Collecting parent fees is becoming increasingly difficult. Every increase in the Toronto Children’s Services user fee component of subsidy means centres with purchase of service agreements are responsible for collecting larger portions of their fees. Collection efforts are hampered by a slower than expected domestic economy; many families are finding it difficult to make ends meet each month. Fee collection will only get more difficult if the economy continues to stagnate.
The most effective fee collection strategies are preventative. It is important to act before unpaid fees become overwhelming for parents and families are unable to catch up. Following are a few preventative measures that may help to reduce your receivables:
Document your policies and rules
Does everybody involved in the collection process know the centre’s policies and rules regarding debt monitoring and collection? Parents, the supervisor and the board of directors all play key roles in fee collection and it is important that these roles are documented and well understood. The basic collection policies for parents should be specified in the parent handbook. These policies include:
- the frequency of payments (weekly, monthly)
- interest and other penalties, if any, to be levied on late payments
- the method of payment (postdated cheques, cash, certified cheques in the event of NSF’s)
- conditions resulting in withdrawal from care
Parents should be made aware of the policies during the initial enrolment interview. Policies must be clearly outlined and documented to ensure neither the board nor the supervisor are put in the position of having to make up rules as they go along. Consequences resulting from non-payment should be clearly communicated to be fair to parents and staff/board members. We are not suggesting that policies and rules always be rigidly enforced. Rather, we believe that clear written policies help make difficult situations more manageable and help reduce nasty surprises. Policies should also be set for the roles of the supervisor and the board. Policies should cover:
- responsibility for billing parents
- communication of fee increases
- maintenance of the receivables ledger
- information to be reported to the board
- action to be taken when fees outstanding are 30, 60, or 90+ days overdue
- special steps to be taken if the receivables are due from board members or staff
Again, we are not suggesting slavish adherence to these written policies. Deviations from the policies should be discussed at the board level on a situation-by-situation basis and documented in the board minutes.
We have a few suggestions that you might consider including while formulating your collection policies.
Regular review of outstanding amounts
First and foremost the supervisor should review accounts receivable on a monthly basis. Many collection problems stem from not acting soon enough to collect overdue debts. A summary of amounts owing should be presented at each monthly board meeting. Names should not be disclosed for reasons of confidentiality. The summary should indicate amounts overdue by month (i.e. one, two, three and over); amounts greater than 30 days past due are a potential collection problem. The supervisor should report on action taken to collect these amounts and the board should respond and assist accordingly.
Responsibility for collection of amounts past due
Generally the supervisor is responsible for collecting and depositing fees. Giving the supervisor responsibility for collection of past due amounts may interfere with care given to the children if staff/parent relations become strained. Unpaid fees are not the child’s problem. We recommend that collection of seriously past due fees be undertaken by a board member and not the supervisor. This will allow staff to focus on providing care to the child.
Speak to parents directly
Person to person contact is essential to collection of overdue amounts. It may be easy to write a letter but it is often ineffective for collecting fees. When talking to parents consider stressing that while the care of their child comes first the financial stability of the centre is also critical. Collection of fees is a key element in that stability. Your objective should be to develop a payment plan that will meet both the needs of the centre and the financial capabilities of the family.
Any repayment plan should start by ensuring that payments for current child care remain up-to-date. For example, if payment for March and April has not yet been received by May then first make sure that the fees for May are paid. This will maintain needed monthly cash flow at the centre even if past due amounts remain outstanding. For some families a weekly payment schedule for current fees may be more manageable than larger monthly payments.
Once parents return to making regular monthly payments you can negotiate a payment plan for the arrears. We recommend that you agree on a regular payment stream over a manageable number of months. If the plan puts the parents in such financial stress that they are unable to pay current fees then the past due problem will only worsen. For example, if a parent owes $600 consider asking for an additional $50 per week until the arrears are paid. A 12 week repayment term may seem long. However, it is better to collect current fees each month and the arrears over a long period of time than to lose a full-fee paying parent altogether.
Amounts due from board members
Collection of past due amounts from board members is an especially difficult issue. The supervisor reports to the board and it is generally inappropriate to ask staff to collect from their boss. Also, board members often become friends during their term in office and collecting debts from friends can get uncomfortable. You might consider having a policy of disclosing by name all amounts owing by board members at monthly board meetings and having the executive committee be responsible for the collection of those amounts. You might also consider asking board members in arrears over a certain period (e.g. 60 days) to resign. You must be seen to be taking action by the members of the childcare centre to avoid accusations of favoritism.
Collection from families no longer receiving care
Once families have withdrawn children from care it is difficult to collect unpaid fees. Gentle weekly phone calls and letters sometimes work. Turning the problem over to a collection agency can result in collection of 50 cents on the dollar. However, the techniques used by these agencies are usually not very subtle. Creating ill will in your community could damage the reputation of your centre and make it more difficult to attract new fee paying parents.
Centres sometimes consider taking parents to small claims court for collection of amounts under $5000. This process takes time and it helps if you have someone with experience with small claims court to consult with. We are aware of some centres that have received last minute out-of-court settlements. However, many cases wind up in court. If you do go this route and obtain a favorable judgment then we recommend asking for payment to be made through the court. A favorable judgment does not always ensure you will actually receive payment.
Collecting debts can be both unpleasant and time consuming. Prevention is the best cure. Develop and document parent and board/staff policies, monitor parent receivables regularly and try to resolve problems in a compassionate manner before they become significant.