Setting up a child care center requires planning and coordinating daily schedules, teaching schedules, curriculums, and so much more. Creating a foolproof child care tuition billing plan will ensure that you have the cash flow to provide the best experience for parents and students. You’ll also be able to have peace of mind knowing that payments and bills are organized and accounted for.
Why is seamless child care billing so important?
An easy-to-navigate childcare billing process is one of the most important aspects of running your business. Tuition payments made to your childcare center are likely your primary source of revenue. Keeping your cash flow running smoothly is a key to keeping your business financially healthy, so you’ll want to make sure that your process is well thought out.
At brightwheel, we understand that time is an incredibly scarce resource. By making your billing processes efficient, organized, and user-friendly, you’ll be able to dedicate more time to the children, teachers, and parents of your child care center.
Steps to setting up child care billing
Below, we've outlined the seven essential steps for navigating child care billing.
Step 1: Decide on a tuition rate
The first step is to determine how much to charge for attendance at your child care center. It’s standard for childcare centers to charge by the hour, per day, by the week, or per month.
To determine an appropriate tuition rate, you’ll need to consider your expenses and your enrollment capacity. At the very basic level, your total incoming tuition will need to exceed your expenses in order for your business to be profitable. In other words:
(enrollment x tuition rate) - expenses = profit
Be sure to calculate all of the expenses associated with running your business, including:
- Staff salary (including part-time aides and substitutes)
- Cleaning costs
- Rent or mortgage payments
- Food and beverages
- Office supplies
- Utilities (phone, water, electric, trash)
- Business licensing and fees
- Marketing and advertising costs
- Rainy day funds or unexpected costs
By considering these charges, you’ll ensure that you can cover the cost of running your child care center.
You should also consider how much your competitors charge when setting rates. When looking for childcare, parents often make a decision based on cost and quality of care, so you want to make sure that your prices are similar to neighboring childcare centers (or that you can justify a higher price point).
You may be able to charge higher tuition than other centers if you have unique competitive advantages, including:
- Specific learning philosophies at the core of your business
- State-of-the-art facilities
- The most highly qualified teachers and directors
- Outstanding safety policies
- Lower staff-to-student ratios
Deposits and hold fees
When setting up your child care rates, you should also consider charging deposits or hold fees for children who are not yet attending your child care center. Hold fees or deposits ensure that you are compensated for reserving space in your child care center for a child who is not yet attending. During uncertain times, these fees can help keep your business afloat. If you have 20 available spaces and 5 of those spaces are held for children who aren’t in attendance, the hold fee or deposit ensures you don’t lose out on 5 payments.
To set a deposit or hold fee, make sure you keep the costs of running a childcare center in mind. You should still be able to exceed the expenses of your childcare center even when you’re not meeting full capacity. Your hold fee can either be a percentage fee (25% or 50% are common for hold fees) or a standardized rate, such as $200 per week.
Step 2: Set fair and reasonable child care billing fees and policies
When setting policies for your child care billing, make sure that you consider conditions that may arise outside of standard tuition. These can include late payments, school closures, and disputes over payment.
Different policies you may want to explore include:
- Late payment fees - These will encourage on-time payments.
- Partial payment options - These allow for more flexibility for parents. If you offer partial payments, ensure you set due dates for the final payments.
- Advance payment - These can be beneficial for parents who work irregular hours and need flexibility.
- Holiday policies - If your childcare center bills by the week, you’ll want to set up holiday policies to let parents know if your childcare center is closed and if payment is expected for the holiday.
- School closures - During uncertain times, rules and regulations change quickly, so a policy that covers school closures will help keep your business afloat. In the case of unexpected closures, you can (and should) charge partial tuition!
Step 3: Set up your child care billing invoice
Your invoice should be clear and easy to understand so parents can tell at a glance how much they need to pay and when payments are due. Your invoice should include:
- A unique invoice number for bookkeeping and referencing
- Your business name and contact information
- Who the invoice is intended for
- How much payment is expected
- When the payment is due
- A description of the services or goods charged for (what they payment is for)
- If there are any late fees or extra charges
- Payment methods you accept
1. Build your own using free software
Free tools for creating invoices include Microsoft Word, Google Docs, and Canva, but you’ll have to spend the time to update invoices and send both single and recurring payments out manually. With those tools, you’ll also need to export and organize invoices into a safe place for storage and referencing.
2. Use generic online invoices or bookkeeping software
These tools can reduce the amount of time that you spend on creating invoices; however, you’ll still need to manually send out the invoices. While all of your bookkeeping is kept in one place, you’ll still be using a variety of softwares to run your business, which can be time-consuming to sort through.
3. Use childcare management software like brightwheel
Brightwheel’s billing feature allows you to set up one-time or recurring billing plans so parents can view their statements and even pay their childcare bills online. Instead of spending hours manually creating and sending invoices, you’ll have more time to spend helping children grow. You’ll also have a digital record of all of your invoices for bookkeeping.
