The single most critical element to the survival of a childcare business is billing. Let’s look at fees your childcare business needs, and some others you may want to consider for your organization:
Security Deposit – Set your security deposit so that you can offset one cycle of billing. If you bill weekly for full-time daycare or aftercare, the security deposit should equal one week of tuition for those services. If you charge monthly for preschool or afterschool activities, require a deposit equal to one month.
This protects you and your business in two ways:
- It deters no-shows who register and then never attend. In the instance of a no-show, you have every right to keep a security deposit. After all, that child has taken up a spot you thought was filled, and you’ve planned for that income in your budget. If you require a security deposit, parents feel like they have made an investment, and they are less likely to walk away from money they’ve already spent. If the child doesn’t attend, at least you’ll have a billing cycle’s worth of income while you attempt to fill that spot with another child.
- Childcare security deposits can also help offset the risk of losing income from services you’ve already provided when parents don’t pay and then disappear for good. You may take a hit from the empty spot for a short time, but you’ll have the cash in hand for the time the child was in your program.
Convenience Fees – When you process childcare tuition or other payments electronically, whether online or by mobile, your business incurs a charge for each transaction. Those transaction processing fees can be offset by adding convenience fees.
This means that parents who take advantage of the accessibility and ease of electronic payments are paying for that convenience. A convenience fee is a small percentage (typically about 3%) on top of what they are paying you. This popular practice makes electronic processing something you can afford.
Note: It’s important to check your state laws regarding convenience fees. Nearly every state requires that convenience fees be disclosed and on display at the point where payment is made, but some states don’t allow fees for certain payment types. For example, you may not be able to charge a convenience fee on a credit card payment processed by a staff member on site, but you can charge a fee if a parent chooses to pay online through a mobile app or parent portal.
Annual Registration/ Enrollment Fee – How do you know how many students are returning to your program each year and how many spots you need to fill? By charging an annual program registration fee, you’ll know exactly who is committed to returning next year and who is moving on.
This makes it easy to plan in advance when it comes to your budget and any marketing efforts you’ll undertake to fill those empty spots and replace that income. Start early by offering a tiered enrollment fee structure, so folks who register early pay an early-bird rate, and families who miss that deadline pay a slightly higher fee. The first step to any good enrollment strategy is to get returning families on board first.
Prepare for the wear and tear
Your childcare program’s annual budget usually dictates the per-child technology fee. Calculate this fee by taking your electronic equipment the children use (think tablets, laptops, desktops, smartboards, etc.), and factoring depreciation, maintenance costs, and planned purchases of new equipment for the year. From that figure, subtract any grant money or donations earmarked for technology, then divide that number across the number of students.
Ensure your applicants intend to attend
Want to make sure the people applying for a spot in your program are serious about attending? Charge an application fee. Anyone who is just “window shopping” and not serious about your program won’t waste the money or your time processing the application. Think of it as an administrative fee for the time spent reviewing each application and entering data from the accepted students and their families and apply it to the first tuition invoice once they’ve attended.
Give teachers the supplies they will need
Teachers need supplies for the activities they plan, and too often, we see them at the craft store or the teacher supply store spending their own money on the things they need to make those activities and projects special. With the average pay for childcare workers hovering in the mid-$20k range, they often don’t have the disposable income to donate to supply costs for your organization.
Collect teachers’ wish lists for supplies before the new school year, then research the costs and divide that amount among the children in your program. From the money collected through the supply fee, you can present each teacher with a budget and keep an account from which they can draw for reimbursements (up to the budgeted amount per month or for the year). If your math is right, teachers should have everything they need.
Cover the cost of field trips, projects, and more
If you know in advance how many field trips children from various classes will be taking and how much they cost, consider including this in your program’s tuition and fees from the very beginning so you’re not chasing down families for yet another payment. Parents will appreciate having to remember one less thing, and your staff will like the time they save collecting one-time fees.
