So, you’ve been stiffed by a parent. Bamboozled. Hoodwinked. Cheated.
Don’t worry, you are not alone. It happens to even the most seasoned providers. Even though majority of providers require payment before service, receiving payments after care, or not at all, is a commonly faced challenge. Despite having contracts and agreements many providers often find themselves at odds with parents who refuse to pay.
Why does this keep happening?
Most providers by nature are empathetic people, they care. Parents often play the sympathy card, or have excuses as to why they need to pay later. Providers agree to care for the child, in good faith, and later get stiffed on payment. Parents altogether ghost providers or claim that something had gone awry in child care which is why they are not paying. It is not to say that some parents do not legitimately have hardships, and there is nothing wrong with being a good human being; however, all too often, we see parents trying to con the system because they have figured out that providers have no real course of action to come after them.
It generally costs more to go after the parents legally, than to let the money go. The parent could ostercize them on social media, they could make up false claims, and most providers would rather not risk the negative reviews. Most child care businesses only have contracts, and they have to take a parent to small claims court to collect their payment. Many child care claims don’t even qualify for small claims court because the collection amount is too low.
How do providers protect themselves and get paid?
The answer lies in business tools, administration, and automation. Parents fail to understand that licensed childcare providers are also business owners, because they often lack the same tools and forms as other businesses. Let’s look at the apartment rental industry, for example, which operates on a similar model. Apartment complexes have credit applications, docusign, and online rent pay. Not only are customers vetted, but if they fail to pay their rent on time they will be automatically charged a late fee, given a 30 day notice, and evicted. They will also have their credit score negatively impacted, which will limit their ability to do the same thing to another apartment complex.
The fact is contracts are not enough to ensure payment unless you have the legal means to prosecute a parent for payment. In this case, a good defense is a good offense. Providers need to set themselves up for success in order to no longer have to worry about non-payment issues.
- Automate as many of your business processes as possible. This includes payment reminders, receipts, and messages.
- Put all necessary communication in writing with parents, and record it. If it’s important, it needs to be recorded. This prevents parents from claiming anything otherwise.
- Accept Debit and Credit Cards, a small loss in service fee is better than no payment at all. Most card service providers charge around 2.9% +.30 cents per transaction.
- Parents often cite bank closures, or other reasons why they couldn’t get cash or check. Providers limit themselves when they do not accept electronic payments. If a parent has no cash, check, or card to pay you with, their ability to pay in the future may be also limited.
- The Daycare Owl website ( www.daycareowl.com ) does not charge providers any service fees and instead charges the parents for card transactions, and 0 fees for cash and check transactions. The platform is free for licensed child care providers.
- Set-up recurring billing for parents. Automated recurring billing ensures parents have the ability to pay, and notifies a provider as soon a parent cancels the recurring payment.
- Daycare Owl allows providers to accept bookings up to one year in advance, with a credit card or debit card hold. Providers can invoice parents directly. Parents can set-up auto-payments for recurring care to pay providers weekly . For on-demand spots, parents get charged on the day of service, no matter how long ago they booked. If the booking is cancelled, the provider is immediately notified. The platform also provides automated receipts for all parties and year end tax reporting.
If technology is not the route for you, chances are you will face a non-payment issue. It is better to anticipate such an event rather than to assume it will not happen to you. Here’s what to do deal with non payment issue:
- Add a non-payment clause to your contract, give yourself wiggle room to charge per day late fees if needed.
- Lay out the steps you will take including litigation to collect the funds, you may not actually go to court, but parents should see that you have legal ground to collect payment.
- Accept partial payment. Rather collecting the whole amount for the week, ask the parents to pay daily, or accept another lesser amount.
- Daycare Owl allows providers to split their weekly rates into daily or hourly payments.
- Check-in with the parent who has not paid, at the end of every day that the child is in attendance. Do this over text or email. This step is KEY!
- Parents will often claim that something went wrong in care and they are no longer going to pay.
- At the end of every day, message the parent. Ask them if all was well today, and if they will be bringing the child in tomorrow. Then, remind them of the pending balance. This prevents the parent from claiming that something happened in care, as you checked in with them daily and they continued to bring their child in.
- Having these messages on hand will be critical if you do decide to go after the parent for non-payment. They also prevent you from slander and any false reviews if you terminate.
Ask for collateral, create a promissory note, and enforce it. Crazy, right? What are you? A pawn shop?
- Asking for collateral is not an uncommon practice for small businesses. Essentially, you would ask to hold an item from the parent of equal or greater value. A promissory note is to be signed by both parties. If the parent pays, the item is returned. If they do not, the item is “gifted” to the provider.
- Add the promissory note to your contract so parents understand the process and there are no surprises. It is also important to note that if the promissory note does have to be executed, it should also mean a termination of services. You cannot make a living off second hand goods.
Following some or all of these steps will ensure that non-payment is a no-issue in your child care business. To learn more about issues pressing child care businesses join our online facebook community and register your licensed child care facility for free at www.daycareowl.com.