Step 4: Determine how you’ll process payments
There are four standard methods of capturing payments:
- Credit cards
- Bank transfers (ACH)
There are pros and cons to each of these payments, and it's important to determine the payment methods that work best for your childcare center and families.
1. Cash payments
Cash payments are helpful to avoid extra fees that often come with online payment methods. Cash can be more convenient for families who work jobs that pay in tips, as well as families who don’t have checking accounts. You’ll also have access to the payment as soon as it’s in your hands.
The downside to accepting cash payments is that you have to manually keep track of payments made. You’ll also have to make regular trips to the bank, and you’ll have to consider the risks of theft.
Checks can be deposited almost instantaneously with the use of banking apps, ensuring that payment gets into your accounts efficiently. Funds from checks are usually available the next business day. Another benefit of using checks is that you won’t have to carry large amounts of cash to and from the bank.
On the other hand, checks are becoming less frequently used. They can also be bounced back, and if your bank doesn’t have online ways to deposit checks, you’ll have to run to the bank frequently.
3. Credit card payments
Credit cards are the most commonly used methods of payment, so most families will be able to pay through card. Credit cards also save you trips to the bank, as funds will typically be deposited into your account 24-48 hours after payment.
The main disadvantage to accepting credit card payments is that there are small fees on every transaction.
4. Bank transfers (ACH)
Bank transfers are extremely reliable and secure, ensuring that payments collected are safe in your account. You can also set up recurring bank transfers, so parents can be sure that their child care is paid for without having to remember to write a check or bring cash.
When considering accepting bank transfers, remember that there are often fees for the recipient. Most ACH transfers also take up to 3 business days to process, so funds are not available to you immediately.
Step 5: Choose a billing frequency
When establishing your childcare billing processes, you’ll also need to choose how frequently parents will be billed. There’s room for flexibility when determining how often to send invoices, with many child care centers choosing to bill parents weekly, bi-weekly, or monthly.
When choosing the billing frequency, consider how often your child care center will need to pay your own bills and staff. Sending more frequent invoices to parents will provide a more steady stream of revenue than if you invoice by semester or year, so it’s important to consider the frequency of your own bills, including your staff’s pay, utilities, rent or mortgage, and taxes.
Step 6: Consider adopting a child care billing tool to collect tuition
To keep billing stress-free, you may want to consider using a child care billing tool. Your child care billing tool ultimately determines the ease and efficiency of the payment process. When searching for a child care billing tool, look for paperless or digital tools, which can reduce (or even eliminate!) the amount of paperwork for your business. It’s also important to search for billing tools that easily integrate into your business.
With online billing tools, you’ll be able accept payments and create reports digitally. You’ll also have an online record of the payments made to your childcare center. Accepting manual payments can be extremely time-consuming—it even makes our list of the top 5 tuition mistakes that child care businesses make.
Brightwheel is an all-in-one solution to simplify your billing system. Made for early childhood educators, brightwheel makes it easy to set up billing plans, collect payments online, digitize your billing and tax reports, and ensure that payment information is kept secure. Brightwheel’s billing system allows parents to securely pay through bank transfer or credit card payments as soon as they receive an invoice. Parents can even set up automatic payments, guaranteeing that you get paid on time, every time.
Step 7: Communicate clearly with families about your child care billing policies
The key to getting payments on time is to communicate well with parents. Tuition rates, schedules, payments, and consequences should all be covered in your parent handbook and orientation to ensure that parents are well-informed of your policies. Establish good communication channels to discuss and answer questions about payments so you can quickly clear up any uncertainty about your child care billing. You may also want to consider sending out reminders when payment due dates are approaching or follow up messages when a payment due date is missed.
If you use brightwheel as your child care billing tool, parents will automatically get notifications when their payment date is approaching or if they miss a payment. Plus, brightwheel’s messaging function allows you to communicate instantly and easily with parents if you need to discuss any tuition questions
Money can be a sensitive topic, so be sure to communicate clearly and professionally with families when questions arise. While some questions can be easily answered through chat, more difficult conversations about payments may be better in-person. Our guide on handling difficult conversations at your childcare center has some helpful tips.
Keeping your child care center’s finances organized is one of the best ways to ensure the success of your business. Simplifying payment processes and having a good grasp of your billing system can help save time and resources.
If you’re interested in using brightwheel to transform your child care center’s billing process, schedule a demo with us today!
Brightwheel is the complete solution for early education providers, enabling you to streamline your center’s operations and build a stand-out reputation. Brightwheel connects the most critical aspects of running your center—including sign in and out, parent communications, tuition billing, and licensing and compliance—in one easy-to-use tool, along with providing best-in-class customer support and coaching. Brightwheel is trusted by thousands of early education centers and millions of parents. Learn more at www.mybrightwheel.com.