From Opportunities Exchange

All too often an early childhood program will have a budget that balances on paper, but the cash just doesn’t come in the door. How come?

Full collection of all tuition fees, as well as any government funding, is essential. Successful early childhood administrators stay on top of fee collections: They have clear payment policies, are firm and consistent with families, thorough and prompt with billing, and on top of their paperwork. 

If you can build these practices into the daily workings of your early years setting, you’ll have a solid handle on financial sustainability.

What is bad debt, and where does it come from?

The most common form of ‘bad debt’ is late payments on tuition. But here are some of the other main ways you might end up with bad debt:

  • Often, the government’s subsidy reimbursement rate does not cover your full tuition, but allows you to charge parents the difference. Essentially it’s a larger co-payment to cover the gap between private tuition and the government’s reimbursement rate. Some settings are able to collect this larger co-pay, but others may not. Any amount not collected is bad debt.
  • In many US states, public subsidy does not pay for every day when a child is absent. If you’re unable or not allowed to collect payment from the parents for those absent days, this uncollected revenue is bad debt.

Collecting tuition revenue can be very time-consuming unless systems are put in place to streamline and automate the process. Using electronic funds transfer (that is, enabling automatic transfer of funds from a bank account, debit or credit card) is one way to strengthen fee collection and save you time and trips to the bank. One way to eliminate bad debt is to make sure you collect tuition in advance of providing your service. That means billing parents up front for child care.

Make sure you are tracking what is owed to you on a monthly basis, set up online billing, and send parents an invoice. There are many ways to do this, from Quickbooks to Invoice maker to Procare, Brightwheel or Wonderschool, just to name a few. If you want to set this up but are unsure how or where to begin, please reach out to us at the Oregon Child Care Alliance. We are here to help guide you, and ensure you are able to collect all fees owed to you. This way, you can pay yourself and your staff for all your hard work.

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