A casual acquaintance needs a day care center to watch their child. You agree to take on another child. However, the parent asks if you can wait for payment until they get their next payroll check. You need the child, and you don't want to offend a new client, so you agree to wait. Two weeks go by and the parent calls telling you that they found someone cheaper to watch their child and will not need your services. The parent also informs you at that time that their child left a very expensive doll at your day care center and asks to come and pick it up. In the meantime, you still have not been paid.

Ethical Question Would you let the parent come and pick up the doll, or would you tell the parent they can have the doll when their account is settled?

Pros Most likely, the parent will come up with the money somehow, as their child is probably upset at the loss of their doll. You will not have to spend time in court trying to collect on a bad debt. You will not have to write off a bad debt. You will not have to send out monthly statements, and call on the phone to try and collect a bad debt.

Cons If the parent can't come up with the money right away, the child will be upset for the loss of their doll. Is this fair to have the child's items be held for lack of payment on the parent's part? The parent may get upset and tell many people about the situation in their own view. You may loose other potential clients because of the bad publicity that could arise from this.

Can this be avoided? This can be avoided. However, you must be firm and in charge. No matter how badly you may need a child placed in your daycare center, unless the parent or guardian is responsible and can pay on time, it is not worth your time. You need to be very careful when thinking about extending credit. While you may want to be nice and bend the rules a little, many people will take advantage of you and not pay.

Keeping your business in the black instead of the red requires good money managing techniques. · One of them must be collecting from customers in a friendly but firm manner. · If at all possible, don't extend credit. · Offer pre-paid discounts to get the money into the business faster. · Keep records of customers that owe you money and how long overdue-don't let anyone get more than 30-60 days overdue. · Have customers pay every week in advance, this way they are always ahead instead of behind. · Send out monthly statements. · Charge interest on monthly statements. Make sure to write the interest charge that may be charged for past due bills on the bill that the customer gets.

I hope you have never had to deal with this situation. Hopefully, if you have a policy in place, you will never have to deal with this problem. Preplanning really pays off.