Unpaid fees – what to do

Unpaid fees are always a difficult topic to broach, and it’s unfortunately all too common to hear that a setting has inadvertently allowed the parent to rack up a bill due to a reluctance to deny the child attendance. We know how important it is that you get paid what you’re owed on time – after all, bills wait for no one! People trying to avoid paying for services can be costly to your business and have long-lasting, damaging repercussions.

In this article, we explain what steps you should follow when experiencing late payments and the options available to you.

In our experience, not many early years settings have a written process or procedure in place for debt management and recovery. So, in light of this, now would be a good time to create one or to review those that do exist!

Any policy should be internal, non-contractual and include a clear management strategy.

We recommend that a financial limit beyond which a provider’s goodwill cannot be exceeded is set and a process created to describe what action will be taken to resolve matters.

Be clear with parents from the outset the possible consequences of non-payment.

1. Invoice as normal

Check that your invoices clearly contain all the relevant information to speed up the payment process, such as:

• your contact details
• a clear description of what you’re charging for and amount (typically itemised)
  
• payment terms and information, including due date
  
• using a standard template, which is the easiest way to ensure that nothing is missing from your invoice.
  

2. Chase for payment

It’s common for invoices to have a payment term of ‘X’ days stipulated at the bottom. If it turns out that you haven’t been paid by a parent when you were expecting, then you should begin the process of chasing up the invoice as soon as possible following the stated payment period lapsing. Send an email to politely remind the parent that they need to pay for the service you’ve provided for their child, otherwise the situation may escalate.

3. Use a credit hold

One way to prompt a parent to pay is to stop providing the service to them until they have paid their outstanding debt to you. To be able to do this, you should ensure there’s a provision in the contract that allows you to do so. This is sometimes referred to as a credit hold, whereby the service stops due to a lack of payment. However, if this doesn’t result in you receiving your payment, then you do have other options.

4. Send a letter before action

A letter before action is the final piece of correspondence you’ll send to the client before legal proceedings begin. This highlights to them that they have until a certain deadline to settle any debts with you before you begin pursuing legal action against them to claim the money owed. In the case of an individual debtor, they must be given at least 30 days to settle the debt or otherwise respond.

The Letter of Claim must:

• refer to the amount of the debt and any interest.
• include the details of the contract and, to avoid delays, a copy of any contract.
• if payment has been made by the debtor, identify why this is no longer acceptable.
• feature details of how and where the debt can be paid.
• enclose an up-to-date statement of account for the debt that’s less than six months old.
• include a copy of the Information Sheet and the Reply Form, which is published by the government.
• include a Financial Statement form to enable the debtor to declare their financial situation.

If this final notice doesn’t see your parent settle any outstanding payments with the nursery, don’t worry. There are different options you can still pursue to get the money you’re owed.

5. Start legal action

Your last resort is to pursue legal action against your client.

Once a decision is made to go to court, legal proceedings can be commenced using the money claim online service. Court fees have to be paid but they are modest, commensurate with the amount owed and are recoverable as part of the debt. While the initial application is online, a member of management must be prepared to attend the court and present the case at a hearing.

Heading the need to litigate off at the pass is a better strategy in the long run but there will always be occasions when litigation cannot be avoided. If in doubt, members should consider contacting the 24-hour Law-Call service.

All Alliance members can contact the team at Law-Call for legal advice. You can find their contact details in the Alliance member benefit overview section of EYA Central: bit.ly/U5Law-Call.