Nursery Management: Finance - Talking about money matters

Nobody needs to be told that a clear approach to fee payment is absolutely vital in these straitened times. However, payment can be a sensitive issue - particularly when fees are outstanding - and nurseries need to establish good communication links with parents to minimise problems.

According to NDNA's Business Performance Survey, carried out in November 2011, almost a third of nurseries (32 per cent) said parents were struggling with childcare costs and being late with payments. More than half (51 per cent) of nurseries also said that their occupancy had decreased in the past six months.

The survey asked nurseries about the most popular method of payment in their setting. Standing order and direct debit were the top two, but some parents had experienced seeing more parents using credit cards to pay. Almost a fifth of nurseries (19 per cent) reported an increase in parents using childcare vouchers.

A worrying trend is that some nurseries report having discovered that the parent has spent funds intended for childcare fees on other bills, such as utilities or car insurance. Part of the issue, of course, is that the nursery is a friendly, welcoming and caring place, rather than a faceless utility company threatening court action. Parents may naturally expect that this approach will be extended to them when fees are owed.

In our recent Business Performance survey, nurseries told us that 44 per cent of parents use standing order or direct debit to pay fees; 12 per cent pay using cheque; 10 per cent use debit card; 7 per cent use cash; and 3 per cent pay by credit card.

The best payment methods for nurseries tend to be standing order or direct debit. Using automated payment systems like this can help parents to budget and get into a routine with fee payment, and the nursery can feel more secure with receiving consistent and on-time payments.

Paying by cheque or cash can make it harder for nurseries to plan when they will receive payments, especially if parents are late in paying. Some nurseries have also seen an increase in parents using credit cards. This is a worrying trend as it suggests that the parents are struggling with their fees and may be building up debt and interest on the card that they cannot afford to pay back.

Nurseries could encourage parents to pay via standing order or direct debit by offering a small discount for it. It is also worth talking to parents who use other methods and explaining why it would be beneficial to you both for them to switch. This might also help you understand why they choose to pay with a credit card, and to strengthen lines of communication.

Nurseries can also help by thinking about the individual needs of each family and being flexible with payments. For example, if a parent gets paid weekly they may find it easier to pay fees weekly, and this should be facilitated by the nursery if possible.

WHEN FEES ARE UNPAID

Outstanding fees are a significant issue for nurseries. It is simply not sustainable to be owed hundreds or even thousands of pounds in fees when there are staff wages and nursery bills to be paid. Allowing parents to owe even just a few weeks of childcare fees can also be problematic for families, especially if there is no plan in place for paying the fees back.

Large amounts of outstanding fees can lead to a breakdown in the relationship between parents and nursery. If not addressed early on, the only way to claim fees back may be to take the parent to court, which may see the nursery being awarded such a small amount for repayments that it is ineffective. Most important of all, children who are settled and happy at nursery will lose out when their parent removes them from the setting.

So, how can nurseries be sensitive to potential difficulties but ensure they are paid? Effective policies and procedures in this area are essential from the moment that families join.

Nurseries should ensure they invoice all parents promptly, on the same day each month and with payment terms clearly visible. Terms and conditions should clearly state the nursery's policy on payment of fees, the date fees are due, and the timescale for withdrawing a place on the grounds of non-payment.

The policy can highlight that the setting will discuss how the family may be supported, such as by discussing repayment plans or exploring a different payment method. Taking a deposit that is refundable once the child leaves the nursery can also help to reduce exposure in situations where there is a payment issue.

As with any policy and procedure, effective implementation is crucial and it is important that all staff are aware of the processes they should follow to try to resolve the situation.

FURTHER INFORMATION

•  NDNA members can visit www.ndna.org.uk/policies to log in and download a free template parent contract which includes a section on collection of fees. NDNA's free legal advice line for members can also give advice regarding debt collection.

• For more information on the results of NDNA's Business Performance survey, go to www.ndna.org.uk/insight-report-2011