Despite bad debt being a common problem in many school-run childcare settings, the scale of the problem is often not known. Many Business Managers that I speak to have a sense that there are issues with bad debt, and they tend to be able to point to certain individual parents who have a history of problematic payments.
However, there is an additional element of bad debt which often sits below the surface, and, unless you know how to look for it, it can remain unreported for years on end. These occur when children attend, often unexpectedly, and there is a breakdown in the communication between club and office staff in terms of ensuring the relevant payment is taken. It is nobody’s fault, just an indication of how busy school life is.
It often comes as a surprise to School Business Managers that this is happening in their school; often, they don’t think this issue is relevant to them. But, there is a quick way to check, which is to compare Calculated and Reported income.
Compare your Reported Income for last year, with your Calculated Income. You can work out your Calculated Income by multiplying your average attendance across the year, by average session cost, by the number of days the club was open. In 90% of schools that we work with, there was a shortfall between Calculated Income (what you should be getting if everyone was paying for every session), and Reported Income.
To look at this in more depth, please have a look at another of our blogs.
Practical Steps to remove bad debt
Here are three practical steps that you can take to minimise (and hopefully) completely remove bad debt:
Step 1 – Ensure payment in advance
My counsel to you is to step back and review your payment terms with a fresh pair of eyes. Do they encourage parents to pay in advance? Indeed, do they require parents to pay in advance? If not, this is the key change you need to make. It is perfectly reasonable to ask for payment in advance – parents just need to be organised and changing to this approach will make a big difference.
Step 2 – Review your Ts & Cs
Very often we find that schools have created Ts & Cs, balancing their existing school IT systems, and the amount of time they can spare to run the childcare administration. More often than not, this will involve using the schools’ MIS, or a dedicated payment provider, neither of which are fit for purpose when taking payments for childcare.
Review your payment and booking Ts & Cs. The best way to ensure parents pay on time, every time, is to ask for monthly payment, in advance, for permanent bookings (those bookings which repeat on the same pattern, on a weekly basis), and to require ad-hoc bookings to be paid for at the time of booking.
If your systems do not allow for this, then your chances of completely removing bad debt are remote. However – this is something we can help you with, so do get in touch if you would like to find out more about our support.
Step 3 – Accept (and hold) parent credit on account
We have processed more than 7 million bookings over the years, and if we have learned one thing from this, it is that parents want the simplest payment administration possible. Many parents will have a surplus sat in their relevant Tax-Free Childcare or Childcare Voucher accounts, and would prefer to send this as one lump sum to the school, to be used for future bookings.
This approach has obvious advantages: it minimises the number of transactions you need to reconcile, it reduces the communication between the school and the parent, and it minimises the risk of bad debt. Simply offering this to your existing parent cohort may well have a significant effect on reducing your administration, and puts you in control of taking the relevant payments for parent’s bookings.
But – at the end of the day, all of this administration is a pain, and a drain on your time.
It can be made much easier by working with us. We completely remove bad debt by having hyper-focused and proactive systems and administrators in place to ensure you get every penny that is owed to you.
If you would like to find out more, please do get in touch.
Can We Help?
If you’d like to sense check your findings, or use our extensive experience to help you set your pricing, why don't you give us a call or drop us an email? We'd be delighted to help.
About Childcare Bookings
Childcare Bookings provide our school partners with a fully outsourced booking, payment and admin service, together with a booking system that is taking bookings for you 24/7 – and even your own dedicated administrator to support parents.
In addition, we provide an Operations Pack, including template T’s & C’s, a best-practice Club Operations Manual, policies and childcare-specific forms and procedures.
Why not get in touch to see if we can help you?
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About the Author
Dan McCaffrey is the Managing Director of Childcare Bookings for Schools. A former primary teacher and previous owner of Pioneer Childcare (the UK's 5th largest wraparound provider), he shares practical insights learned (the hard way!) from the front lines of school-run childcare.
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