TTO: To average or not to average?

I have done A LOT of research on this issue and I am still very torn, everyone seems to have different opinions and neither is swaying me one way or the other. :panic:

My very close friend paid her Childminder an average amount over 12 months for TTO care, and she swears by it. She says it made things easier on her budget, uncomplicated her standing order and worked well with her childcare vouchers from her employer. She is advising me to do this.

However my partner pointed out to me last night (with many samples, diagrams and mathematical equations) that if the parent terminates the contract early (a very possible outcome that I ridiculously didn't think of) then one of us could end up paying the other a lot of money. I have seen other Childminders on here say that it can cause arguments and for money to be lost on either side. The nightmare version being (I think) if they hand in their 4 week notice half way through June, finish half way through July and then vanish.

All these questions came up whilst I was writing my Fees Policy for parents to sign just so they agree with me on what they should be paying. I now have 2 versions of the policy (one blue and one red!) depending on which payment system I decide on. This is an extract from that:

"Fees are charged every calendar month in or out of term time to spread the costs evenly throughout the year. The amount charged is based on my daily rate multiplied by the number of term-time days in the year (normally up to 195 days) divided by 12.

For example, if you require full time childcare (5 days a week), the charges will be:

£35 x 195 days / 12 months = £568.75 per month

Please note, as the monthly payments are averaged over term time and holiday periods, terminating the contract before 12 months may mean the amount paid to date does not reflect the number of days actually worked. In this case, the final payment will be adjusted accordingly."

This really is the side of the business that I'm dreading. I want to make sure that whatever payment system I agree on it is all stated to the parent very clearly before we sign our first contract.

What does everyone think? O_O

I charge monthly in advance. I charge a little more for term time only and put a little in the bank to 'pay' me in the holidays.
I have parents who pay by standing order each month and then make up the difference, or , if they've over paid, I 'refund' it the following month.
All my other parents seem to have no difficulty paying a different monthly fee! Some use vouchers but they 'action' those each month on receipt of an invoice.
I had another mum who had a standing order for the same amount each week ... That worked for us.
I wouldn't be happy averaging out fees, but I know some minders do.

I would not even out over the year for the reasons you say.

If you want to budget for the school hols you could put a bit away each month yourself (in a separate account if you want) so you have some put by for August etc. That way you are in control and the maths is much easier.

I would not worry about trying to make payments easier for parents if it puts you in a difficult and complicated position.

I do both, depending what the parents want to do.

For those using vouchers or claiming tax credits it is often easier to have their fee averaged out, so I am happy to do that. I make it very clear that the amounts may not work out exactly, especially if changes are made to hours during the year, or if notice is given within that time.

Even if you explain it fully to parents some still seem very surprised when you present them with a bill at the end of the year as they haven't paid enough. What I do is show the figures every month on their invoice. I write the actual cost for the month, how much they pay and the amount carried forward. It means that each month they know exactly where payments are at.

Your policy is very similar to my own except that I charge per academic year, so I say "If notice is given part way through any academic year, the final payment will be adjusted (increased or reduced) to reflect fees accrued up to the point of leaving". This reflects that this may happen during the course of any year, not just the first.

I work out how much the fees would be for a whole year and divide it by twelve, and this becomes the regular monthly payment, but I also work out how many schooldays to the end of the current school year, and adjust the first payment upwards or downwards to reflect that, if that makes sense.

So if someone's total bill per year was going to be £3600, their monthly payment would be £300. But say they started on say 4th June, and had 6 weeks left of the academic year, their total bill for rest of the year would be 6/39 of £3600 so £533.85, so I would charge £233.85 for the first payment, and £300 a month after that, indefinitely. I would also take a £300 deposit to be returned at the end of the contract assuming all fees and charges paid up to date at that point.

Just to add to the options, I also offer my TTO parents, most of whom are teachers, the option of paying eleven payments a year, missing out August. Most of them are way on holiday then, so it means they don't have to remember to pay while they are away somewhere exotic, and also means they have more cash in the holiday season - a sort of saving scheme.

I think the advantage of having regular payments set up by voucher or standing order (meaning you do not have constantly late or missed payments) outweighs the outside chance that someone might owe more than their deposit when they leave due to averaging out.

