Education providers across the globe, from schools to universities, are being threatened by the constant impacts of late payments on their cash flow and resources.
Around 80% of all invoices issued by educational providers are paid late, causing a cash flow crisis that can significantly impact their operations and ability to provide top-quality education.
Adding to that pressure is the time and resources that need to be spent chasing overdue payments and managing late payers.
The 2022 late payments report research shows that 40% of respondents from the Education Management industry spend seven or more hours managing accounts receivable tasks every week. That extra time spent chasing late invoices adds up to 364 additional hours each year that could instead be spent on more crucial tasks, focused on providing top-quality education for students.
Education providers spend 364 hours every year following up on late payments from students and parents.
Education providers also have specific pain points that make collecting late payments even more challenging. Chasing families struggling financially or students taking their first steps toward independence and learning financial responsibility can be uncomfortable.
However, with the right tools, educational facilities and universities can manage their accounts receivable quickly and efficiently while ensuring that family or student relationships stay healthy.
Whether you're a school looking to streamline your billing process or a college or university that needs to track and manage tuition fees, this blog post will provide you with seven practical steps you can take to improve your accounts receivable process and combat the growing problem of late payments.
An often overlooked aspect of accounts receivable management for education providers is the need to have a comprehensive and easy-to-understand payment policy in place.
By clearly outlining the cost of tuition, fees, and other associated costs, such as late payment penalties or service charges, you can help ensure that parents and students are fully aware of what they owe before receiving their bills.
This helps you manage your receivables effectively but also helps to maintain good relations between you and the parents or students by providing them with clear and concise information about what they owe and when it needs to be paid.
These payment terms should be communicated and ideally agreed upon by the student or family during the course of the enrollment process via a signed contract. This ensures everyone is on the same page, and no one is surprised by unbudgeted costs when bills arrive.
Should a billing dispute arise, having a transparent credit control policy that has already been agreed on by all parties can help alleviate misunderstandings and resolve any disputes with the minimum amount of administrative work.
When it comes to creating concise payment terms, it's critical to be thorough and detailed without using so much legal speak that the document is difficult to understand.
Here are some key points for creating your payment terms:
It's always a good idea to include your payment terms and conditions in a separate section at the end of your invoice. This way, your customers are reminded of them each time they receive an invoice and can refer to them if needed.
By creating a payment terms and conditions section, you can set expectations for how your customers should make payments, reducing any potential bill shock and allowing parents and students to budget and plan for payment in advance. This reduces the chances of invoices being paid late and mitigates the administrative cost of providing policy details on an ad-hoc basis. See a summary of everything to include on an invoice here.
As customers of all kinds, including those in education, become more digitally native, providing payment options that cater to different preferences is becoming increasingly important.
Schools should ensure they provide a range of payment options, from traditional methods such as cheques, standing orders, and direct debit to more modern methods such as Stripe or Apple Pay.
By making it as easy as possible for students or their parents to pay their invoices on time, you can reduce the number of late payments and administrative costs related to chasing unpaid invoices at your school, college, or university.
Implementing a payment portal that offers multiple payment options while also collating all the required payment data together in one place is an excellent way to streamline the process. This will make paying much simpler for your customers and help you manage cash flow more efficiently.
Parents and students will be able to see their outstanding tuition fees or other debts and make payments quickly via an online portal. This can be a great way to encourage timely payments, as students will not have to worry about the hassle of manually writing out cheques, transferring money between accounts, or making payment over the phone.
Options such as Stripe and instant bank transfers are popular payment options with low transaction fees and simple processes, allowing customers to pay with a few clicks.
Offering your customers a simple and streamlined payment experience can help boost your reputation, as well as show that you value their time and understand the importance of convenience. By making payments easier and quicker, you can help reduce delinquency rates and drive customer satisfaction.
As mentioned, one of the knock-on consequences of late payment is the increased administrative burden placed on accounts receivables teams.
Having to spend an additional 364 hours per year chasing up late payments means that valuable time and resources are being taken away from other departments or duties.
This additional strain makes it all the more important that education providers streamline and improve their invoicing process. Taking a proactive approach to sending out invoices on time will help to alleviate the pressure placed on teams and ensure that payments are made as quickly as possible.
Ensuring accuracy and transparency in the invoicing process is also essential. This includes ensuring that invoices are correctly drafted, have a clear due date, and contain all necessary information, such as payment terms and contact details. While this may seem like an obvious point, there have been many cases where businesses have suffered financial losses due to invoice discrepancies or errors.
Given that accounts receivables teams are already under additional pressure, reducing the number of errors in invoices can help to reduce this burden.
When creating an invoice, it is crucial to be aware of best practices that can help to reduce the chance of errors.
These include:
Adopting these best practices can help to streamline the invoicing process and make it easier for your business to collect payments on time. Additionally, it will also help you to stay organized and build a good relationship with your clients.
Focussing on building excellent relationships with parents and students is a critical part of running a successful educational institution. Word of mouth and positive feedback can help your school to attract the best students, grow and thrive.
Generally, tuition payments are large and can be difficult to pay in a single installment. Offering an installment plan will make it easier for your customers to pay the fee on time without having to worry about making a large payment all at once.
The benefits of offering installment plans are two-fold. Firstly, it increases the likelihood of parents and students paying the tuition fee on time since they can break up the payment into smaller amounts. This helps to prevent unpaid bills from turning into bad debt, as customers have a greater number of payment options available.
Secondly, offering installment plans signals to your students and their parents that you are willing to work with them to meet their financial needs. This helps build trust and strengthens relationships. It turns a potentially difficult situation into one that is manageable and that parents and students can feel comfortable with. Parents and students are more likely to appreciate the service you provide if you are willing to be flexible when it comes to accepting payment for tuition fees.
