Easier billing for parents and your setting

Calculating the month’s fees isn’t usually the job that makes Early Years leaders skip out of bed in the morning. With different numbers of days and sessions falling differently from one month to the next, it can be a job for managers to tot up what’s owed, and for parents to know what their bills will look like.

But there is another way to do your invoicing that’s easier for you and more manageable for your bill-payers - annualised billing. So what is it

Annualised billing is when settings calculate a flat monthly fee for a child’s early education, based on a yearly average. This enables parents and carers to pay the same amount every month and avoid costly fluctuations in their fees. You may already be familiar with this way of billing if you annualise your children’s funding, so parents and carers can spread it out beyond term time only.

So what does it look like? For example, say a child attends one session a week and the session costs £60. To calculate an annualised fee, you would multiply the cost of that one session per week by the number of weeks you’re open, and divide that by the number of months. 

1. £60 (per 1 session) x 50 (weeks that this setting is open) = £3,000
2. £3,000 ÷ 12 (months) = £250
3. £250 for every month is the annualised fee.

A flat rate, every month, with no nasty surprises. Below, we’ll see why it works, and what you get from it.

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Keep your current parents happy 

Chasing parents for fees is never pleasant, and potentially even more so now, during the cost of living crisis. However, since moving to annualised billing, we’ve found that parents and carers are less likely to end up in arrears, as they know their monthly expenses in advance. The annualised bill gives parents a clear figure each month, allowing them to accurately work out how their fees can fit into their budget.

When billing for the actual sessions that fell into each month, some of our parents' bills would fluctuate by up to 20%, depending on the length of that month. This was especially acute in March, compared to the shorter (and therefore cheaper) month of February. The hike in fees from one month to the next meant parents easily fell behind, and we’d have to put a support plan in place to get the fees in.

All in all, keeping your current parents happy means you’re more like to keep them at your setting. It’s better for the continuity of their child’s education and it’s better for your business.

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Better for prospective parents

Due to the way different settings calculate their fees, daily rates alone can be misleading.  If a parent just asks a setting for their ‘daily rate’ it might not tell them everything you need to know about the actual amount they’ll be paying monthly in fees.

Let’s imagine three nurseries with the same schedule, being closed to children for 3 weeks per year (2 weeks at Christmas for a holiday and 1 week for staff training). In this example, we’ll say there are parents who’ve enrolled their children for one day a week.

The parents pay the exact same annually, £2,860 per year. But the settings have three different daily rates: 

• Setting 1 charges £58.37 per day, for all the days the setting is open to children. 
• Setting 2 charges £57.20 per day, but only for the days the staff are working - 49 weeks and 1 week of training 
• Setting 3 charges £55.00 per day, 52 weeks per year, including training days and when the setting is closed for holidays.

If a prospective parent calls and asks how much the setting charges per day, Setting 3 is going to appear the cheapest. But because of the way they’ve set up their billing, parents are paying even on the weeks when the nursery’s closed.

That’s a problem. A lot of parents and carers will make up their minds about what nursery or preschool they want their child to go to based on the daily rate they hear over the phone. But if that daily rate could actually mean three different things, how can they decide which is the best or even know what they’d be paying each month?

That’s why annual billing makes things clearer for prospective parents.

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Making sense of changing nursery fees 

No one likes being told they’ll have to pay more, but annualised billing can certainly make it more palatable for parents and carers footing the bill.

When you’re using a daily rate, it isn’t immediately clear what an 8% increase to a £50 per day bill is. Of course, we can tell the parents and carers that the new rate is £54, but if they attend multiple days a week and have a fluctuating monthly bill, what does that increase actually mean for them?

However, for parents on annualised billing, an 8% increase on their consistent monthly bill of £208 means they’re now just paying a consistent £225 per month. Again, parents and carers have a much clearer picture of what they need to budget for or make an informed decision about. 

What our annualised fees look like at Little Beehive 

In order to make annualised billing really clear to parents, we updated our fees as follows: 

X  One day at Little Beehive costs £50~ per day

√  A monthly charge of £208 per month entitles you to attend one day per week

The rate our parents pay per month for their annualised billing is based on assuming that they stay for the full 12 months. However, we have informed our parents that we won’t be backwards calculating their fees if they choose to leave early (before the end of the year). 

Our contract now reads: 

“Your monthly charge (as agreed on page 7) entitles your child to the agreed number of Session(s) per week on your scheduled days (as agreed on page 6).”

‍“If you are unable to attend your weekly scheduled sessions due to unexpected closure, you may book additional ad-hoc free of charge for any missed days.”

We tell parents and carers we can't guarantee their requested day and will offer alternatives if it’s not possible to accommodate their request.

This safeguards us from large refunds if we are forced to close, while also ensuring the children get their day at nursery. And, doing it this way limits the additional cost to us, as when the parent or carer rebooks their child’s sessions, we only allow them to be booked where we have staff already in place. 

While parents and carers feel like they are getting something in return for a closure day, it’s a way of highlighting that their child’s day in education is the most important thing.