Dealing with Bad Checks in Daycare
Many daycare business owners spend way too much time dealing with bounced checks and other collection issues. Dealing with return checks can be one very frustrating aspect of your child care job . However, by creating a solid returned check policy or preventing bad checks in the first place, daycare owners can reduce bounced checks.
How to Create a Returned Check Policy
It is important to make your payment policies clear in the event that a client’s check is returned. Many daycare providers list in their daycare contracts that the family is responsible for ALL fees incurred as a result of the bounced check. This means all returned check fees and overdraft fees if applicable.
A simple returned check policy might state the following:
“Checks can be made payable to XXX Daycare with a returned check fee of $35.00 per returned item. Payments on returned checks (check total, returned check fees, and related fees) must be paid by cash or money order or certified check, immediately. If the client has written 2 or more checks that are returned to us for NSF (insufficient funds) you MUST pay all remaining school year fees by cash or money order. There will be no exceptions to this policy. Returned checks that are not paid in full will be turned over to the State’s Attorney’s Office”.
What to do When you Receive a Bad Check
The first step is to send a return check notice. This is one of several important daycare forms to have on hand. The notice might read: Your July 27, 2010 tuition payment of $400 was returned for non-sufficient funds. Per our agreement, there is a $35 fee for any returned checks. This fee is to be paid in cash by August 5, 2010. At XXXDaycare we allow 2 bounced checks before we insist on another form of payment. This is your 1st/2nd returned check. You may/may not continue to pay your tuition with a check. Please make your payment in any of the following forms: CASH or CREDIT CARD. Thank you.
If this notice is ignored and the client does not make good on the check, (even as early as 7 days in some states) you may forward it to a State Attorney’s office in the county where the check was accepted for prosecution. Contact your local State Attorney office regarding any forms that need to be completed. This will begin the process of prosecution/collection
Preventing Returned Checks
Rather than dealing with return checks, eliminate them completely from your daycare business. You can do this one of two ways: Collect payment up front or invest in child care software.
Payment up front means that the policy states that the client’s payment options are cash OR money order and are to be paid before the child can receive services. For example, your contract policies may that you will request payment every Friday for the upcoming week. In some cases, daycare providers may choose request payment up front for the entire month. Monthly payments may not work for many families. However, to calculate the monthly fee, calculate the total number of working days in the month and multiply it by the daily rate you charge.
Child care or daycare software can help eliminate returned check issues. The software can collect payments in person or online using the following methods:
- Set up recurring ACH (Automatic Clearing House) transactions which are bank to bank transactions. In this way, payments are automatically deducted from the client’s checking or savings account and then deposited into your daycare’s business account.
- In person Point of Sale Transactions (POS). POS transactions allow you to process payments by swiping the client’s credit or debit card on-site.
- Set up recurring credit card transactions. In this type of transaction, the client’s credit or debit card is automatically charged on a recurring basis.
Above all, remember that first and foremost daycare is a serious business, and if you don’t get paid, your business suffers. Protect your business. Be polite, yet firm, in enforcing all policies.
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