Childcare, preschool, and school-age programs are starting to turn a corner. It hasn’t been easy.
As the panic around COVID-19 ramped up, you saw attendance diminish to a trickle as non-essential businesses were forced to close, parents were furloughed, and schools all over the nation shut down. With that reduced attendance came reduced tuition income for your organization.
Now, as government-mandated restrictions have begun to ease, parents are slowly but surely heading back to work. That said, that protracted pause in paychecks from March through May may affect their ability to pay for childcare, preschool, and summer programming with the more traditional payment methods of cash and check.
For some families, those costs are going to need to be placed on credit cards while their income streams stabilize and they can catch up from the financial effects of COVID-19. That small plastic rectangle is their lifeline to normalcy. For some families, the only way they will be able to afford your services right now is to be able to pay by credit card so they can pay for them later.
You know that expression, “robbing Peter to pay Paul?” Well, that’s what it feels like right now for many parents, and in this scenario, you get to be Paul.
4 Myths About Accepting Credit Card Payments That Hold You Back
Myth #1: Parents don’t mind paying tuition in cash
Parents can’t always afford to pay you with cash, and right now, you can’t afford to deny their children a place in your program until they can write you a check like the good old days. Those days are over, and when you don’t offer parents the very simple technology of credit card payments as an alternative, you’re basically sending them away to an organization that does.
In addition, today’s parents love the convenience of shopping online, placing orders through apps on their phones, and paying bills electronically. They’re busy, and anything that makes making payments easy while your tuition bill is in the forefront of their minds is going to help you get paid more. It is the way they expect to do business these days, and doing business with your business is no exception.
Myth #2: Accepting credit cards and other electronic payments is too expensive
There is a cost associated with processing payments by credit card, that much is true. That said, there are ways you can make it affordable, both for your organization and for the parents. You just need to understand what the costs are and where you can make some of that back.
About Transaction Fees
These are fees charged whenever you process a payment. Most fees are set up to charge a small flat fee per transaction, plus a percentage of the transaction total. This is fairly standard when it comes to electronic payments, but it can differ from merchant to merchant and from credit card type to credit card type. For example, transaction fees for credit card payments using Visa and Mastercard are usually less expensive than Discover and AMEX.
Transaction fees can also vary by payment type. Credit card payments are more expensive than ACH payments because part of those transaction fees pay the card issuer for their services. ACH payments transfer money from bank account to bank account, so there is no card conglomerate in the middle.
Application & Setup Fees
If a merchant account service tries to charge you to set up a payment account so you can start accepting credit card payments, walk away. There are other payment account providers, like EZ Payment Services, that won’t charge an application or startup fee that also integrate with a management system for your childcare or preschool program.
Monthly Maintenance Fees
These flat fees can be tricky, because if you aren’t using your gateway, why would you pay to maintain it, and if you are, aren’t you already paying to use it through the transaction fees? Understand the real costs of processing by factoring in all the extras to make sure you’re budgeting correctly and not being overcharged.
Offsetting the Cost of Electronic Payments
By carefully choosing the right merchant account provider and offsetting some of the transaction costs, you can absolutely cut your share of the transaction fees to little, if not all, of the expense. You do this through careful research to ensure you’re getting the best processing rates, and by charging convenience fees when parents pay electronically.
Convenience fees are common, whether you’re paying your electric bill online or paying childcare tuition. Many organizations choose to “bake in” anticipated convenience fees when setting tuition each year so parents don’t feel the extra pinch, but some choose to charge parents at the point of sale – a per transaction cost of about 3% or so. This can be accomplished easily by setting the fee in your management system.
To keep parents from balking at the additional cost and get them paying on time every time, consider waiving transaction fees for anyone who agrees to your automatic payments program. That gives you control over when you get paid and a steady, guaranteed cash flow you can count on.
Myth #3: There’s too much complicated equipment to set up
You don’t need any special equipment at all if you’re using a childcare management system that has an integrated payments suite built in. In fact, many childcare and preschool providers rely heavily on management software that offers multiple payment options, from phoning in a credit card number that staff can enter into the system to online payment portals to mobile payment options.
There’s no additional equipment to hook up, and the transactions are secure if your management system and merchant account provider are PCI compliant. In fact, when you offer an online payment option, you can collect tuition without lifting a finger.
Myth #4: It’s just easier this way
Ask yourself, “Easier for who?” I bet the list of beneficiaries is short.
It isn’t easier for your billing staff. We know this because we’ve conducted numerous case studies that have all led to the same conclusion, and the numbers don’t lie. Accepting electronic payments is easy, and it saves time – lots of time.
Just ask Columbus Montessori, who cut the time they spend on their AR routine by 80% when they switched to electronic billing and payments, or Issaquah School District, who reduced their billing hours by 91%.
It’s also a fact that, when you accept electronic payments, you can reduce the number of late payments by up to 33%. That’s a third of the time your staff spends chasing parents for late payments, applying late fees, and having endless discussions about late fees.
The amount you end up writing off each year as uncollectible balances? That can be reduced by nearly 40%, which is a number your accountant and your Board of Directors will love even more.
It isn’t easier for parents. Stopping at the ATM or waiting in line at the bank on the way to pick-up isn’t easier for parents than paying by credit card, whether it’s at your center as your staff enters the payment information or through an online payment portal like EZCare’s Parent Portal.
Think about it. Cash and checks are a waiting game for you and for them. Waiting for a staff member to be free to make a payment. Waiting for a receipt. Forgetting the checkbook. Forgetting to order new checks. Waiting for new checks to come. Waiting for check payments to clear.
With the ability to pay online, parents can login, view account balances, and make payments whenever you send an invoice email, whether they are on the train commuting to work or standing in line at the grocery store. That’s a convenience they’ll be willing to pay for.
How Electronic Payments Help Fit Your Contactless Plans
You really can collect tuition without lifting a finger by providing parents with options that are easy, convenient, and comfortable.
- Electronic payments by phone – For families who might not trust entering credit card information online, calling in to a staff member to authorize a payment by phone is a great way to get them on board with paying electronically and get them out of the habit of coming into your facility for the weekly routine of cash payments and paper receipts.
- Online payments – Give parents an access point to view account information, enter payment data, and make payments, whether it is by credit card or ACH. This online option provides parents with the convenience of electronic payments and the control of when they pay, how much they pay, and with which credit card. That is going to matter in the coming months.
- Mobile payments – This is the definition of the technology today’s on-the-go parents need because it can go with you anywhere. Payments in the palm of your hand, literally, are the future, and when you can send parents a push notification to alert them when an invoice is waiting, you’re accommodating the way they expect to be able to pay.
Right now, many parents are just easing back to work after weeks or months of lay-offs and worry. They’re happy to be back generating income for their families, but catching up on all those bills is going to take some time.
With cash flows a bit tighter and priorities shift to putting food on the table, a roof overhead, and keeping the lights on, childcare centers can help families afford the child care they need to get back to work. To do that, accepting credit card payments is a must.