Article Link: http://exchangepress.com/article/monitoring-fee-collection-and-cost-per-child/5023670/
This article is the second in a three-part series on the Business of Early Childhood Education.
Effective business metrics are focused and easy to understand. The Iron Triangle of ECE Finance, which underscores the three areas required for long-term sustainability, is a helpful framework. Indeed, full-fee collection and revenue that covers per-child-cost form the base of that triangle.
Full-fee Collection
Full collection of all tuition and fees — including public and philanthropic subsidy as well as parent fees — is essential. All too often an early childhood program will have a budget that balances on paper, but the cash just doesn’t come in the door. Successful ECE administrators stay on top of collections; they have clear payment policies, are firm and consistent with families, thorough and prompt with billing, and on top of the paperwork required by third-party funders.
The industry standard is to keep bad debt to less than three percent of revenues (Mitchell, Brodsky, & Workman, March 2015); however, exactly what unpaid fees are considered bad debt may vary among ECE providers. In general, the term ‘bad debt’ refers to the proportion of revenue that is not collected. Thus, any expected revenue that was used to establish a budget and calculate a ...