Direct Debit collections for nurseries – the ultimate guide

Last year, UK small business faced a whopping annual bill of £6.7 billion because of late payments. But it was nurseries who particularly felt the pinch. Then and now, an unprecedented number of nurseries are being forced to shut their doors, faced with unsustainable cashflow insecurities.

The challenge? Difficulties in getting parents to cough up what they owe has led to a culture of surrender. Funding cuts and free nursery entitlement are the focus of busy nursery owners. They simply haven’t got the time to chase non-payments and rely on the goodwill of parents. It’s a system that only compounds their cashflow issues even further.


Direct Debit for nurseries

Direct Debits are the solution, certainly to late payments, but also to many other challenges faced by nurseries including time on administration and dropping customer numbers.

An automated payment system, Direct Debits do not require regular initiation from parents or service providers. Money is collected on a monthly, weekly or quarterly basis. Money comes directly from the customer’s bank account, so the issue of late payments is reduced significantly

Most nursery owners are aware of Direct Debits, but it’s something they stray away for fear of rejection from the banks. Whilst this is a very real problem when going it alone, it’s not without resolve. There are Direct Debit bureaus and revenue management services that can manage the process for nurseries using their SUN.

With that in mind, what are some of the other benefits of Direct Debit for nurseries?


Benefits of Direct Debit for nurseries

Direct Debits help maintain a happy relationship with parents

Chasing payments can drive a wedge between nurseries and their customers that can’t be repaired. This has the potential to ripple outwards in the form of bad word of mouth or poor reviews. Direct Debits nip this in the bud before it’s even had a chance to take place. With the number of late payments reduced, the need for credit control is also reduced.


It makes life easier for parents

There are several reasons for this. Firstly, they don’t have to make a mental note to pay up every month. Secondly, payments are spread over an extended period of time. The ability to pay in smaller chunks more frequently is often more manageable.

It’s basically admin free!

As we said, payments are automated. The only thing left to do is double-check that a regular flow of payments is coming in when it’s supposed to. Nurseries that go through a revenue management company don’t even have to do that and they can be sure of a very high payment collection rate.

It helps to bring on new customers

Customers can sign up through a website or app in an incredibly short space of time. No arduous forms, no conversations with the bank. This level of ease is hugely appealing to busy parents who want to reduce their own admin time. Plus, it makes for a great marketing opportunity. Nurseries can link to their joining portal in online marketing and draw people in that way.

It’s much cheaper than standing orders and card payments

Businesses will typically be charged a fee for every transaction that isn’t cash-based. Direct Debit is much cheaper than other payment methods in this respect. So it doesn’t just save you time and energy, it actually saves you money too.

 

DFC works with educational bodies and childcare facilities to manage their Direct Debit process and increase customer growth. Head to our childcare page for more information.