Key Fob/ Swipe Card Fee
Stop replacing expensive fobs
Key Fob/ Swipe Card Fee
If your organization provides parents with security fobs or swipe cards for access to your facility, you know how costly it can be to order new ones. You can offset your costs and make sure parents keep track of them by refunding the amount of the fob to parents once they’re returned. Some centers provide each family with one fob, but they can purchase a second for a small fee. After that, replacements are at their expense, not yours.
Keep bellies full on a healthy bank account
This is one that is easy to forget, but it’s expensive if you do! If your childcare cetner serves lunch, consider this fee a must-have to offset the costs of the meals and dining utensils. Just like other childcare fees, there are many ways to structure your lunch program charges. Consider offering families a discount for pre-payment of lunch fees for longer periods of time; this can give you more budget overhead and parents are happy to pay less frequently.
Here are some policies every organization should have in place before the first child walks through the door:
Your staff doesn’t work for free, and when they stay late because a parent is late for pickup, you have to pay them extra. That extra payroll can be a budget-buster, so you need to charge parents in a way that inspires them to always be on time. Outline this policy on your website, in your handbook, and post it loud and proud in a prominent place in your center so there are no misunderstandings.
Late payment fees are ones that will elicit the most pushback from parents after they’ve been assessed, but you need to get paid on time. Make it clear to parents in your handbook, on your website and on every invoice exactly what the deadline is and the penalty for missing it. As with any policy, your late payment policy is only as strong as the way you enforce it, so the stricter, the better.
If you can offer parents the ability to drop off a child on a day that isn’t part of their normal schedules (think jury duty or something similarly inconvenient), you should be charging for that convenience. After all, this requires you to have more childcare staff on hand or on call to make sure you are always meeting state ratio requirements.
When a parent bounces a check, that charge from the bank hits your account. That is an unbudgeted expense for your business. In your returned check policy, make sure you outline a fee that offsets the charge from your bank and accounts for the administrative time that your staff spent recording the payment and the return. Consider a policy that requires the make-up payment to be made in cash immediately.
When issuing refunds, there should always be a waiting period, particularly when it comes to checks and ACH payments. This is because of the way banks process checks and ACH, and how funds may appear in your account initially, but then are removed once a transaction fails. A good rule of thumb here is to enforce a waiting period of 7-10 days to ensure funds have cleared before issuing any refund. For charges other than tuition, like registration fees, consider holding back an administrative charge for staff time spent processing the registration form, getting paperwork together, and entering data.
If you’re processing electronic payments, that’s great! That means you’re accommodating the way today’s parents like to pay bills. That said, transaction processing fees are real, and if you’re absorbing all of them, it can be tough for smaller centers to afford. Consider offsetting some of those transaction processing fees with convenience fees, specifically online payments made by credit card.
Pro tip: You can also use this policy to incentivize parents to enroll in your automatic payments program using ACH, a much less expensive way to collect electronic payments. This has loads of other benefits to your program – check them out!
When you categorize your billing into “buckets,” it’s easy to track where you’re making your money – and what’s costing you. This type of financial reporting is essential when performing monthly budget comparisons to ensure your income is on track with the projections in your budget. That way, you’ll know right away whether you need to cut expenses to balance your budget and keep your business operating in the black. Try these basic billing categories for your childcare program:
|Full-Time Daycare||Registration||Late Pickup||Referral Credit|
|Part-Time Daycare||Activity Fee||Late Payment||Sibling Credit|
|Preschool||Supply Fee||Out-of-Contract||Employee Credit|
|Beforecare||Technology Fee||Returned Check||Tuition Discount|
When it comes to billing and payments in the childcare business, communication is key. Making sure your policies are documented and accessible to parents will go a long way when you have to enforce them and charge the fees associated with them.
Be upfront about what you charge. Today’s parents want to understand what they are paying for and why, so be clear about all of your fees by providing a list of them to families and discussing them prior to enrollment. You can also include this information as part of orientation paperwork or an important page on your organization’s website.
These billing best practices can take a new childcare business from beginner to winner and keep an established program going and growing. Be sure to check out the links for more great resources!