Hi all,

I know this topic has been touched on before, but I don't think with this precise slant.

I'm considering offering students a discount (maybe 5%) if they pay up-front (ie. in week 1) for the whole school term (usually, in Australia, about ten weeks).

My student policy requires up-front payment for the month or term, but there are always a few "stragglers". I know some teachers charge a late fee - but I was thinking it might be nice to reward the people who do the right thing, while providing an incentive to pay right on time.

I'm wondering what experience various teachers have of offering discounts?

Cheers, Paul

My singing teacher's policy is 10% discount if a person pays in ten week blocks, the money must come within the first two weeks of the new ten week block. I've been through eight private instrumental teachers altogether, none of them operate that way, but the way it works in the studio I work, the money is to be paid at the beginning of every month.

I give a 5% pre-payment credit if 5 mos or more are paid up front.

It's a nice-sounding concept from the student point of view, Paul, and you might get paid quicker. But it's also money coming right out of your income. If every student in your studio takes advantage of the offer, you have just implemented a 5% pay cut!
Probably not your intention.

We piano teachers earn so little, that I have yet to try the discount idea. But yes, I have thought about it, more along John's line: i.e., payment for half a year of lessons in advance, or maybe the whole teaching year.

I never offer discount like this before.
However, I think I will consider it next year. I will have 5% discount for parents who pay ONE YEAR in advanced, that is 10 months of piano tuition.
Then I will have 2.5% discount for parents who pay half year in advanced.

I totally agree with Peter. Why would you take a 5% pay cut? For those who repeatedly "forget" to pay on time, institute a late fee of $25 and see how quickly they start paying on time!

It's not necessarily a 5% pay cut. You have use of the money for many months in advance. For example, if you have outstanding balances on loans for your studio, you're probably saving much more than 5%. You've eliminated a lot of detail accounting work for many months. Or being able to pay cash for something you needed in the studio probably meant a lower price.

Better to raise the price by 5% before giving the 5% discount. Or better yet, raise it 10%. We're always charging less than what we're worth... for some reason.

We offer a slightly discounted rate for student who pay tuition by the semester. Even though only a couple of students took advantage of this, it really helped us with cash flow, and I think the discount was worth the cost of having that extra money on-hand to cover unexpected expenses.

Now if every student did it, I may consider raising the tuition so that we get paid what we should be charging, and those who pay monthly would pay more (rather than us taking the hit). But so far we're not in that predicament.

By the way, if you're not particularly good with your business finances, you may not want to do this option at all. Having money sitting in the account can be a temptation for some to spend, not considering that money is earmarked for the next 4 months of salary, rent, utilities, etc.

My daughter's teacher offers a slightly reduced rate for pre-paying for 10 lessons at a time.

You can think of it as a tiered pricing plan, and wonder if you can extract better rent etc. As a dad, I view buying the 10-class blocks as a signal that I am committed to her as my daughter's teacher as much as she is committed to developing my daughter's skills. To me that's far more important than the slight pricing difference.

Thanks everyone - helpful thoughts.

I am going to experiment with 5 and 10 per cent discounts for students who do certain things like pay in advance for the school term and/or move to a 45-minute lesson.

I agree with John's point that what appears to be a pay-cut is not necessarily so. I have a mortgage, so by getting a lot of my income ten weeks in advance - assuming I can put a chunk of it towards paying off my debt - I save a lot of money in interest.

Moreover, I would sometimes have people miss, and not pay for, a lesson during term (despite my studio policy's stipulations). By getting people to pay in advance for the term, I am not missing out on payment during those odd weeks (hence my income is actually higher). Plus I save myself the stress I would have gone through chasing payment during term or fretting over students who miss a week and don't pay. PLUS the student feels good about getting a slightly reduced rate.

It feels like win-win to me. But I will let the forum know how it pans out. (I should mention, too, that I've increased my fees by a little over five per cent each year for at least the last five years).
-Paul

I agree that paying ahead discount is not losing money...it's the time value of money plus the trouble of collecting, recording, depositing checks each month and sending out reminder notices when late.

Not only these benefits, but sometimes you have to make large purchases. We want to move my Yamaha G3 down from WI, but that costs a lot of $$ that we don't have. We'd like to have it in time for the recital at the end of the semester, and with a student who just paid for semester tuition, that money is available now rather than having to save it up and wait a few more months. So certainly the whole cash flow issue becomes much easier to manage.

My utility bills provide a slight discount for prompt payment. Or maybe it's really a disguised small penalty for slow payment, which they phrase euphemistically by terming it a discount for prompt payment. I can't tell which it is, but it works: it gets me to pay right away!