Quote:

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Originally Posted by greenfaerie

I have done A LOT of research on this issue and I am still very torn, everyone seems to have different opinions and neither is swaying me one way or the other. :panic:

For example, if you require full time childcare (5 days a week), the charges will be:

£35 x 195 days / 12 months = £568.75 per month

What does everyone think? O_O

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Seems very complicated to me. What would happen if the school was closed for the kids due to snow or plumbing problems, early finish at the end of term, what about inset days?

I charge in arrears - after 12 years I have never had a problem with this , but understand that many people have
I do not like being paid when I haven't worked

I charge each month for what the parents have used, either the kids are at school or it's the holidays. My I comings do vary vastly each month depending on the school term. I think it's clearer to parents, and most pay me with a combination of vouchers and BACs payments that can be altered each month.

I'm like Mouse, most of my parents pay a monthly bill in advance. But I have 3 parents (using childcare vouchers) who prefer the averaged out method. I don't really mind and I put the actual figures due on each monthly invoice. That way if they were to leave I can work out how much they've paid vs how much they owe or I owe them. I do 1st Sep - 31st Aug, factoring in school holidays and my own holidays. I'll be honest it's not as easy as the normal payments when you're working it all out but ultimately it's up to you if you choose to offer this service. Apparently some voucher companies only let clients change the amounts a couple of times per year.

Quote:

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Originally Posted by natlou82

Apparently some voucher companies only let clients change the amounts a couple of times per year.

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The voucher company one of my parents uses charges £25 for any changes. She's got the amount set as the full £243 a month and pays the rest by bank transfer. If the bill is ever less than that we just carry the extra over to the next month rather than trying to change it.

I invoice for the month taken, not in advance. I Stick to one counties school holiday dates, but am prepared to negotiate if there is a difference between local LA's as I am on the border of 4. I budget my finances for no payments in School holidays. All my families have vouchers - they just ok the payment monthly, they build up a reserve in school holidays which helps for extra days or 5 week months, one parent has got themselves in advance now so the vouchers always get to me on time.

I do not want to work school holidays, I have always been used to them. I also don't want to book my holidays up in advance either so it suits me to stick with being closed school holidays - then I just continue on as I have always done, going away when the fancy takes me, a month in France in the summer, usually late booking to ensure elderly parents/dog/family are all organised.

The problem with averaging out in any situation is trying to explain to parents that if they leave/give notice before the full 12 month period is over, then there may well be a shortfall on their part or a refund due from you - they always hear the refund due part of the conversation btw :laughing:

An easy way of keeping everyone informed as to where the finances are at, is to keep a running total each month by way of an invoice, a monthly payment statement, or on a receipt. You keep a copy, parents get a copy, doesn't matter if they lose theirs as you can show them the copy :thumbsup:

I show it on an invoice:

Balance from previous month: £xxx

Then a list of all payments received, the date and amounts. These are then deducted from the balance to give the current running total

I then list the care fees due, written as W/c for each week of the following month

Once the balance, payments received and the next months fees have been put together, you have the balance you carry forward to the next month

So for example

Balance for February: £25.00
Payments received in March:
02nd £25.00
09th £25.00
16th £25.00
23rd £25.00
30th £25.00
Rec: £125.00

Care due for April W/c:
06th £35
13th £35
20th £35
27th £35
Due: £140.00

Balance: £40.00

A red figure means parent owes me, a black figure means I would owe parent
so £25 owed at the start of the month =
- £25
+ (Payments received) £125
- (Care fees due for the next month) £140
= (balance of) -£40

Quote:

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Originally Posted by Kiddleywinks

The problem with averaging out in any situation is trying to explain to parents that if they leave/give notice before the full 12 month period is over, then there may well be a shortfall on their part or a refund due from you - they always hear the refund due part of the conversation btw :laughing:

An easy way of keeping everyone informed as to where the finances are at, is to keep a running total each month by way of an invoice, a monthly payment statement, or on a receipt. You keep a copy, parents get a copy, doesn't matter if they lose theirs as you can show them the copy :thumbsup:

I show it on an invoice:

Balance from previous month: £xxx

Then a list of all payments received, the date and amounts. These are then deducted from the balance to give the current running total
I
I then list the care fees due, written as W/c for each week of the following month

