Business development

Easier billing for parents and your setting

Matthew Martin from Little Beehive on why they’ve moved to annualised billing
A portrait photograph of author, Matt Martin, on a purple background. The white text reads: Easier billing for parents and your setting.
March 28, 2023
Reading time:
min.
a light bulb with the letter p inside it

a black and white image of two hearts

famly icon - piggy bank

a black and white image of two houses

setting

s

a black and white image of a bunny and a bottle

children

a black and white heart icon

With Famly since

In a rush? Here’s the quick run-down.

  • Matt Martin, Business Development Manager at Little Beehive Nursery, noticed that parents could see their fees fluctuate by as much as 20% from one month to the next, due to the differing number of days.
  • To support sustainable budgeting and prevent parents from getting into debt in expensive months, Matt chose to annualise parents’ fees.
  • Annualised fees are also beneficial to you as a setting, as you know exactly what’s coming in each month, and don’t have those fluctuations in revenue.

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.

A mac laptop next to a brown notebook with two pens on top.

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.

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.

A silver mac laptop and office items on a white desk.

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. 

The big ideas

Annualised billing: a case study

From August 2023, we are introducing a fairly significant contractual change in our settings, where we will now be closed to children for in-service training days. We see these training days as critical to the improvement of the service, so we are going to charge our parents and carers for them.

If we were charging a day rate, where parents are charged for the sessions they use or have booked, we would have two potential ways of approaching this change. 

  • We could increase their daily rate by about 2% (to cover the cost of closing on those days)
  • We could charge them for the days as normal

However, for annualised bill-payers, we simply close for the training days and their monthly bill can stay the same.

All three of the above options have the exact same outcome, but from bill payers' perspective, the third option is far more palatable.

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.

Matt Martin is the Business Manager at Little Beehive, you can reach out to him at matt@littlebeehivenursery.co.uk

download pdf
graphical user interface, text, application
Official Danish Government Reopening Advice

Guidance from the Danish Health Ministry, translated in full to English.

Picture of a Guidance document
UK Nursery Covid-19 Response Group Recommendations

The full recommendations from a working group of over 70 nursery chains in the UK.

Please note: here at Famly we love sharing creative activities for you to try with the children at your setting, but you know them best. Take the time to consider adaptions you might need to make so these activities are accessible and developmentally appropriate for the children you work with. Just as you ordinarily would, conduct risk assessments for your children and your setting before undertaking new activities, and ensure you and your staff are following your own health and safety guidelines.

Learn more about Famly

Find out below how Famly helps Maggie & Rose sort out their invoicing and finance issues at the press of a button.