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Reinforce Payment Deadlines


How to Reinforce Payment Deadlines for Childcare Tuition

Put away your brass knuckles, there’s a better way to collect outstanding childcare tuition. First and foremost, follow these two simple rules for tuition payment collections:

  1. Be consistent. The rules apply to everyone and by enforcing them consistently, you’re keeping it business. It’s not personal, it’s business.
  2. Be strict. Going the extra mile to be flexible and accommodating seems like the right thing to do sometimes, but it’s a great way to set yourself up to get burned.
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Create an Airtight Service Contract

So what’s the best way to ensure you are collecting fees on time and recovering outstanding balances when you’re not? The majority of childcare, preschool and aftercare professionals agree that communication is the key, and it starts at the very beginning with your service contract.

When parents enroll children in childcare, preschool, aftercare or K-12 programs they usually complete a myriad of paperwork – emergency contact information, medical information, photo permission forms – all the things you track as a childcare provider.

But the most critical piece of paperwork they’ll sign is your service contract, which outlines the services you will provide, as well as payment terms. When parents sign this contract, they are acknowledging and agreeing to those terms.

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That’s why it is so important to spell out the fees and policies for tuition payments and collections in your service contract. Make sure it includes the following:

  • The security deposit – Carefully explain when it is due, what it covers, when it will be returned, and what happens to it if there is an outstanding balance.
  • The late payment fee – How much is it and when will it be assessed? Is there a grace period? If so, how long is it?
  • The second late payment fee (and any more after that) – Some childcare, preschool or afterschool centers will end their service contract after a second or third late payment. If yours includes this policy, make sure it is clear.
  • When services will be suspended for non-payment – Most families who have a child in daycare, preschool, or aftercare need those services in order to work outside the home. Let them know early.
  • Collection efforts after the fact – Make parents aware that the legal or collections agency route is a possibility; no one wants a poor credit rating!

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What Would You Do?

If you’re in the childcare, preschool or aftercare business, chances are you’ve run into these four situations. Meet four parents who might be giving you a run for your money – literally. How would you handle them?

payment policies are like a childcare tuition safety net

10 Ways to Protect Yourself Against Out-of-Control Receivables

  1. Require a security deposit equal to one billing cycle for the services you’re providing. This way, if a family leaves without notice or has an outstanding balance, you can apply that security deposit to the account. It may not cover the whole thing, but it helps.
  2. Outline payment terms and actions you’ll take in your service contract. This way, you can always refer back to it when talking to parents and when sending notices. If you are considering engaging a third party to handle collections, this is critical to their efforts as well.
  3. Bill BEFORE services have been provided. Unlike other bills like cable or car payments, you can’t shut off or repossess the time invested and services provided after care has been given. Billing in advance protects you and your bottom line.
  4. Send those reminder notices as soon as the due date passes. The income from tuition and fees is what keeps your business running. Therefore, posting tuition, sending invoices, and reminding parents when bills are past due are critical.
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  6. Bounced checks? Assess the Returned Check Fee to the account immediately and send a notice that payment must be received in full – and in cash – by the end of the business day. Another option is to require enrollment in your automatic payments program, but keep the Returned Check Fee on the account. The bank isn’t going to waive what they charged you, and it is bad business to eat it.
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  8. Assess late payment fees on the day after any grace period ends. Sometimes it seems easier to give it an extra day so you can avoid the extra work applying late fees. Resist that urge, and be consistent with those fees every time.
  9. Develop a plan to handle late payment fee waiver requests. They’re inevitable. No one likes paying more for something they could have gotten for less, so be prepared with a set policy that empowers your staff and gives them guidelines for what to do next.
  10. Take swift, decisive action based on your service contract every time, and don’t hesitate to suspend services when it is warranted. If you don’t get paid, you can’t pay your bills, including payroll. If you can’t pay your teachers, they leave. When they leave, your business folds. So be strong and consistent when enough is enough.
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  12. Offer payment plans. This goes for families still in your program who are a little behind, as well as families who have moved on despite an outstanding balance. The most important thing here is to keep the lines of communication open to give yourself the best chance at getting paid.
  13. Make it clear that negative credit reporting and legal measures may be used to collect outstanding fees, but try to avoid that whenever possible. After all, what’s the goal of your collection efforts? Collecting money you are owed. And when you engage a collections agent or attorney to do your collecting for you, you’re essentially agreeing to only collect a fraction of what you are owed. Economically, it makes better sense to settle balances amicably.