A Direct Debit Collection Guide for Nurseries

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A nursery can be an incredibly rewarding enterprise to run, but it is subject to many of the same commercial pressures as any other business. This includes bad debts and late payments, which are two of the biggest challenges facing small businesses in every sector in the UK today.

Of 1,000 SMEs surveyed by an invoice specialist, the average business was owed £40,857 in unpaid invoices, with £20,937 of that total overdue. The truth is that many childcare business owners tolerate late payments from parents, fail to chase up late fees promptly and do not enforce the consequences when they should.

To add to the challenges nurseries face, there is also a constant battle to balance costs against the squeeze of free entitlement. This makes getting paid on time, and having control over when these payments are made, critically important to the survival of the business.

The Payment Challenges Nurseries Face

As well as the free nursery entitlement of 570 hours a year for all 3-4 year olds, there are also plenty of other challenges that can impact on cash-flow.

Over the past year or two, nurseries have found themselves facing dropping occupancy rates. This has been compounding cash-flow problems and leaving nurseries without the money they need to operate effectively.

Nurseries also rely largely on the goodwill of parents to pay their fees on time, and although many will pay promptly every month, there are also those whose fees will be paid a few days, a couple of weeks or even a month late. The result can be a real headache for child care providers, and some extremely awkward payment conversations with parents.

The Solution to Late Payments

In the past, many nurseries have been unable to set up direct debits with the banks, but London & Zurich allows nurseries to put in place a direct debit system to collect fees and manage their debts.

The direct debit system at L&Z is easy to setup and allows nurseries to collect fees whenever they are due. Rather than having those awkward conversations whenever payments need to be made, once authorisation has been obtained from the customer, nurseries can collect payments directly from customer accounts.

The Benefits of Direct Debit Payment Collection

Direct debit payments for nurseries offer a range of benefits, including:

  • Payments are easier to process – The whole process can be automated so you can concentrate on running your business in the best possible way. You’ll also know who has and hasn’t paid and be informed as soon as a direct debit is cancelled.
  • There’s almost no administration – Rather than checking your bank balance every five minutes to check for payments coming in, the fees will be taken from parents’ accounts on the same day every month. You’ll know the money is in your account without having to check, and you won’t have to chase those annoying late payments.
  • It’s cheap – Receiving payments from credit cards or debit cards will typically cost a percentage of the transaction plus a flat fee. Direct debit payments tend to be much cheaper.
  • It’s easier for parents Parents can set up their payments through your website if you have one, so there will be no forms to post to the bank and no trips to your branch.
  • The ability to process variable payments – The number of hours of childcare you provide every month is likely to change in line with the requirements of the parents. Direct debit allows you to collect variable payments without having to ask for authorisation every time.

How Can L&Z Help?

At London & Zurich, simply use our paperless web-based system to enter the parents’ details and tell us how often and how much you want to collect. We’ll do the rest!

You can find out more about our direct debit collection service here or get in touch with the L&Z direct debit for business team today.

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