Once the balance, payments received and the next months fees have been put together, you have the balance you carry forward to the next month

So for example

Balance for February: £25.00
Payments received in March:
02nd £25.00
09th £25.00
16th £25.00
23rd £25.00
30th £25.00
Rec: £125.00

Care due for April W/c:
06th £35
13th £35
20th £35
27th £35
Due: £140.00

Balance: £40.00

A red figure means parent owes me, a black figure means I would owe parent
so £25 owed at the start of the month =
- £25
+ (Payments received) £125
- (Care fees due for the next month) £140
= (balance of) -£40

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Phew ! I really don't see the advantage to the childminder with spread out payments.
You would be constantly making sure there was money there in case, at a months notice you would be having to pay back money!
You might as well take a little extra per week and have a system where you save the money for Easter, August etc...or aim to eat beans on toast then! ( you have to anyway in case you have to pay it back!)
Am I missing something?

I have 2 parents who pay by average. I have made up an excel spreadsheet which I share with parents. I make all invoices for the year and input the figures in to the sheet then work out the average. I have added columns which show whether the parent is in advance or arrears so we both know exactly where we are at any given point in the year. I have one who does this weekly and one monthly. I find it works well for me and for them.

Other parents choose to pay a variable amount each month and this also suits us.

It really is a personal thing which can only be decided on a case by case basis in my opinion :thumbsup:

Quote:

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Originally Posted by FloraDora

Phew ! I really don't see the advantage to the childminder with spread out payments.
You would be constantly making sure there was money there in case, at a months notice you would be having to pay back money!
You might as well take a little extra per week and have a system where you save the money for Easter, August etc...or aim to eat beans on toast then! ( you have to anyway in case you have to pay it back!)
Am I missing something?

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:laughing: It is definitely a case of each to their own isn't it :laughing:

It looks complicated to begin with I'll admit, but it really isn't once you get going. As Shortstuff does, I have an excel spreadsheet that does the calculations for the whole year, so producing the invoice is little more than 'copy and paste'
Some will accept the spreadsheet printed out, some prefer invoices, some prefer nothing - well, until TC's want to check their claim lol

When notice is given, you work out the next 4 weeks, plus any outstanding fees, less any deposit paid, and that gives you either an amount that needs to be paid, or a refund due to the parent which can be paid from the deposit you've held in a separate account since it was given to you :thumbsup:

I have split my payments by 12 months for about 10 years and during this time I have had to pay money back (school children paying in advance for August holidays within they payment) once.

There are always teething problems when you first start so I would air on the side of caution until your next contract review. i.e. now to end of August invoice based on weeks in the month and Sept to Aug at contract review divide by 12 as you would know your parent by then.

As others have said, you may need to recalculate if they leave, are you confident in doing this?

On my contracts I put "should this contract end before 31st August then fees may be recalculated based on time used and monies paid"

Thank you everyone! You've all certainly given me a lot of think about. The whole issue is still really confusing to me, I tend to learn by doing, but my patient partner has been told that he has to help with and double check all my calculations before I show them to parents. :) We liked the ides of averaging out over 11 months instead of 12 (if we do decide to average) and keeping a running total on the monthly invoice just to keep things clear. Thanks guys!

195 working days in a year?

I have five weeks a year off so I do my calculations on 47 weeks x 5 days for a full timer which is 235 working days. Don't do the calculation on 11 months because then it gets confused because there are 4 and 5 week months. Do it on the full 12 months 52 weeks less your holidays.

I do the same as rickysmiths , less a few extra days for bank holidays. Most of my parents are teachers and so I use the school year for m calculations. A parent starting now would be calculated until 31st August , then recalculated from 1st sept..that way its much easier to keep on top of than everyone having different 'accounting periods'.
The only time I foresee any issues is if I take any sickness time off , how do I refund , Im not supposed to refund in cash to the parents as there are tax implications. Touch wood Ive never had to be off sick in 5+ years.
As for owing or being owed payments at the end of the contract, parents deposit will usually more than cover any they owe.

I don't have any parents whose fees are covered by their Voucher payments. They all have to top up so any refunds are not a problem. If they are maybe account for them at the end of the year and reduce the first payment of the new accounting year?