Schar & Loan Receivable Mgt Issues    7401-02     ZZar

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                            TO:  Interested Schools                                                                                FROM: Jim Bramer, Retired Auditor-CPA
                                                                                                                                                         FILE:  7401-02/schar

                             RE:  Schar & Loan Receivable Mgt  Issues                                            Originated:  January 2002

          Below is a hypothetical Online Email thread (THRD) between  and one of the these MFTeam members: PAT (Ministry Executive), LEE (Ministry Volunteer Board Treasurer), and FRAN (Ministry Computer Bookkeeper)  

From:  Pat - 
            I am the School Principal. Both the School Board Chairman and I are frustrated. We have read your IRISH story so we see that you identify with our frustration. 
            As School Principal my primary mission is to give leadership to educating our students from a Christian setting and viewpoint. I know that I have to deal with the issues of facility, staff and the general topic of finances (you know that very challenging budget process) to insure that we have such resources to carry out the Schools purpose or mission.      
            But when it comes to dealing with a Dad/Mom who does NOT pay their bill as promised .... and concurrently coping with their recalcitrant child and related matters .... I really struggle. 
            As shared with the School Board Chairman, I had three situations with parent and child very much like this within the past month.  And, frankly, I can not get as firm with Dad/Mom about paying their bill as I should ....  I simply am not a good Bill Collector within context of what Dad/Mom and our Student are going through as I try to counsel with them.
            Surely we at the School have some alternatives in getting our money so we can pay our bills ..... do you have any suggestion?

To Pat from: 

    Let's refer to Dad/Mom above as the "Late Payor." And, of course, we all realize that in a College setting you preferable will be dealing with the student;  plus sometimes a non-parent assumes these kind of responsibilities. 
    Some schools transfer from ground zero the whole process to a third party, or they retain some other entity to do the entire Tuition billing and collecting process.  Please  Click here   for relevant information that includes a list of such resources.
    This, of course, takes care of some of the concerns that you have expressed above, but some of the negatives, other than the expense itself, include:

  •    This process almost always covers just Tuition and the School still must deal separately with charges or fees during the year that the parents incur and pay to the School - or the School has to have some type of billing and collection system and manage such matters anyway;

  •    The School does not track Mom/Dad's payment activity and when a "Late Payor" has a financial crisis the School and its people can not be of some help; 

  •    Dealing with this separate entity could be viewed by Dad/Mom as too impersonal and mercenary; 

  •    When a school deals with Dad/Mom concerning finances they might get a flavor of why their children are the way they are, etc;

  •    And, most importantly,  the School does not have another opportunity to deal with the most important people in the life of their Students.  

From: Pat --

                Yes, I see your list of negatives and I hear you , but the whole idea of having someone else who functions as a buffer in billing and collecting at least the Tuition from the Parents, which is the largest portion of what they owe us,  sure sounds like a winner to me.    

From: Jim --- 

    Right on.  But there are some other options that counteract many of the negatives above.  
    As we pursue such options, the first issue is that all parties involved MUST recognize and acknowledge that when the monthly payment is late, the School loans money to Dad/Mom, or the Late Payor.  Or the unpaid balance converts at some agreed point in time  from a regular amount due to a loan -- the School has loaned some money to the Late Payor and they now must repay a loan.

From: Pat --

                I'll have to think about that ......  but I guess that is right, but we would need to make that very clear when Dad/Mom registers and agree in writing with us as to when and how they are going to pay their monthly unpaid balance.  

From: Jim --

    Correct.  But your options that are explained next go on the premise that the Late Payor has voluntarily chosen to  NOT pay their bill on time and have in essence borrowed some money -- including the facts that they incur a Loan (Late) Fee and from that point forward they owe interest on a loan, etc.

From: Pat --

                Ok ... that makes more sense now.  Please share more about how we go about all of this and ultimately get paid so we can pay our bills.

         From: Jim --

                   First, let me lay down some "Foundations:"

  •     Give appropriate consideration to transferring the loan to your Credit Union; See  7888  and look into a possibility of something like this.

  •     The School could have a separate School department for this purpose which we call the Loan Company which operates as a DBA (doing business as) of the School

  •     The School Loan Company would have it's own set of books and could righteously appear to Late Payers as unrelated to the School.

