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Why Should Childcare Businesses Offer Direct Debit?

Childcare has always been an essential pillar for the community. Many large childcare franchises we see today began in modest rooms, managed by a small crew of fellow parents. In fact, according to Education Matters NZ - an official government census taker - over 181,045 children (plus their parents and caregivers) rely on licensed childcare centres for their daily care needs.  

So, with so many families relying on childcare centres, why do so many exclusively offer clunky payment methods - like cash, cheque and credit cards - which carry unique risks and challenges?   

Working with a payment service provider like Ezypay can help childcare providers better manage their cash, reduce administrative costs, and improve relationships with parents. 

See how offering direct debits can help alleviate some common challenges experienced by childcare providers.   

Challenge: Push Payments are Parent Dependant   

Push payments are any payment method that requires the payer to initiate the transfer of money to a payee - for example, paying for groceries with cash.   

When childcare providers only offer push payment methods like cash or bank transfers, they're effectively requesting parents to pay for any related cost - including one-off extras like uniforms or group activities - entirely manually. 

Parents simply forgetting to make their payments, or not having enough money available when the payment is due, are both common occurrences. Missed payments quickly develop into major headaches for childcare providers, restricting cash flow and ramping up administrative costs.

 

Solution: Direct Debit is Set and Forget   

On the other hand, direct debit payments powered by Ezypay are an entirely automatic, set-and-forget process.    

Once a parent provides their payment details to their childcare provider (along with their DDR or 'direct debit request'), payments can begin automatically and continue until either party cancels, which allows for more predictable budgeting and forecasting. 

Automating payments can help you avoid awkward, uncomfortable conversations with parents – especially when payments have failed repeatedly.  

  

Challenge: Administrative Costs Are High   

The process of chasing late payments can represent an enormous financial drain to childcare providers, distracting them from the more important parts of running a childcare business.

Childcare providers must hire extra staff or work extended hours to cover these shortfalls. Luckily, some of these manual tasks can be partially automated, or even entirely canned - saving time and money.   

  

Solution: Direct Debit Reduces Administrative Time   

Offering direct debit payments to parents can slash administrative costs and free up time usually spent chasing payments. 

Ezypay utilises a variety of failed payment processing solutions to reduce the chances of failed payments. Plus, if payments fail repeatedly, Ezypay can do the heavy lifting for you and alert parents via email.  

But what does this mean in terms of savings? How do automated payments save childcare providers money? Let’s explore a practical example of how automated payments can help reduce administrative times and costs for childcare providers.  

Assuming it takes a childcare administrator 45 minutes a day at $25/h to reconcile payments made by parents, childcare administrators are essentially ‘locked in’ to 3.75 hours a week of chasing parents and processing childcare fees.  This represents $93.74 every day, or $4,875 p.a. - per childcare centre. 

Expand these costs out to multiple childcare centres, and automated payments could save businesses hundreds of thousands of dollars every year. For childcare companies with more than 90 childcare centres, automating payments could help save around 2 million dollars a year – money that could be far better spent making the childcare experience even better for children and parents. 

Instead of worrying about running cash to the bank, processing cheques or chasing missed payments for a planned group outing - childcare providers can now spend this extra time focusing on running their businesses.  

 

Challenge: Human Error    

Processing payments of all kinds requires manual effort – both on behalf of the childcare provider and the parent. When undertaking these essential tasks, simple errors can quickly snowball into massive issues which slow down business and restrict cash flow.    

 Everything from misplaced cash to bank fees and bounced cheques can result in your business carrying debt, which can pile up fast. This debt can eventually become unrecoverable, especially when failed payments stack up.    

   

Solution: Smart Rebilling and Flexibility  

Ezypay offers automatic, reliable smart-rebilling and failed payment recovery solutions to make retrieving failed payments a breeze. Childcare providers can choose to immediately rebill a failed payment, add to the customer's outstanding debt or stop billing entirely. Ezypay is also capable of sending alerts when payments fail repeatedly, maximising the chance of capturing every payment. 

Parents can also elect to provide multiple payment methods – meaning if one payment method fails, there’s always a backup handy. Some parents may even choose to use direct debit as the backup payment method instead and continue to pay with cash.  

   

Challenge: Lump Sum Payments Are Intimidating   

Childcare is an essential - and sometimes expensive - service for families. Many families may find the prospect of paying for multiple weeks or months of childcare daunting.   

Some parents may be unable to access enough cash to pay for their child's necessary care at the start of a school term - or have their child miss a group activity due to a lack of funds.  

Given that parents utilise childcare services so they, themselves, can work - it makes sense that some would appreciate the offer of a payment plan.   

   

Solution – Payment Plans Made Simple   

Ezypay allows large payments to be split up into smaller, more manageable amounts – a massive benefit for families.    

As direct debit payments are made automatically based on an agreed-upon schedule, they also allow parents more time to plan and budget, reducing the likelihood of any 'surprise' payments. Plus, due to the automatic nature of direct debits, parents are far less likely to be hit with late payment fees or dishonesty fees.   

   

Challenge - No Fee Flexibility    

When relying on cash, cheques, credit or debit cards - childcare providers can become all too aware of the impact of the fees they pay to banks and payment gateways.   

Most payment gateways charge a fee based on a percentage of the total transaction – however, this percentage doesn't always cover set-up costs and maintenance fees often charged by payment gateways.   

Without any flexibility, childcare providers are often forced to raise their prices which can drive away business.    

   

Solution – Flexible Fee Structure    

Ezypay proudly offers an entirely tailorable fee structure - meaning childcare providers can choose how much (or how little) of the fees they pass on to their parents. Fees depend on how much money you are processing through Ezypay – and there’s no business set-up fee, so you can get started with Ezypay for free.  

Giving childcare business owners the freedom to forecast more efficiently and with far more confidence is what Ezypay does best.   

   

Summary   

Cash may have been king for childcare service providers back in the day - however, childcare service providers now have greater access to far more efficient ways to invoice their parents, pay their essential vendors and do business.   

These efficiencies help childcare service providers save money and resources and allow them to spend more time with their most important customers. 

If you're curious to see what integrating a direct debit solution into your business would look like, please feel free to get in touch

  • March 05, 2024   ⎯   mins read
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