Ross Midgley of the Crocus Early Years group offers some practical ideas for managing payments by voucher.

I recently attended a policy forum at which a range of providers, small and large, met officials from DfES, Treasury and local authorities. We covered a range of issues from children’s centres to top-ups, but when the conversation turned to vouchers I was amazed to hear so many complaints.

One large provider was upset by the multiplicity of different schemes and the fact that the government had just increased the monthly tax-free limit from £217 to £243 at very short notice. Smaller providers complained about red tape in registering for new schemes, or said that delays in redeeming vouchers were causing them severe cash-flow problems.

The introduction of tax relief for employer-supported childcare has been a massive boost for the PVI sector. Working parents booking full-time places for their children can save between £1,000 and £1,500 per year each, depending on their tax bracket, simply by opting to receive part of their salary in the form of tax-free childcare instead of taxable cash.

Numbers on this scale make a real difference to the affordability of day care and should be significantly helping providers either to increase their margins or (for those who take a longer term view) to increase their investment in staffing, catering and equipment.

I don’t claim that the system is free of irritations. Yes, it would have been nice to have had a little more warning of the new limits, to give us time to tell parents. Yes, it would be good if the voucher providers could agree to identify each payment, so that we can allocate it straight to the right account rather than having to guess who it relates to or waste time on the telephone or internet trying to find out. But these are minor issues compared with the overall benefits of the scheme.

Registering

Registration with a new provider is simple. The majority of vouchers which a nursery receives will come from the three or four largest providers, but there are more and more players in the market and you may come across new ones from time to time. When you do – unless the parent or their employer has done the work for you – you will need to contact the voucher company and obtain a registration form.

After that, the process is usually the same – you complete the form and give details of your Ofsted registration and the bank account into which you want the funds to be paid. Once the setting is registered, that should be that – it shouldn’t be necessary to fill out new forms for subsequent children.  

Cash flow

As for cash-flow problems, these should not be laid at the door of voucher schemes. Even if the money arrives a week or two later than before, at least it is sure to arrive – and for any nursery operating really close to the edge, that certainty should make it easier to arrange some working capital facilities with the bank.

Why are there delays?

In my experience, the main reasons for delays in getting vouchers redeemed are postal problems. Another reason can be that parents who see that their salary has been reduced, automatically assume that the money has been paid over to the nursery – whereas in reality they are just building up a credit balance with the voucher company which they have to take positive steps to transfer. Most parents would rather see the money in the nursery’s bank account rather than the voucher provider’s – if they can’t have it in their own!

Resolving difficulties

It is up to you to be proactive in dealing with problems as they occur.

  • You can avoid postal delays altogether by encouraging parents to adopt electronic redemption.
  • You can help educate parents about the workings of their chosen scheme, and work with them to set up a convenient date for funds to be transferred from the voucher company each week or month.
  • Try including some broad-based information in your prospectus, and draw all new parents’ attention to this. Send out a note to all parents when there are changes.
  • If the voucher companies are making life hard for you, complain. After all, it’s a competitive world, with lots of choice. If word gets back to employers that one voucher scheme is a nightmare while another works like clockwork, it’s not difficult for them to change. Write to the CEO of the voucher provider and explain how you would like the system to work for you.

Grab the opportunities

Don’t forget that you don’t need vouchers to attract tax savings – it is just as effective for employers to contract directly with childcare providers. For large employers, the common currency of a single voucher scheme will usually be convenient and justify the administrative fee. But for employers with smaller numbers of staff, who may use just two or three local nurseries between them, there is a lot to be said for dealing direct.

We have many such arrangements with employers, for which we make no charge – unlike the voucher companies. The companies pay us by direct debit on the due date, which is good for our cash flow.

But this isn’t just about securing payment from existing parents. Try contacting local employers and arranging meetings with their human resources managers. If you aren’t confident about explaining the workings of salary sacrifice, get your accountant to come along with you. You could even put on seminars with local accounting firms to explain not just vouchers, but early education grant and tax credits as well.

Vouchers are good for affordability and cash flow, and offer a great way of promoting your nursery to a lot of potential new customers. That’s worth a few administrative hassles.

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