The information you submit via our enquiry form is shared only with the franchise business that you have selected.

The franchise business will contact you by means of email and/ or telephone only to the email address and phone number you have provided.

By submitting the enquiry form you are consenting to send your personal information to the selected franchise business.

You also agree to receive further newsletter email marketing from What Franchise.


How to prevent late payments

How to prevent late payments

Late payments can negatively impact cash flow and growth, but there are ways to prevent them, Nikki Th’ng, CEO and founder of ClassForKids, says

For many franchisees in daily contact with their customers, the mere thought of having to chase people for late payments far outweighs the long wait for funds.

In fact, for many it’s both gruelling and painful to come down hard on customers who don’t pay on time. But it’s a big concern for a lot of franchises. Many are running small, busy businesses and are balancing the pressures of work and being selfemployed with family life, so waiting around for long overdue payments can cause issues with cash flow, not to mention stifling business growth.

The harsh fact is, late payments are estimated to cost the UK economy around £2.5 billion a year. The Federation of Small Businesses estimates that one in three payments to small businesses are late and that business owners can spend an average of 1.2 days every month chasing those payments.

‘Pay later promises’ don’t work

In the children’s franchise sector particularly, the late payment culture is an ongoing worry for many franchisees, who are often managing hundreds of busy parent customers all with their own set of daily family hurdles.

There are a number of reasons for late payments in the children’s sector and we’re all aware parents and families with young children often lead complicated and hectic lives.

As customers, parents have many competing priorities and a long list of things on the ‘to do’ list. Reminding them to make a payment for a club or to confirm a space on a class for their child is just another thing to remember - and as late payment mentality suggests, they don’t always do that.

What needs to start happening more often - and it’s happening slowly, thanks to technology and updated processes - is that franchisees need to stop allowing people to make bookings without payment. The two should go hand in hand - you pay and you’re booked onto the class or session.

It sounds straightforward common sense, but it’s amazing how often this doesn’t happen and that’s where the problems begin.

Money gets in the way of relationships

Human nature and our natural desire to avoid conflict and confrontation mean chasing payments is often our worst nightmare.

The time it takes to chase money owed, worries over handling it correctly and whether it will inflict potential damage on relationships can make it feel like more hassle than it’s worth.

Relationships are key in the kid’s activity market. It’s equally important to create strong bonds with the parent and the child. Both are key decision makers.

Franchisees are great at talking to parents about their club, the activities they run and the children who attend, but they’re not always great at talking about money. It gets in the way and is often seen as the negative part of the parent experience.

Franchisees are, however, beginning to adopt different approaches to payments, especially when chasing them becomes time consuming and negatively impacts their cash flow.

Engaging with customers and forming good relationships is the nature of any franchise business, one that doesn’t correspond well with repeatedly asking customers for the money they’re owed.

In what is a competitive market, franchises are often nervous about a whole raft of issues, whether it’s their pricing, communication with parents or booking processes. Franchisees also fear losing customers to lower cost competitors with simpler processes, although that’s no different to many other business sectors.

Despite this, franchisees are often worried that using technology to simplify the booking and payment process, thus automating more of these interactions, means the relationships with parents will suffer.

The reality is, by removing that part of the conversation franchisees can speed up payments and spend more time discussing the child and parents’ ambitions and make changes to classes and experiences accordingly.

Technology to support customer retention

In truth, parents like things to be simple. They’re comfortable using technology and they readily use online platforms to pay for all manner of things on a daily basis.

As with many other industries that have moved online, the children’s franchise sector simply has a degree of market normalisation to go through.

Many franchisees have switched to subscription-based payments as a result of this burden, which is in effect a form of direct debit, to eradicate this problem and remove themselves from the unwanted ‘debt collection’ role.

Certainly in the children’s activities sector, technology continues to respond to an increasing need to secure payments before booking and franchisees now have more options available when it comes to ensuring their bookings are genuine.

Asking for payment upfront alleviates the chance of no shows and wasted spaces, as well as eliminating any payment chasing over the term.

Uncertainty is the biggest impact

The biggest impact of late payments is always going to be the uncertainty.

Predicting cash flow is crucial for any business, big or small, to help make decisions on marketing, pricing and growth. In a franchisor or franchisee relationship, it also has more complex implications surrounding trust and transparency.

Franchisees and franchisors are increasingly looking for data to be transparent and for reports to show more than just the basic financials. They’re now looking for insight beyond the finances. They’re asking about growth and conversion rates, repeat custom and drop off and are trying to understand how business behaviours tie in to these results.

The amount of admin time franchisees spend chasing earned revenue places real and costly constraints on their businesses. This is time that would be better spent investing in training coaches, running marketing campaigns, engaging local schools and community groups or any number of other ventures that contribute to business growth.

Wasting valuable time on a basic operational function like getting paid is unfortunately a growing problem for businesses today, but it’s one that can be resolved in many cases.

Reducing late payments

How can you reduce late payments? The simplest thing is to insist on booking up front to confirm a place. Though this sounds obvious, we’re finding that the majority of franchises are now looking for systems that support this behaviour.

Simple sales tips like adding a sense of urgency can have a big effect on late payments. It’s always worth being clear about a payment deadline at the time of booking.

The majority of admin processes for franchisees can now be automated, which leaves the issue of invoicing.

In the case of those children’s activity franchisees that allow parents to book in to their classes without paying upfront, they can expect regular invoice chasing and often manual tracking across various payment methods. Keeping things simple and consistent removes a lot of the burden.

Being able to see at a glance who has debts outstanding can also help speed up late payments and automating your invoices to these customers can make a huge difference to admin workload and organisation.

Sending outstanding invoices through multiple messaging channels is also worth trying. We found that introducing invoices by text message - with a link to pay online - had a big effect on payments.

Must Read Articles

View all Business Advice

More from our business portfolio

  • Global Franchise