Billing Policies For a Successful Dance Studio
Billing your families seems like a pretty straight forward task. You invoice or send a statement and the family pays you for your services. However as many of you likely have found, it’s not always that simple. If you’re new to running a studio or you’re having difficulties chasing down payments each month/quarter, this article is for you.
Having a consistent policy for your billing practices will help streamline your business. It will also show families you are a well run organization. Even if someone doesn’t agree with your policy, if you have the same policy, and you always handle billing the same way, other families notice. They know you mean business, and you will likely keep the type of clients that appreciate your policies. Having policies in place will also help remove questions from your staff as to how to handle certain situations. It will also remove anyone being able to claim you were discriminating against them, if they somehow feel you treated them different from someone else. You can always just point to your policies and say “This is how we handle this situation. You read this and agreed to these policies when you registered.” Done.
How you decide to bill your families is very important. And you should decide how you want to do this before you open your studio. Do you want to bill monthly? Quarterly? Or by season? Do you allow families to drop? What’s your drop policy? Do you pro-rate for holidays? Do you pro-rate for first and last month? Do you accept cash, check, and/or credit cards? What’s your late fee? Do you have a method to enforce these policies? — That’s a lot of questions!
Below are some policies we have put in place over the years that have helped us have as smooth a billing process as possible. At our studio we bill monthly, so something to keep in mind as you read along. Hope this helps!
Require a credit card upon registering
We use a program called Danceworks by Akada Software. Their online registration can be set to require a credit card upon registering for a class. We have that feature set to “on”. We require it even for families coming in for their free trial class. Nowadays most people prefer to pay by credit/debt card. People don’t carry around cash or checks like they used to. Requiring a credit card at the point of registration also guides the customer to what we ultimately want as studio owners…auto payments.
If a parent wants to opt out of using a credit card and decides they would rather pay by cash or check, we do allow it. They just need to tell us after they fill out the registration form and we delete the card on file. I hear you saying…”My families would never register if I required a credit card!” – are you sure? Today, people give their credit cards out for all kinds of recurring billing. Netflix, Amazon Prime, regular utility bills are even on autopay, and the list can go on. People are more used to it than you imagine. Like everything else in our industry, your demographics may matter, but I suspect it may not matter too much in this regard for most of us. Our studio has around 900 active accounts at peak season. Of those accounts only about 5, yes 5, are paying us by cash or check each month. That’s less than 1% of our families that are not on our autopay system.
Setup Auto Pay & Save Time. Time = $$$
Once you have credit cards stored in your software, it’s highly likely that you can setup an autopay system. We charge everyone’s tuition on the 1st of the month. Most of the credit cards go through without a problem. There’s always a few that have expired or that were renewed because of fraud or being lost or stolen. In those cases the families don’t always remember to update their cards with us, so we need to follow up. That follow up takes much less time than if we had to chase down cash of check payments all month.
Our system automatically sends out an email to all account whose credit cards came back as declined. It’s a very cordial email letting the family know the credit card we have on file needs to be renewed and to please contact us with a new card number as soon as possible. We also remind them we have a late fee of $10 that kicks in on the 6th each month. That usually motivates people to call us quickly and the majority of the declined cards are updates within a few days. To stop classes we require a 30 day notice. Families are less likely to just vanish if they are on autopay vs. if they are paying with cash each month.
Auto pay lets you focus on other things important to your business. Would you rather be tracking down cash or prepping your lesson plan for the week? Would you rather be calling families about payments or doing something else that helps your studio grow? This is where time = money. And lost time tracking down money is really costing you twice as much.
What about credit card fees? It’s up to you to decide if you can afford the fees. In general we value the time we save and headaches we avoid and we know that the credit card fees are more than worth the money. You can always make more money, you can’t get more time.
Prorate tuition? When and how to do it.
As mentioned above, we charge our families on a month-by-month basis. So this may not apply to all studios if you decide to bill differently. Our tuition is based on an average of 4 classes per month. This means when a month has 3 Mondays due to a holiday, we do not bill less. It also means if a month happens to have 5 mondays, we do not bill more. The tuition remains consistent. We do not prorate for holidays, or absences. It all should average out over the course of the year. Obviously, certain days of the week are less impacted by this (Tues, Wed, Thu) so they do end up with more classes. As long as everyone gets their minimum to average out to 4 per month, we are good. When do we prorate? When starting or ending mid-month. Because we are on a month-to-month billing cycle, families are free to start and leave anytime of year. We require a 30 day notice to stop classes. So if a family tells us on June 1, they are cancelling, that would be their final bill. If another family tell us on June 15 they are leaving, we would bill them through July 15. Then we count the classes they still have available to them in July and bill accordingly. Our tuition is $74/mo, so if they happen to have 2 classes in July that are in their 30 day notice, we would bill them $37 on July 1.
Late Fees
We add a $10 late fee to an account that isn’t paid by the 6th of that month. Accounts that fall behind multiple months will see multiple late fees. That being said, we are flexible. We waive the fees as long as a family contacts us and lets us know why they are late. Sometimes it’s as simple as – “I lost my card and a new one hasn’t arrived.” Other times it may be more serious financial problems. We would evaluate those situations on a case-by-case basis. In our policies we do state that falling 3 months behind on tuition would mean we remove the dancer from the class until the account is up to date. We rarely have to send out that warning, but do occasionally. Need help wording your policies? Feel free to check out our studio’s website to see how we present these policies to our families. http://www.principalarts.com/policies/
