Wow you have a huge heart - the late payments and being late being picked up would have resulted in termination a long time ago here cause I cannot stand being disrespected in my own home and those are both signs of lack of respect!

As for the behaviour - your home, your business and your program and therefore you ARE the expert in the expected behaviours of the children with in it - if parents are not willing to do the work to help their child MEET those expectations than your program is no longer a match for them ... they need to seek a program with different expectations for behaviour.

I would do the

"Dear X;

After careful consideration and reflection of the quality of program I desire to offer to all of my clientele I have come to the conclusion that ABC Daycare is no longer the ideal fit for your families needs as we seem to have too many differences in child rearing philosophy and approach to guiding behaviour.

As a result our childcare arrangement will be coming to an end effective X date (give however much notice you feel is fair but be prepared for THEM to leave early and I personally would be willing to refund them any 'deposit' just to get rid of them at this point).

I am confident that there is a program that can better meet your families needs and have enclosed a list of local home childcare advertizing sites and directories to help in your search and wish you all the best in your future childcare arrangements.

sincerely
X