Consumer borrowing in the UK recently crashed through the 1 trillion barrier. About 80 per cent of this is due to credit card borrowing plus loans and mortgages and interest rates are rising. For most individuals being in debt is a short-term problem, but 5 per cent of the nation is in serious debt and families with young children are high on the list.
Protect your club's income, and your relationships with parents, with these steps: 1 Reflect concessions against your fee level or payment terms in your club's written policies. Rebuff all attempts to negotiate on an ad hoc basis.
2 Ask for payments from everyone on an identical fixed monthly date. This makes it easy to see who is late with their payment and reduces overall administration costs.
3 Offer to accept your term's fees via three monthly instalments paid in advance by post-dated cheques. This cuts out a great deal of paperwork while providing parents with an avenue to spread payments. Simply submit the cheques in bulk on the due date.
4 Only accept cheques supported by a guarantee card; the bank must honour these providing they are within the guaranteed limit shown on the card.
(Just over half of Trojans' 2004 defaulters had presented cheques that were not supported by a guarantee card.) 5 Consider accepting credit cards - weigh up the advantages of secure payment and convenience for parents against service fees.
6 Watch out for direct debits - Trojans has found it to be a common way for parents to delay payment and blame the bank and now does not offer the facility.
7 Avoid cash payments. Cash makes you and your business vulnerable to theft from outside and to 'leakage' within. It is an unusual way to pay for a regular professional service and special insurance is needed to cover more than Pounds 300 cash on site. Where cheque or credit card payment cannot be provided, ask for a postal order or building society cheque.
8 Ask your bank to provide weekly account statements and make use of internet banking facilities to do a quick daily check for bouncing cheques.
9 Write a non-payment of fees policy and a procedure to enforce it, including standard letters. Your costs in managing debt collection must be met, including your time (see below).
Trojans receives 400,000 annually in parents' fees at its 26 projects. At the year end 2002, 30,000 (7.5 per cent) was in default, added to which were losses to the charity of 5,000 in administration and court fees. Of this, 15,000 was not recovered. A non-payment of fees policy was designed and publicised and at the end of 2004 debt collection procedures were applied to just 8,000 (2 per cent) of which 4,000 was recovered, most on the first formal request.
MONETARY DISTRESS
Dealing with default is uncomfortable for everyone, but if a parent is showing signs of monetary distress, kind assertiveness over fees will help rather than hinder their recovery. To avoid overreacting, consider the amount owed and into which category the non-payer falls: The model service-user pays to the agreed schedule. If once in a while they say that they have run out of cheques, it is probably genuine.
The disorganised service-user occasionally has cash-flow problems owing to disorganisation, but their financial integrity is never in doubt. You are likely to have several encounters over the long term and they are responsible for meeting your costs accordingly.
The 'blip' service-user may get into difficulty where outgoings temporarily exceed income, but they get themselves back on track. They explain their position frankly and clearly understand their responsibilities. It is safe to agree a short-term repayment spread to recoup the default sum, but if that agreement is broken, act swiftly.
The defaulting service-user could run up a large bill in a short time unless you take drastic steps. They blame their default on 'circumstances outside their control'. Typically they offer to pay in cash instalments or claim that an agency will fund their places, but successive arrangements fail. They probably do not have a cheque book, bank guarantee or credit card. This user must remove their children until the bill is paid.
BOUNCING CHEQUES
It takes about three weeks for a bouncing cheque to announce itself. The client faces payment of the defaulted sum, plus the bank's and your administration fees, plus the next month's childcare bill, and this relatively common scenario can push a family on a tight budget into financial chaos.
The personal effects of struggling to repay debt can be far reaching, leading to stress, depression, anxiety, mental health problems, relationship breakdown and more. Money worries could be affecting not only your clients but your club's staff too. Encourage anyone in this position to go to a money advice agency (see box).
Advisers will assess the situation, check if there is entitlement to any extra income, for example tax relief or state benefits, and make sure that the client really is responsible for debts that they are being asked to pay. They will identify essential living and childcare costs, help to work out and negotiate repayment plans with the people who are owed money to and see that the most important debts are paid first. Many creditors will suspend interest when they see that a money advice agency is involved and money advisers give top priority to childcare costs.
TOP TIPS!
* Service Level Agreement clients should be treated like any other. If engaging with them requires an extra level of administration to meet their systems, ask for the costs of doing it. If there is a delay in the payment schedule insist that they cough up the extra costs to you of chasing the payment. You can charge interest and so long as you are meeting your side of the contract, you can take the clients to court.
* Whether you provide a term-time only or an all-year-round service, the academic timetable is irregular which complicates the payment schedule.
Provide a 'ready reckoner' for each period and get the payments right from the outset.
* If you feel compelled to assist a parent financially, do so via anonymous donation or 'sponsor' for their child's place and try to keep your relationship with the family within professional boundaries.
Jackie Nunns is a founding member and director of the Trojans scheme, a charity running out-of-school services in south London
* NON-PAYMENT OF FEES POLICY
for successful out-of-school service (SOSS) If a family has used SOSS's services without payment or their payment to us has been dishonoured we will follow a procedure in these stages: 1 Write to or speak to a parent and ask for payment in full within seven days plus an administration fee of 10.
* If payment is received within seven days no further action will be taken.
2 If payment is not received we will write to the parent asking for immediate payment in full plus an administration fee of 30. At this stage their child(ren) will be unable to use our services until payment in full is received.
* If payment is received within four days no further action will be taken and their child(ren) may continue attending SOSS.
3 If payment is not received within four days, a 'last chance letter' will be sent to the parent inviting immediate payment plus a further administration fee of 30.
* If payment and fee is received within four days no further action will be taken and their child(ren) may resume attendance at SOSS.
4 If payment is not received within four days, SOSS will immediately begin proceedings in the County Court for which we charge an administration fee of 50 and all court fees.
5 If we are required to attend at County Court, costs will be applied at a rate of 20 an hour.
It is SOSS policy to pursue all unpaid fees and other thefts through the County Court for recovery of the service's money.
USEFUL CONTACTS
* PayPlan this service has no hidden charges or management fees so every penny goes towards paying off consumers' debts as quickly as possible. Call 0800 085 4298 or visit www.payplan.com.
* National Debtline expert advice and a free self-help pack. Call 0800 808 4000 or visit www.nationaldebtline.co.uk.
* Citizens Advice Bureau advice charity with 2,800 branches. Look in your local phone book or visit www.citizensadvice.org.uk.
* Consumer Credit Counselling Service charity funded by the financial services industry specialising in debt management plans. Call 0800 138 1111 or visit www.cccs.co.uk.
* Community Legal Service (CLS) provides assistance with legal problems.
Visit the CLS website on www.justask.org.uk.
* Taking someone to court visit www.moneyclaim.gov.uk or apply for forms at your local County Court (see local phone book). It is easier and cheaper than you probably think.
