Opinion: Let's grasp the nettle

A number of people have contacted me since my August article about the credit crunch, asking whether my cautious optimism as to the likely impact of the crisis in our sector has changed. I now want to offer practical advice on what operators might do to reduce their risk.

Will people have the money to spend to perpetuate their life style? My own view is probably not. So my first piece of advice would be to monitor very closely your bad debt position. We all know this is a very sensitive point, and no-one in our sector likes to exclude a child from nursery because of non-payment - especially if non-payment is due to yet another bureaucratic muddle in the tax credit department.

However, as one operater told me last week, the fact that you permit credit to parents on the back of a payment finally being made through tax credits does not mean that the provider will receive the money when it finally comes in. This operator lost over £7,000 in back fees while waiting for such a situation to be sorted out.

What can you do about bad debt in general? If you do not operate a credit card acceptance facility, my advice would be to start doing so immediately. A simple call to your bank should be all that is necessary to set up such a system.

The second main area where you can lose operational efficiency is with staffing ratios in a declining market. If you lose children due to the recession, then you should need fewer staff than before. No-one likes to make staff redundant, but it is far better for the children in your care, and the other employees, that you stay in business and weather the storm. Adjusting staffing levels to the immediate needs of your nursery will be essential factor in your survival.

Finally, your employees are your greatest asset and they are also quite poorly paid, and the least able to shoulder any further burden. When it comes to salary reviews in 2009, I would suggest you stick to an explainable increase - that you've related it to public sector pay rises, for example - and pass this increase on to your parents. Staff, more than anyone, deserve your support.

Alan Bentley is chairman of the Childcare Corporation

It is widely accepted that we have only seen the top-end of the crisis so far, and it is the bottom end - 'sub-prime' credit card lending - which will have the most immediate impact upon the retail economy - which includes the nursery sector.