Dealing with debtors

As a childminder you will have built up close relationships with the parents and guardians of the children you look after. There may come a time at which those relationships will be tested; and it is normally at the point when the parent or carer misses a payment. Like all businesses you may be faced with non or late payment by parents.

Acknowledging this, and having a plan to deal with it, is your best way of being prepared in the case of possible debt.

If the case went to court it is useful to think of yourself as the business and the parent as the consumer – meaning that if anything is unclear – the parent may get the benefit of the doubt. Having really clear contracts will help to give you peace of mind.

PACEY members can get advice on setting up contracts and a practical support package to help you manage debt recovery in the event that parents withhold payment for services provided or breaches of contract occur.

PACEY factsheet on debt

PACEY debt recovery guide

Read more about how PACEY contracts can help

Top tips to help you manage debt:

1. Be prepared and be assertive

If you are starting out as a childminder and have never run a business before there’s a chance you may not be familiar with or feel confident about asking for outstanding payments.

The reality is that you are providing a service and that service deserves and commands prompt payment in order for your business to continue. Remember your fees will always be in your control. You may choose to ask parents to pay in advance, that way you can manage possible non-payment and decide if the service is still available if a parent has not paid.

2. Do your homework

Whenever you enter into a new contract with a parent, consider the following:

  • Ask the parent how they intend to pay for their childcare. If they are planning to use vouchers, Tax-Free Childcare or funded hours, make sure that this is clear in your agreements.
  • Always make sure your contracts are clear, signed and dated – use PACEY contracts for added peace of mind.

3. Keep talking

Some parents may get into temporary financial difficulties; for example if one parent is out of work for a few months. Keeping your eyes and ears open for potential cashflow issues could help prevent a parent from running up debt.

Anne* who manages a pre-school in Hertfordshire says: 

If we hear of a parent losing their job, then we will encourage them to chat to us. It may be that a simple repayment plan can help them through temporary financial problems and allow you to keep their business.

4. Minimise your risk

There are a number of things you can do to avoid being owed money, for example:

  • taking deposits
  • taking payments in advance
  • suspending services where payments have not been made.

Your PACEY membership offers access to free legal advice and cover if you need to take someone to court if they don’t pay fees. However you should bear in mind that sometimes even with the best solicitors and the strongest case it can be difficult to recover unpaid fees.

5. Know when to end the service

If a parent refuses to pay, or simply doesn’t have the money to pay, you may end up losing out – at the very least a court process is likely to be time consuming and will probably have a detrimental impact on your business. Having really clear contracts in place in the first place will help stop you getting to this stage.

PACEY members can get further guidance on avoiding debts and help if they need assistance with an unpaid debt by using their Legal Plus cover. There's more detail about this here, if you're thinking of PACEY membership.

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