Collection problems can be sorted into two primary types. The first is collecting from private pay clients, and the second is collecting various subsidy funds from federal, state or local government.
PRIVATE PAY CLIENTS (From 100% to Subsidy Differentials):
Private pay clients are oftentimes like children who are simply testing boundaries. Operating in this mentality, the client will continue to take from you for as long as you will allow it. It is very important to set the boundaries (payment policy) when registering the parent’s child or children. I can’t count the number of times that a childcare company officer or private school owner has told me about a parent that can’t pay weekly tuition, but she drives a Lexus and she always has manicured nails. There will always be a reason that this parent can’t pay their bill, and the more in arrears the parent becomes the less likely it is that you will ever recover the money owed to your company.
When the outstanding bill becomes too big to pay in the parent’s eyes and you ask for the money owed to you, the parent simply stops coming to your center and moves on to the next center or school. Now you have to make the decision to pursue the parent through the legal system (typically small claims court), continuing calling their cell only to be ignored or forget the whole thing. None of these options are good as they are all time consuming and an expensive use of time that you could use for more productive activities like enrolling children with paying parents. Remember, while you are generously donating free child care and education for the betterment of this parent’s child, you still have to pay your bills–teachers, electricity, food…etc.
The most common collection policy used in professional childcare centers and schools is as follows:
1. Tuition is due when the parent drops-off their child on Monday.
2. If tuition is not paid by Friday of the same week, then the parent is not allowed to bring their child back until all tuitions are paid in full as defined in #1 above.
It’s that simple. This structure is sometimes adjusted for a two week period if you are in an area where parents have very little disposable income and get paid every two weeks. However, I have never heard of a parent that can’t make the weekly deadline when he or she decides to make the deadline. For clarity, I come from a place below the poverty line. It can be done if the parent cares enough.
If your collection policy is considerably more lenient than the one described above, then you may be wondering how to implement a new and stricter policy. As with any policy, it’s always best in writing and preferably delivered so the parent can review it without the pressure responding immediately. Hence, a letter in a sealed envelope works well. Ideally, the letter will also include other news about the center. Remember, a policy is only as good as its execution so you’ll want to be sure that your staff follows through and doesn’t fall back into the old policy ways.
GOVERNMENT SUBSIDY PAYMENTS (GSP):
The owners, executives, shareholders and directors of our industry do not write policy for GSP. From the Federal Food Program to Title 20 to NACCRRA payments, we follow policy. Following policy carefully and quickly can improve your collection times. A few things that help our industry entrepreneurs are as follows:
1. Make friends with your contact person in the government entity that works with you. Whether it is face-to-face, by phone or email, make yourself standout.
2. Part of making friends with your contact means making their job as easy as possible. That means that when paperwork is due, your paperwork is perfect and it’s in the contacts hand the first minute you are allowed to submit it. You want to be seen as their easy school or easy center.
3. Ask questions and give your contact the opportunity to help you learn through his or her experience. The key to working well in any system is to understand the details of that system.
This industry is filled with good people. Unfortunately, some people try to take advantage of good people. You provide an incredibly valuable service for your parents and their children. A service that is likely more valuable than a parent realizes on any given day. A child’s conditioning for a lifetime of education and success starts with the desire and ability to learn. There is no better investment for a caring parent than giving their child the ability to learn.
(Legal Disclaimer: Always consult the proper professionals before taking action. By and before the use of the information provided herein, reader agrees that BFS® is not responsible for viewer’s actions related to said information.)