  •     The management of the Loan Company could be transferred to some other appropriate Online third party which we will call an Outsourcer.  Learn about Outsource HOMERs such as Stay at Home Moms or Keenagers when you go to  0905 . --- or even your CPA Company. 

  •     If this is done, then the set of books of this School owned Loan Company  would be available to both the School and the Outsourcer  via the Online service called  QBOE via the Web

  •     The significance of this is that the Internet allows both the School and the Outsourcer  to have access to the same set of books which show the most current status of such loans.

  •      Bookkeeping tasks for the School's  Loan Company would be shared by the School and the Outsourcer.

  •      The School would accommodate the Late Payer and process payments at the School that are due to the Loan Company.

  •      The Outsourcer  would manage the School's Loan Company and virtually function like any commercial or collection agency endeavor, within the School Board policies.

  •      The School would have a Board Committee managed CRISIS FUND that assists Late Payors  when they are coping with a financial crisis that is not of their making.  The money for the CRISIS FUND comes from School fund raising endeavors and possibly from the Operating Fund.  This allows the School to be a  'friend'  to appropriate Late Payers owing money rather than the  'enemy.''

From: Pat - - - 

      Wow, having a separate Loan Company sounds like a lot of red tape and work!  But it seems to offset many of the negatives that you mentioned above.  Can we implement only portions of what you suggest?

      From: Jim  - - -

             Absolutely ..... not all Schools have the same needs. Please analyze the following Methods:

Method One

        This method embraces almost all of the foregoing because they were having some serious delinquent loan and Bad Debt difficulties.  Yet they are not comfortable in turning over the Tuition billing and collecting to someone else.  It is necessary to retain an Outsourcer (like the CPA Company) mentioned above to implement the process and get it  across to the Late Payor that they really did borrow money from the  School at a  point in time. Plus they have to make payments in the manner that they agreed to in writing at the time of registration.

Method Two

          The Bad Debt and delinquent loan problem was lessened so we started to use this method.  It is virtually the same as Method One, but the Outsourcer  was not involved so it was not necessary to use the  QBOE via the Web  facilities.  The set of books for the School's Loan Company is a separate QuickBooks system from that of the usual School's QuickBooks set of books.  Late Payers are handled by assigned School Board members - not the School Principal.

Method Three

         The School  Loan Company's  system/features and approach are pretty much the same as the previous method, but the amounts due the Loan Company are integrated within the School's QuickBooks set of books; there is no separate QuickBooks sets of books for just the School Loan Company.  Please go to  0658  for more details of how the School could have within it's own set  of books three separate Schar Control accounts.  

>>    The usual School Account Receivable (Schar)  Account  for current unpaid amounts due - which are moved to the Loan Receivable account below when they become a loan; 
>>     The Loan Receivable account which requires our rehearsed special attention, etc.
>>     The Prepaid Tuition account where amounts are transferred to income when earned.

From: Pat ---

                    As I study this, I can appreciate more and more the fact that Dad/Mom have borrowed some money from us when they do not pay their unpaid monthly balance on time.  Thank you for making that such an important issue in what you have shared above on these matters.
                    Also, I appreciate the fact that you are sensitive to our having a healthy relationship with the parents of our students and some of it can only come about if we relate to them regarding what they owe us.  Having a means of helping parents in a financial bind makes real sense to both the Board Chairman and myself.

From: Jim - - 

    As you pursue the Methods above,  I also recommend that you  click here  and study other School Account Receivable  (Schar)  resources on this web site. 


CPA = C)ertified P)ublic A)ccountant
Crisis Fund = Money collected by the School to assist applicable Late Payers
DBA = D)oing B)usiness A)s 
Irish Story = depiction of a parent having both child and finance problems at a School
Late Payor = People responsible, usually a parent,  for monthly unpaid School Tuition and Fees who do NOT make payment on time as the School ends up loaning them money.
Loan Company = Department, or Division of the School
Outsource = having a third party perform some duties/tasks for you
Schar = Sch>ool A>ccounts R>eceivable
School = Private School who charges Tuition and Fees

    Please  Click Here  for some additional "Schar" resources on this web site. The bulk of this Publication originated in January 2002.  Click here and go to List of threads (THRDs) at  UPTD: March 09, 2012