Dealing with debtors
When you're looking after children, it's likely you will have built up close relationships with their parents and guardians. There may be times when those relationships will be tested. For example, it could come 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. This can be especially tough for childminders who usually manage all the childcare as well as the business arrangements in a setting.
Research has shown that the majority of those small businesses who are reluctant to pursue debtors are so because they find the process uncomfortable or they are afraid of antagonising their customers.
However, for your business to be successful you must ensure that you are payed for your work. Here are some resources and tips for dealing with debtors.
Top tips to help you manage debt:
1. Be prepared
Whenever you enter into a new contract with a parent you should make it easy for parents to pay you. Clearly state your payment terms and share payment details.
Always make sure your contracts are clear, signed and dated – use PACEY contracts for added peace of mind.
Ask the parent in advance 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.
You may choose to ask parents to pay in advance or pay a deposit. That way you can manage possible non-payment and decide if your service is still available to a parent that has not paid.
2. Be assertive
If you are starting out as a childminder or 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. So, be assertive and provide timely reminders.
Tips on how to be assertive:
- Take immediate Action: Don’t delay in flagging up payment issues. Make it clear you are in firm control of your business.
- Be firm but friendly: You are likely to have better results if your approach is pleasant. However, stick to your firm request for payment.
- Be persistent: It is likely that one email will not get you paid. So while staying friendly do be respectfully persistent in your requests.
- Use the telephone: If email correspondence isn’t working try speaking directly to the parent. Be prepared for how you will respond to excuses for non-payment.
- Listen: Earn the parents respect by listening. This might allow you to find a reconciliation. Even if it does not, you will have demonstrated your professionalism and enhanced your reputation.
3. Be aware
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. If they acknowledge the problems, you could negotiate a payment plan.
4. Know when to end the service
If a parent refuses to pay, or isn’t able to pay, you may end up having to withdraw your service to rule out future losses.
This will in effect mean cancelling your contract with the parent. This should be done in writing, in a clear but polite way. You should state the reason for the termination (non-payment of fees) and the date from which it is effective.
Taking legal action is likely to be time consuming and may have a detrimental impact on your business. However, PACEY membership can offer access to free legal advice if you need to take someone to court. 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.
PACEY members can get further guidance on dealing with unpaid debts by using their Legal Plus Cover. There's more detail about this here, if you're thinking of PACEY membership.