Embracing Modern Payments in Childcare Centres and Daycares
For many childcare centers, collecting payments from parents can be a time-consuming administrative burden. Traditionally, centers have relied on cheques, and while some have adopted e-transfers, both methods still require significant manual effort. While e-transfers are more convenient and easier to manage then cheques, they still take lots of time to match to invoices and require follow-ups when parents are late. These systems can delay payments and increase the workload for staff.
In this post, we'll explore why it's worth moving away from cheques and how to improve your operations and make payments smoother parents.
What's Wrong with Cheques?
While cheques have been the traditional payment method for many years, they come with several drawbacks:
Time-Consuming and Administrative Burden. Cheques require manual processing, which includes receiving, depositing, and matching cheques to parent accounts. The reconciliation process can be tedious and take valuable time away from children-related tasks.
Inconvenient for Parents. Many parents no longer use cheques regularly, making it a hassle to write and deliver cheques every month.
Risk of Loss. Physical cheques can be lost, stolen or tampered with.
Despite these drawbacks, many centres continue using cheques simply because they are unsure how to transition to better alternatives.
E-Transfers Are Better
Many centres that move away from cheques transition to e-transfers to modernize their payments. Overall, e-transfers are a much better option than cheques. They are simple, fast and secure - and there is no risk of losing them.
However, there are similar drawbacks with e-transfers:
Time-Consuming and Administrative Burden. While e-transfers are deposited instantly, they still require directors or admin staff to manually match payments to invoices. This process can take a lot of time every month depending on the size of your centre. Directors also continue to spend time reminding parents to send their e-transfers.
Inconvenient for Parents. Parents need to remember to send the e-transfers every month. The daily and weekly e-transfer limits may also cause delays in letting parents send the e-transfers.
Pre-Authorized Debit is Best
Pre-authorized debit (PAD) lets you process payments easily without chasing parents for fees. It is the best payment option for childcare centres to manage cash flow and reduce administrative tasks. With PAD, payments are automatically withdrawn from a parent's account on a set schedule, eliminating the need for parents to remember to send payments each month.
Key Benefits of Pre-Authorized Debit for Payments:
Improved Cash Flow. Ensures payments are received on time, every time. With a regular, predictable schedule, you can better manage your centre's cash flow and make financial planning more accurate.
Convenience for Parents. Parents appreciate the convenience and simplicity of automatic payments, avoiding the need to write cheques or send e-transfers every month.
Reduced Admin Work. The best PAD options automate much of the matching process, reducing the time spent updating parent accounts or tracking payments.
Minimized Late Payments. Since payments are automated, there's less risk of missed or late fees.
We recently conducted a survey for a client, where we asked parents whether they would be interested in transitioning to pre-authorized debit payments instead of e-transfers. The majority of parents at this centre receive income-based subsidies, and the Director did not think they would be interested in pre-authorized debit. To everyone's surprise, the majority of parents at this centre responded that they would be in favour of transitioning to pre-authorized debit. In our experience, this is true for most parents. If you are unsure of switching to PAD, consider conducting a similar survey (if you need help preparing the survey, reach out!).
Options for Setting up Pre-Authorized Debt Payments:
Banks. Banks offer automated fund transfer services through their cash management or commercial banking groups. You would connect with your existing bank to set up and it would be processed through the bank's online banking portal. Typically, transactions cost around $0.50/transaction, but this can vary by institution.
Childcare Apps. Childcare apps like Lillio, Brightwheel and others, offer payment processing options through the apps. If you're already using these apps, this may be a convenient option for you, although adding payments increases your reliance on these apps. Costs vary but are also typically around $0.50/transaction. Brightwheel integrates with QBO, connecting payments to your accounting software, while Lillio does not integrate with accounting software directly.
Payment Processors. There are several payment processors that cater to schools, childcare centres and similar businesses with recurring payments (Tuio). Prices vary but they typically cost more than $0.50/transaction as they try to provide additional services. They also offer credit card payment options. It is important to remember that centres enrolled in CWELCC cannot charge parents extra for credit card processing fees, so accepting credit cards will cut into your revenue by 2.9% - 3.5%.
Specialized Payment Processors that Connect to Accounting. For a seamless solution, consider processors that integrate directly with your accounting software. These options will reconcile accounts for you, reducing the admin work and keeping records up to do. One example is Rotessa, which integrates directly with QBO and Xero. As a preferred Rotessa partner, ChildcareCPA clients receive a 30% discount. There are several other options that may be a better fit, depending on your centre's needs and current operations.
Making the Transition
Switching to modern payment solutions doesn't have to be complicated, and the long-term benefits are significant. Here are a few steps to help you make the transition smoothly:
Communicate with Parents: Notify parents about the new payment process and the benefits they offer. Provide clear instructions about what to expect.
Update Your Systems: Ensure that your accounting and managements systems are capable of handling modern payments. Invest in secure, user-friendly software that integrates with your existing processes.
Train Your Staff: Provide training for your administrative staff to help them become familiar with the new payment methods and systems.
By transitioning to a modern payment solution, you'll save valuable time, reduce errors, and improve your centre's overall operations. Parents will appreciate the ease of automatic payments, and you'll have more time to focus on what matters most - the children and your staff.
If you're considering a switch, we can help set up the right tools and systems for your centre. If you have any questions or would like to discuss how we can help, get in touch!
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