Lump sum Discount...

[jeremyjchilds]

Just this morning, I had a student's mother ask me if I gave a discount for a lump sum payment for the entire year...

I had not thought about it, so I just said no..

Has anyone  had experience with this?

I could see the value in this for teachers who charge by the lesson...but I require post-dated checks, so I don't see any advantage to this other than the full committment of the parent.

[abell88]

I have a colleague who runs a music school and she gives 5% off for paying the full year's tuition. Personally, I much prefer monthly cheques -- I know how much my income will be, and if the student drops out, I don't have to pay them back for the six months or whatever they've already paid for.

[pianoannie]

I give about a 7% discount for paying by the semester.  Within a couple years of offering that, everyone chose that payment.  Refunds are not an issue, because I do not give them.  By paying in advance, and getting the discount, they are committing to the entire session.  (except in case of dire emergency).  About one month before a new session, they must pay their materials/music deposit, and if they're not continuing they let me know at that point.  So I always have at least one month to fill any vacant spots.  I love it.  Bookkeeping and tax time are SO much easier and faster!

[jeremyjchilds]

I guess that does make some sense...

I have only been teaching for about 3 years now, so I have never had anyone stop in the middle of the year...

If you added up the amount you made last year,  how much less would you guess you made, factoring in the students who did stop, but had payed in advance.

Was it worth the peace of mind, and budgeting?

P.S. I have 45 students this year, so 5-10% off would be a fairly large amount of money if all of them took this option...

[pianoannie]

Jeremy,
I don't actually "lose" any money with my semester payments. At the time that I began offering the "lump sum discount," the semester fee actually broke down into the per-lesson fee that I wanted to charge anyway.  People that wanted to continue paying by the month had a larger than usual increase in their monthly payment that year.  I never really called it a lump sum discount to my students; in actuality it was more like a penalty for not committing (and paying for) the entire semester.

I no longer even list monthly fees in my policy statement.  If anyone would request smaller payments (which no one does) I would add on 10% to the semester fee, and break that into 4 or 5  equal payments.

As far as budgeting for my own living expenses:  tuition checks go into a savings account when I receive them, and my monthly "salary" gets transferred (online) into my checking account each month.  Quite simple.

I'm not saying everyone should charge by the semester.  I personally hate messing with checks, adding them all up, driving to the bank, etc.   I just don't want to do that every month.

[leahcim]

I'd be careful how you word it [w.r.t whatever sales acts you have wherever you are]

An advertised "discount" or "reduced price" that is the actual usual selling price in the UK is dodgy for example.

[pianoannie]

I'd be careful how you word it [w.r.t whatever sales acts you have wherever you are]

An advertised "discount" or "reduced price" that is the actual usual selling price in the UK is dodgy for example.

I'm not sure if this was for me or Jeremy, or just everyone in general.  To clarify, my written policy/fee statement does not mention the word "discount."  They do save money if they pay by the semester, or to state it another way, they pay more if they want to make several smaller payments.  Nothing dodgy about that.
pianoannie

[leahcim]

They do save money if they pay by the semester, or to state it another way, they pay more if they want to make several smaller payments.

Everyone in general.

But yes, your confusion about whether you're giving a discount for bulk payment, or adding a surcharge for not did trigger me making the point - not because I thought you were being dodgy.

E.g note you've called it a 7% discount that you "offered" in one post that was taken up within a couple of years by everyone - that suggests different people were paying 2 rates, one of which they thought was a discount, no? The next post suggests it's wasn't a discount at all, because it's what you would normally charge and suggests you'd add 10%.

The next says you don't use the word discount at all - but yeah, your posts aren't your policy - my point is, if you're going to have a policy be wary of the fact that what you say in that does matter - at least in most places - even if it looks mathematically like you're "stating it another way" - from the pov of the usual consumer legislation, how you state it does matter.

[pianoannie]

E.g note you've called it a 7% discount that you "offered" in one post that was taken up within a couple of years by everyone - that suggests different people were paying 2 rates, one of which they thought was a discount, no? The next post suggests it's wasn't a discount at all, because it's what you would normally charge and suggests you'd add 10%.

The next says you don't use the word discount at all - but yeah, your posts aren't your policy - my point is, if you're going to have a policy be wary of the fact that what you say in that does matter - at least in most places - even if it looks mathematically like you're "stating it another way" - from the pov of the usual consumer legislation, how you state it does matter.

I guess my posts have contradicted each other--sorry.  My system has evolved a bit through the years, and in trying to keep my post short, I didn't detail my system in depth (so it ended up sounding contradictory). 

Now, having "fine-tuned" my payment policy, in any given year there is about a 7-10% difference between paying the lump sum or paying smaller installments (I round totals up or down to keep them nice round figures).   I was using the words "discount" and "penalty" here in my posts thinking it was a quick way to make my point.  I'll reiterate that I have never used those words in my written policy.

I think of this as being like the way my insurance company charges me.  They send me a bill that says, for example, I can pay $500 for 6 months premiums, or I can pay $100 each month for each of those 6 months.  It's clear to me that they will charge more for the extra administrative costs of dealing with numerous payments from me.  Discount?  Penalty?  It's just two choices.  I give my piano students those same two choices.

When you talk about consumer legislation, or you thinking of things like stores that sell something for "50% off," but in actuality there is never a time that the product sells for full price?  I see that as a whole different thing.   annie

PS Jeremy, getting back to your original question, if it's just one mom asking for a discount, then that would be actual money you would lose.   There's not much advantage to you in this case.  But if you ever decide you want to save yourself some bookkeeping time, make lump payments the standard (however much you need to earn), and set your monthly payments to total a little more than the lump sum.  Then you don't lose any money, and you can spend more time teaching and less time messing with checks.

[jeremyjchilds]

PS Jeremy, getting back to your original question, if it's just one mom asking for a discount, then that would be actual money you would lose.   There's not much advantage to you in this case.  But if you ever decide you want to save yourself some bookkeeping time, make lump payments the standard (however much you need to earn), and set your monthly payments to total a little more than the lump sum.  Then you don't lose any money, and you can spend more time teaching and less time messing with checks.

Thank you...that is the words of experience answering my question..

[cora]

The reason I don't give discounts is a bit different. I sell my time, and there's only one price for that, regardless of whether you have a brood of ten piano-playing kids. I never want the focus to be on money. They should pay me like sheep with monthly post-dated cheques, and be done with it.

I know of a piano-lesson storefront place that actually mails their parents an invoice every month!! I told him you should never remind your customers monthly that you cost money! And he wasn't even charging enough in the first place. Essentially, you are as important and crucial to their monthly budget as the heat and light bills.