Work Matters: Finance
Wednesday, January 23, 2008
Lynn Bryden is business and finance support officer at Sure Start Strategic Partnership Tyne & Wear (www.northtyneside.gov.uk).
Economic forecasts for 2008 look gloomy and it's important for nurseries to avoid bad debts.
Preventative measures
The easiest way to ensure that you are paid on time is to request fees in advance. If you have taken the business decision not to do this, there are several steps you can take to minimise risk:
- Credit-check potential customers. For a small cost a status report can be obtained from a credit reference agency.
- Ask for a deposit. The amount can be determined by you, i.e. a percentage of the month's fees, and can be offset against the parent's final payment.
- Include payment terms in the contract. Clearly written terms are essential and should state the action you will take to recover money owed and at what stage a child's place will be terminated.
How to recover funds
If you find that debt collection is a problem then it's important to act quickly, sending a clear message to parents. The best course of action may differ according to circumstance. Business Link (www.businesslink.gov.uk) has an interactive tool outlining the most appropriate options available, such as:
- Write to your debtor as a first step. State how much they owe, the service provided, and when you expect the debt to be paid.
- Issue a solicitor's letter. A formal letter threatening court action can produce quick results. For help in choosing a solicitor experienced in debt collection, visit www.lawsociety.org.uk.
- Consider using a debt collection service, from either an accountant or a debt collection agent. Charges are usually on a flat fee or no collection - no fee basis.
- Take legal action. This is a quick and inexpensive last resort, with debts of up to £5,000 being dealt with by the small claims track at your local County Court. For details download the leaflet The small claims track from the HM Court Service website. You can either complete a pack or start the process electronically by visiting www.moneyclaim.gov.uk.
Debt recovery can be a time-consuming and costly business, so it's seriously worth considering if you can alter your payment policy to request fees in advance.
