Child Care Accounts Receivable – Tuition Policy
Many owners view childcare as a mission; thus, they often manage their business with their hearts instead of their heads. This is particularly true when it comes to collecting tuition. Too often, they hear the parent’s story, and out of empathy and sympathy, they allow the parent a few extra days to pay tuition. A few days turn into several days, a week, two weeks, or more.
The efforts to help the parent have created a larger problem and financial challenge for the parent. The parent is now not just a few days behind but possibly weeks and hundreds or thousands of dollars behind. The greater the amount of tuition due, the more of a financial challenge it is for the parent to not only get caught up but also stay current with tuition payments.
Uncollected tuition payments from just one or two parents may not lead to the financial instability of the business. However, many childcare business owners have several parents behind on tuition payments – and a large accounts receivable balance. Accounts receivable dollars that may never be collected – and the longer the money is due, the less likely the money will ever be collected.
In an ideal childcare business, accounts receivable would be zero. How is this achieved? It starts with an Accounts Receivable—Tuition Payment Policy. The policy should be enforced for all parents—not just for some parents, and not just some of the time. The image below illustrates a simple but very effective Accounts Receivable Policy that is easy to understand, hard sometimes to enforce, but essential to implement.
You may find this policy too harsh. However, it is important to take a realistic look at how carrying a high accounts receivable balance or being unable to collect tuition (often from the same parents – time after time) is detrimental to a childcare business’s financial health and stability. Unmanaged and with a lack of accounts receivable – tuition policy balances can get out of hand quickly and spiral out of control, resulting in thousands or tens of thousands of dollars in lost revenue and profits.
Copyright -ChildCareOwner.com
