Do you find yourself constantly amending invoices, spending too long on admin and getting invoice queries from families?
If your answer is yes - I'm going to guess that it's based on your billing method.
This guide will show you what billing methods are available, their pros and cons, and which ones you should be using in your service.
What Billing Methods Are Available?
When dealing with the Childcare Subsidy, there are 3 main ways to bill families.
Billing in Arrears
Billing in advance, but administering CCS in arrears
Billing in advance, and estimating CCS.
Let's go through each of them.
1. Billing in Arrears
Billing in arrears means billing families AFTER they've received care - i.e. if a child attends childcare in the first week of term, the centre bills them the second week.
Pros
The main benefit is that what's stated on the invoice is EXACTLY what has been had. This means that the only reason you may have to amend an invoice is for human error.
If a family decides to change days/times, or pick up casual days for a week, the service has the flexibility to help the family without needing to amend their invoices or do any extra admin work.
Cons
There are a couple of disadvantages to billing in arrears.
The first is that you have to wait longer to get paid, which has a minor effect on cashflow. However, if you can't get by billing in arrears because of cashflow issues, you have bigger problems than your billing method.
The second is that it means that last bill comes after a family's last week at the service, which means they could be tempted to skip the last bill and try to avoid paying any debt. However, this can be easily avoided by taking a bond at the start of the enrolment and/or utilising debt collection services.
2. Billing in advance, but administering CCS in arrears
Billing in advance means that the family pays BEFORE they have received care. When you bill in advance, but administer CCS in arrears, families will be billed their full fee in the first billing cycle. Then, in the next billing cycle, the CCS from the first billing cycle will be applied to the invoice.
Sound complicated? Let's explain with this table.
Week 1 | Week 2 | Week 3 |
Full Fee | Full Fee - Week 1 CCS | Full Fee - Week 2 CCS |
e.g. $100 | e.g. $100 - $50 = $50 | e.g. $100 - $50 = $50 |
($50 CCS) | ($50 CCS) | ($50 CCS) |
Why do people do this? Let's go through the pros and cons.
Pros
Billing in advance is good for getting cash upfront and preventing debt. Administering CCS in arrears is good because it saves admin time. This way, you're getting the benefits of both.
Cons
Whilst getting cash upfront is good for the service, in can be a bit of a deterrent for families. For instance, when you get the first bill of $500, after paying a bond and everything else, it can be a bit of a temporary financial burden on the family. This is particularly an issue for services based in lower socio-economic areas or for families that receive a high amount of CCS.
It also may mean small issues for families picking up casual days. For every casual slot booked, the service may have to generate a new invoice, or amend future invoices, leading to more admin work.
(Thankfully, OWNA automatically carries over casual booking payments to future invoices, leading to less admin work)
3. Billing in advance, and estimating CCS
When a child attends the same days every week, we can guess how much CCS they will be entitled to. As a result, many services will bill in advance and just 'estimate' how much CCS they'll get. In most cases, the estimation is correct. But not always.
The department recommends that you don't estimate CCS. Let's go through the pros and cons to see why.
Pros
This method allows services to bill in advance without the increase first invoice, so it's a bit easier to swallow for families initially.
Cons
Estimating CCS can be a nightmare when it doesn't go right. When families pick up casual days and go over their entitlements, go over their allowable absences, or when their circumstances change, it can lead to a mountain of extra admin time rectifying invoices and is not recommended by anyone associated with the Child Care Subsidy.
So, which method should I use?
The No.1 priority is to make sure you save admin time, and bill families correctly.
If you can, try to bill in arrears. But billing in advance is ok as long as you don't estimate CCS.
I'll repeat myself again. Please try to avoid estimating CCS...