How to Get Parents to Pay You on Time?

Late payments and bad debts are two of the biggest challenges faced by small business across all sectors. According to a recent survey by Bacs, nearly a third of small-business owners in the UK end up paying their own suppliers late due to overdue invoices. Many businesses are forced to resort to bank overdrafts to settle their business bills and find themselves struggling to pay staff salaries because of the impact the slow payments have on their cash flow.

The pressure is further compounded for childcare businesses who largely rely on the goodwill of parents to pay them on time. However, with free nursery entitlement and other commercial pressures weighing down on the nursery sector, getting paid on time has become critically important for the survival of their business.

So, what can nurseries do to bring down late payments?

1. Set clear terms right at the outset

This might seem like a no-brainer, but many providers underestimate the need to set out clear payment timelines, notice periods and late-payment penalties in their payment-provider contract.

Remember, the contract is important not only to make the payment terms clear to parents but it can also serve as crucial evidence on what was agreed between you and the parents - if any legal disputes arise in the future.

If you accept cheques, make sure you include a fee for returned cheques or bounced payments and mention any subsequent payments will have to be paid in cash. Similarly, if you accept childcare vouchers, set a rule to ensure vouchers are paid in advance as it could take a few days for the funds to reach your account.

2. Automate your payment collection

Automating payment collection using direct debit is one of the most effective ways to bring down late payments and non-payment. According to the Bacs survey report, a combination of direct debit and good invoicing practices was cited as the reason by the majority of  SMEs (82%) who did not experience late payments.

As the invoice amounts are automatically deducted from the customers’ accounts on the due date, direct debit leaves little room for delay from the customer's end.

However, irrespective of how secure the system is, parents who are used to traditional payment methods may need some convincing to switch to direct debit. Our article on direct debit has some useful tips on how to encourage your customers to sign up for direct debit.

Now, if any of your existing customers (who pay using other payment methods) are late with their payments, make sure you take the opportunity to guide them gently to switch to direct debit. Point out to them that paying by direct debit can help them avoid late payments in the future and will make the payment process easier for them.

3. Be prompt to issue reminders

With most parents juggling busy work schedules and parenting, it is not unusual for many to miss invoices in the mail or forget a payment date. Sending out a reminder is sometimes all it takes to get them to make an immediate payment. A polite reminder by email or text message or a good old fashioned payment reminder sign at the entrance for your centre can do the job for you.

However, avoid sending out handwritten notes in the children’s folder as it can demonstrate a lack of professionalism on your part. Make sure you document all issued notices and retain a copy on file for future reference.

4. Keep accurate records of payment and attendance

Make it a priority to maintain accurate records of each child’s daily sign in-out times as well as the records of who paid you, when, how much, and by what payment method(s).

Retaining the records will not only help you keep on top of overdue payments, chase up late payments and flag repeat offenders, but it will also place you in a better position if you are ever forced to escalate an issue and turn to debt collection services to recover the unpaid fees.

With Cheqdin's childcare management software, you can issue invoices, collect direct debit, capture, record and keep track of payments, invoices and attendance details - all using a single platform. Interested to find out more? Get in touch with us for a free demo.

You might also like:

8 Reasons why preschools and after-school clubs should use direct debit?  >View article.

How to encourage parents to pay you by direct debit?  >View article.