Georgia Pollock10/13/20 9:50 AM3 min read

Annual vs. Term Based Billing

Private schools are (in essence) a business. Although schools and education providers face unique challenges, they still exhibit most - if not all - the key characteristics of any other service business. An effective billing strategy can be a key ingredient in succeeding in this type of business. Implementing a robust platform to manage billing is half the battle, but you may also want to consider how your billing frequency affects your income, parent/ guardian satisfaction, and school reputation.

Through advances in technology and the resultant shift in billing structures in other industries, annual billing is becoming an increasingly viable option. We’ve compiled some information that may help you weigh up the pros and cons of annual billing compared to a term-based structure.

Advantages and Disadvantages of Annual Billing

Advantages	Disadvantages
A full year of revenue is received earlier in the year, allowing for more informed allocation of funds.	Allowing for staggered payment of annual billing may increase administrative overhead
Excess funds may be deposited into interest bearing accounts.	it may cause undue financial stress for other parents.
Single payment collection reduces accounts receivable function throughout the year.	Changes to enrolments or subject based billings may necessitate additional billing and/or refunds.
Increased transparency, with fees and charges laid out up front.	Limited amount of ‘wiggle room’ if fee structure needs to be adjusted
Can reduce ‘churn’, with parents committing to a full year at the school.	Parents may perceive a lump sum payment as a barrier to enrolling at the school.

Advantages and Disadvantages of Term Billing

Advantages	Disadvantages
Having staggered income on a reliable basis may provide for better cash flow management.	Even though it’s ¼ of the Annual bill, the term bill can still be quite considerable to the parent.
Logistically speaking, it’s much less difficult	The school may come off as more casual about collecting school fees.
It’s most traditional option for many schools	Since it’s quite common, it gives your school no point of difference.
Smaller, more manageable bills for families paying from their savings	Makes it easier for parents to pull their child out of your school mid-year

How About Monthly Billing?

Monthly billing is the standard for most companies, and with subscription-based services becoming prevalent, many households have more monthly payments than ever. So, it’s no surprise this model is also becoming more common for schools. Rather than a single lump sum payment or four slightly smaller chunks, school fees are broken down into smaller, more manageable payments that fit nicely into their monthly budget.

This option has the potential to reap a consistent revenue stream, and accurate cash flow projections. However, it may be worth considering the additional administration work this method could create, including processing and administering the payments each month, rather than on a term or yearly basis.

Providing Multiple Options

There are pros and cons for each billing frequency, and what works for your school may not work for another. Of course, there’s nothing stopping you leaving the choice to your parents, however there are some things you may want to consider.

The more pricing options you offer, the more resources you will need to manage the process and perform follow ups. In addition, using a combination of billing methods could potentially cancel out some of the benefits that each frequency (when used as a stand-alone option) would bring to the table.

Top Tips for Billing Practices

David Buley, Chief Financial Officer of the Independent Education Sector NSW, compiled a list of 'best practices' for recurring billing in schools. Here are some of Mr Burley’s key points:

Regardless of your billing method, parents should be able to access and review payments that they have made and print past or current invoices.
Some banks provide payment gateways that can be made accessible through your school’s portal to provide easy payment options for parents.
Support multiple payment types and pass on merchant fees if parents choose to pay by credit cards.
Provide billing date options to parents, which may lead to higher parent satisfaction. This is easier if you use an automated platform for regular billing.

View Mr Buley’s full article here.

At the end of the day, you know your school best. Finding a billing system that works for you means weighing up the pros and cons to see what method is best for your school and the school community.

Georgia Pollock

Georgia Pollock is the Digital Marketer at TASS.