have tried the Small Claims Court already.
Problem solving
Five ways to prevent late payments becoming a major issue…
• Keep impeccable records about attendance – squabbles over invoices can damage valuable relationships
• Keep notes about conversations, phone calls and emails regarding debt chasing – these will be invaluable to you if things progress
• Act fast, and don’t let debts build up
• Establish clear timelines and stick to them. If payments are expected on the 1st of the month, for example, phone on the 2nd, speak in person on the 5th, phone again on the 6th and 8th and write formally on the 10th to sort out a payment plan. Give parents copies of your payment policy, including the details that you will go to the Small Claims Court to retrieve debts after ‘X’ number of days, and that the service will be suspended after ‘Y’ number of days.
• In any payment plan, remember to include the fees that will be incurred if a child continues to attend nursery
Lorraine Jenkin is an author, journalist and blogger, a mother of three girls and has been involved in childcare for several years, including running the village playgroup, acting as a parent-governor and working as a play-assistant within a three-year-old provision; for more information, visit lorrainejenkin.blogspot.co.uk or follow @lorrainejenkin
And then even if you do suspend the service to the parent, you’re still going to have to spend time – and maybe money – on getting the debt paid. The ideal solution, therefore, is to never get into the situation in the first place. This means either having to be very lucky, or putting in place a robust financial policy and procedure that makes it clear to parents that if they’re struggling to pay their bills, it won’t be their nursery one that they default on…
Good practice
Many of the owners I spoke to said that they had learned from past mistakes, tightened up thier procedures and thus reduced problems. The more successful ones reported the following good-practice points:
1. Make sure parents are aware of the importance of paying on time when they sign up Show them the policy regarding what you will do if funds are late. Relate their payments to the staff wages and resources; make it personal.
2. Make payment easy On every invoice, give information about account details for BACS payments and who cheques are payable to; keep a receipt book on hand for cash payments.
3. Adopt a ‘late payment penalty’ or an ‘on-time incentive’ Make sure that you build both of these into the charges.
4. Formalise your billing and receipt processes Ideally, make use of formal emails and/or printed invoices in envelopes, rather than a handwritten scribbles from a duplicate book. Don’t do business via online chat services, texting or Facebook, even with friends.
5. Appoint a dedicated person to be in charge of billing Others can speak to parents about any child-related issues, but where possible, keep the billing person fresh for payments. It can easily – perhaps preferably – be someone outside the nursery environment who deals with the payments, so that staff can simply say, ‘X is dealing with it’, thus avoiding strains on what might otherwise be a precious relationship.
6. Know your clients If someone who never defaults forgets to sign a cheque, you won’t need to come down as heavily as you would for a parent who is regularly presenting problems.
7. Have a clear charging schedule Costs per day are simple, but parts thereof may need clarification. Regulars may have perks, but make the boundaries clear.
8. Try to hold a buffer within the setting’s bank account This is easier said than done, but will prevent that one bad debtor from seeing your bills going unpaid.
9. Remember that word gets around amongst parents If you stick to your guns, it’ll be a reminder to other parents for years to come!
Legal action
If you’ve exhausted all the other alternatives, taking a debtor to the Small Claims Court might feel daunting, but is actually a straightforward procedure.
You must write to your debtor giving a minimum of 14 days’ notice. You should state the time period, and the fact that interest, court fees and the cost of legal advice will be charged for, according to County Court rules and procedures. Also state that out-of-pocket costs, such as travel and loss of earnings will be claimed. It’s worth knowing that many people will settle up pretty quickly if they receive this statement of intent…
Filing a Small Claim can be done online at a reasonable cost (£60 for £500–£1,000). You simply include a statement of your case and upload any supporting documents, such as the initial contract and your records of previous attempts to resolve the dispute to date. Judgement is relatively quick. Anyone not behaving in accordance with a directive from the Court will be in breach and you can call upon bailiffs.
It’s also possible to ‘sell’ the debt to a debt collector, but they can typically take 30–50% of the amount owed, potentially making the value of this option quite limited. However, you may appreciate the peace of mind that this provides, saving your own time and worry, as well the satisfaction of knowing the debtor will be brought to account by someone in some way.
Be aware, however, that these companies will want ‘fresh debts’, and are less likely to take on a debt if you have tried the Small Claims Court already.
Problem solving
Five ways to prevent late payments becoming a major issue…
• Keep impeccable records about attendance – squabbles over invoices can damage valuable relationships
• Keep notes about conversations, phone calls and emails regarding debt chasing – these will be invaluable to you if things progress
• Act fast, and don’t let debts build up
• Establish clear timelines and stick to them. If payments are expected on the 1st of the month, for example, phone on the 2nd, speak in person on the 5th, phone again on the 6th and 8th and write formally on the 10th to sort out a payment plan. Give parents copies of your payment policy, including the details that you will go to the Small Claims Court to retrieve debts after ‘X’ number of days, and that the service will be suspended after ‘Y’ number of days.
• In any payment plan, remember to include the fees that will be incurred if a child continues to attend nursery
Lorraine Jenkin is an author, journalist and blogger, a mother of three girls and has been involved in childcare for several years, including running the village playgroup, acting as a parent-governor and working as a play-assistant within a three-year-old provision; for more information, visit lorrainejenkin.blogspot.co.uk or follow @lorrainejenkin