By showing consideration for your customer's financial situation, you can build long-term loyalty and turn late payers into evangelists for your school who can spread the word about the quality of your services.
Payment plans are a complex and delicate undertaking. It is important to take the time to develop a plan that meets both your needs and those of your customers. However, there are some best practices that can form the foundation of your plan.
First, you should aim to set up a payment plan that is based on the customer’s individual financial situation rather than a blanket policy across all customers. This way, each customer can be offered more tailored terms that better reflect their needs and might lead them to more readily agree to the payment plan.
Second, understand how you will handle late payments. Will you charge additional fees or interest rates? Will there be a penalty for failing to stick to the plan, and if so, what type of penalty? It is important that these terms are clearly laid out and communicated with your customers in advance.
Finally, make sure you ensure efficient communication with customers regarding the payment plans. Keeping on top of payments and updating customers on their progress is essential for maintaining successful relationships with them.
This could be in the form of automated emails or text messages that remind your customer when a payment is due or simply by offering regular check-ins to discuss their progress with meeting their financial obligations.
By adopting these best practices and clearly outlining the next steps if students or parents fail to meet agreed-upon flexible payment plan conditions, you can offer grater flexibility while receiving reliable installment payments from customers.
With late payments being so common in the educational sector, having a robust policy in place is essential. Having a credit control policy outlining the policy and procedures for late payments is key in ensuring that customer accounts are managed swiftly and efficiently.
Making sure your staff members are fully aware of the policy and procedure for late payments will help to ensure that any issues are managed quickly and efficiently.
Be sure to include processes such as:
Using a comprehensive credit management policy as the foundation for your accounts receivable management will help ensure that payment issues are dealt with in a timely and effective, and consistent manner, reducing the administrative burden on your school or university’s finance team. It will also help to protect your business’s reputation and financial health by providing clear guidance as to how you handle late payments.
It’s important to regularly review the policy, update it as needed, and communicate changes to staff members as they come up so everyone is on the same page. Having a consistent approach to managing late payments will help create an expectation of prompt payment among your customers and make them more likely to pay their invoices on time.
If you don't currently have a credit control policy in place, then Chaser's credit control policy template can be used as a starting point from which to build your own.
Keeping on top of overdue payments and analyzing payment trends can help you stay ahead of any issues that might arise.
Track the payment behavior of each customer, review their past invoices to identify any trends in late payments, and compare your customers’ payment performance against industry benchmarks.
This will provide valuable insight when it comes to creating or updating your credit policy or terms of payment. It will also help you adapt your approach to that particular parent or student’s late payment in light of their typical payment behaviour.
Understanding why customers are not paying on time can be critical in determining the appropriate course of action. For instance, if a customer is consistently late due to cash flow issues, you may wish to consider payment plans or other arrangements that make it easier for them to pay on time.
By developing an understanding of your customer's payment behavior, segmenting your customers based on these behavoirs, and putting measures in place to ensure timely payments, you can help to improve your cash flow and reduce the risk of unpaid invoices.
Implementing key performance indicators (KPIs) can help you to track customer payment behavior and identify patterns. This data can inform decisions on when and how to follow up with customers who have not paid on time, as well as provide a better understanding of why payments might be late.
Some relevant KPIs include:
Accounts receivables KPIs can help you identify problem areas, such as customers who aren't paying on time or customers who are delinquent in their payments. Using these metrics, you can get a better understanding of how efficient your accounts receivable process is and take steps to improve it. Track your accounts receivables KPIs using this free tracker for Google sheets and Excel.
Automation is a crucial component of improving your accounts receivable process. By automating payment reminders, you can ensure that customers are reminded to pay their invoices on time. This can significantly reduce the amount of time it takes for customers to pay and help improve the overall effectiveness of your payment collections process.
Using automation also reduces the need for allocating staff resources to chase customers about payments manually. This can help up staff time for more productive tasks and optimize overall efficiency.
Chaser's automated credit control system can be tailored to your specific business needs. Our software is easy to integrate with existing accounting systems and allows you to set up automated payment reminders for customers that fail to pay on time.
By automating this process, you will save time, money, and resources while still ensuring that customers are reminded of their payments. Chaser's customers save, on average, 15 hours per week on credit control while getting paid sixteen days sooner!
One unique method schools, colleges, and universities have to reduce the chances of late payment is by offering financial aid or scholarships. This will reduce the burden of tuition fees for students or their families, and help them to pay on time.
Scholarships are also an excellent way to attract new students and enhance your institution's reputation. Setting up a financial aid team can help communicate the funding options available to students and provide them with necessary assistance in understanding and managing their tuition fees.
The easy-to-implement steps above will help to effectively reduce the likelihood of late payments while also freeing up administrative time and resources.
However, if late payments still occur, it is important to have a strategy for dealing with them. If possible, try to reach out to the student or their family and discuss ways that they can pay off their balance. This could include offering additional payment plans, providing evidence of scholarship eligibility, or eligibility for financial aid.
Open communication and flexibility are key to combating late payments for educational institutions. It is important to be understanding while setting clear expectations and timelines for payment. A combination of clarity, transparency, and empathy can go a long way in helping students and parents to pay off their balance.
Establishing an effective credit control policy can not only help drive on-time payments, but it can also help maintain positive relationships with students and parents.
By automating the accounts receivables process, education providers can reduce the administrative burden, and proactively follow up with late payments automatically in a sensitive way, without losing the human touch.
Organizations have been able to save over 15 hours per week without compromising on client relationships (see Love Brand’s story), and get their fees or invoices paid 54 days faster (see FHC’s story). See how your school, university or college can reduce late payments and save time with accounts receivable automation. Try Chaser for free, for 14 days (no card details required).