The Business Of: e-payments
A step for districts going paperless is to stop accepting cash or paper checks from parents. Many school systems have had vendors set up secure online portals where parents can pay for AP courses, lunches and field trips, among other items.
“It is about creating a consumer experience for parents,” says Douglas Solomon, the senior vice president for FACTS Management Company, a tuition payment solutions provider. “This is how they manage so many other areas of their lives and they think it is terrific they can do it with their schools, too.”
E-payment portals let parents and districts track transactions, see payment histories and handle receipts via email or text. Here are the decisions district leaders must make in order to reap the benefits of e-payments:
1. How should we select a vendor?
Several considerations should be made when selecting a vendor. Any legitimate processor should have certain security measures in place to protect the district’s bank information and parents’ credit card details, says Solomon. Vendors should have SSAE 16 Audit in place, he says.
This report proves the vendor complies with the financial security standards set by the Auditing Standards Board of the American Institute of Certified Public Accountants.
Vendors also should be PCI DSS compliant, meaning they meet minimum levels of security for storing, processing and transmitting cardholder data. Ideally, vendors should go above and beyond those standards. “The organization should have the procedures in place to detect attempts of identity theft and respond quickly,” Solomon says.
There should also be network redundancy so if a server that provides account security fails, a backup protects parents’ and districts’ data.
Some vendors can help districts track down late or missed payments. “If a family falls behind with full-day kindergarten tuition payments, even though we are not a collections agency, we can reach out and remind them of their obligation or give them the chance to make a catch-up payment over the phone,” says Solomon.
2. What types of payment methods should we allow?
All online payment processors allow parents to use credit cards, because payments via credit card are easily trackable. Few allow payment via automated clearing house, or ACH, which is when the parent electronically submits an account and routing number to pay for an item—just like a paper check.
However, e~Funds for Schools, a payment processor, sees about “four times as many parents submitting funds via ACH than credit cards because there is a lower transaction fee,” says Richard Waelti, the vice president of sales at e~Funds for Schools.
Ultimately, accepting an electronic check via ACH is safer for a district than accepting paper checks, says Waelti. Paper checks are easily lost and, depending on a district’s banking schedule, it could take up to a week before finance staff realize a paper check has insufficient funds.
Many processors do not have the ability to track electronic checks, and therefore cannot tell if an ACH was submitted with the wrong account number or another error. “Because of our relationship with banks, we have the ability to submit ACH and credit card payments to a bank overnight,” says Waelti. “If there is a problem with an ACH payment, the district will know the next morning.”
3. How should the fee structure be handled?
To maximize the cost savings of e-payments, districts can pass credit card transaction fees along to parents. CHECKredi, operator of the PayRedi online payment platform, charges an average of $2-2.50 per transaction, Business Operations Manager Nikki Barlett says.
Some vendors allow district administrators to pay for the transactions to get buy-in from parents who might resist paying the fees. “However, 90 to 95 percent of our districts have the parents pay so the solution is truly no cost for the district,” says Waelti.
With e~Funds for Schools, the fee is $1 per transaction for ACH. Credit card transactions are $2.45 for each increment of $100, says Waelti. When parents pay the fee, e~Funds pockets the fee before the rest of the funds hit the district’s bank account. There is no work on the district’s part.
If the school would like to pay the fee, it is 50 cents per ACH transaction; credit and debit card transaction fees are 2.89 percent of the total plus 20 cents.
What should we allow parents to pay for electronically?
There is no limit to the items parents can pay for electronically. One of the greatest benefits of e-payments is paying for recurring items automatically, Waelti says.
“When the money in a student’s lunch account drops below a certain dollar amount, parents can have their credit card charged automatically to replenish the lunch account to a certain amount,” Waelti says. “And if they have several kids in a district, they can set that low-balance threshold to different amounts if they’d like.”
Even field trips can be paid for electronically. “There’s no need for teachers to store hundreds of dollars in field trip money in [a box or envelope in] their classrooms,” says Waelti.
Some platforms can be integrated with student information systems, says Hume Miller, the president of Data Business Systems, which owns several e-payment services.
When parents log into a Data Business Systems’ e-payment program, all of the AP courses or workbooks they need to pay for are in one convenient spot, since students’ class information is pulled from the SIS. Parents can even pay installments on overnight class trips that may be over $1,000. And if a student moves from one school to another in a district, the systems can deactivate any required payments that are unique to the first school and bill for applicable fees at the new one.
Districts that charge fees for sports participation may give parents discounts for multiple children or cap payments, says Miller. “Our software calculates that automatically when a parent signs on to pay for sports fees,” Miller says.
And a Colorado district uses a Data Business System program to collect transportation fees. Low-income students pay 50 cents per ride, others pay 70 cents. “Our system knows which students receive which fare,” Miller says. “Parents can buy monthly or yearly passes, too. All of this is easily done through e-payments.”
What about using PayPal?
Parents may have a sense of comfort and familiarity with certain online payments platforms. Districts can use the PayPal School Store, the service’s electronic payment solution for districts. It lets parents and community members make payments, including fundraising donations. For 2.2 percent of the transaction total plus 30 cents, parents can click on a PayPal link on a district’s website, donate the desired amount to a specific fundraiser and check out securely. Parents do not need a PayPal account to pay via credit card, and the district’s PayPal account receives the funds in minutes.
The funds can be transferred from the PayPal account to the district’s bank account at any time for no charge. After six months free, the district pays $11.99 per month in PayPal hosting fees.
Should we also implement a system for paying our vendors electronically?
Going paperless was the goal for Downingtown Area School District in Pennsylvania. “It was 2013 and we knew the technology was available to stop writing paper checks and to pay our vendors electronically,” says Mike DeAngelis, the district’s assistant director of finance.
DeAngelis selected NVoicePay because it allowed Downingtown Area District to pay vendors via ACH or credit card. Additionally, the district could earn rebates from NVoicePay. “For credit card payments, we receive 1.3 percent of the dollar value of the transaction back in cash,” he says. “So we encourage our vendors to accept credit cards.”
Districts get that cash back on a monthly basis, says Karla Friede, CEO of NVoicePay. “There is no waiting until they hit a certain amount dollar-wise,” Friede says.
Between rebates and the money saved from no longer printing checks, the district will save $50,000 annually, DeAngelis says.
When beginning a relationship with a payment processor, DeAngelis recommends setting up a bank account that is used exclusively for paying the electric utility, lawn maintenance company and other vendors. “The amount in the account should be only what is necessary to pay your vendors,” he says. “This way, your processor does not have access to all of the district’s money.”
The cost per electronic transaction is 43 cents, and DeAngelis estimates his district will spend $6,000-8,000 per year in fees for all vendor payments.
Beyond that, NVoicePay actively works to get vendors set up for electronic payment, says Friede. “If they aren’t already set up, we send letters and follow up if necessary to get them set up. We do the work so districts don’t have to.”
Kylie Lacey is special projects editor.