I already sense your disagreement to me saying flat rate billing is not the best way. And you are ready to say:
At our studio we have always done it. We have a chart that explains it. Our parents “need” it to budget. We have a 48-week calendar that works all that out perfectly, every time!
Before I back up my statement, yes, based on hundreds of thousands of transactions proving actual number of lesson billing is superior, and that even your scary existing families will actually like it more, (new families won’t care because it is more logical on every level), imagine this scenario, just play along. C’mon don’t be a grumpy pants, you can argue your point after I’m done.
Let’s say it’s mid July. A lady called Fictional Fiona comes into your studio and wants to register her 2 kids. She explains that her husband is getting transferred and she asks if they can only take lessons until the end of August.
You are feeling generous (and broke - because it’s the summer) so you say “sure”. There are 2 lessons left in July, and based on the day she picked there are 5 lessons in August.
You charge her for the 2 July lessons and are setting up the August billing. Do you set up billing for the 5 lessons she will get in August, or because you’re a “4 lesson flat rate no matter what studio”, will you charge her for just 4 lessons because it is “easier for her to understand"?
Chances are you will not bill her for 4 lessons in August instead of the 5 lessons she will get and just eat it. (Just eat it, don’t you make me repeat it!)
Charging for 4 lessons when there are 5 would be a dumb business move and the customer would actually not understand that logic at all. She would probably think you need some type of SBA mentoring program on operating a business. You would bill for 5 lessons if they are stopping at the end of August and they got 5 lessons.
Ok, now it’s late August.
Fiona comes in and says her husband is now going to be transferred at the end of October. She asks if she can stay for just 2 more months and be done at the end of October.
Since they are switching schools anyway, she is not registering her kids in regular school and they will be homeschooled so they can come for the earliest time you have. Any day works.
You are still feeling generous so you allow them to stay and take a 2:30 time, (that usually doesn’t fill anyway, bonus!), so your other good spots won’t be wasted on students who are leaving.
The 2 teachers can only start earlier on a day that has 4 lessons in September and 5 lessons in October. Do you set up your billing for the 4 lessons she will get in September, and because your are a “flat rate no matter what studio”, will you charge her for just 4 lessons in October instead of the 5 she will get because it is “easier for her to understand"?
Chances are you will not bill her for 4 lessons in October instead of 5 she will get, and just eat it. (Eat it! you just made me repeat it!)
In this case flat rate billing, even if you use a magic “48-week calendar that makes everything work out”, won’t work.
48-week calendars work perfectly if the student stays in for 48 weeks, only quits at the exact month that lines up with the 48-week cycle and never switches days to a month that has more or less lessons. Oh, and never switch days mid month either, that will screw it up too. So basically, they don’t work in a lot of cases.
Flat rate billing is actually a product of a limitation in current billing technology. Recurring billing systems can only do the same number over and over again. Studios make up charts and calendars and tell ourselves that it will “all work out” (hey, we used to do that too) but it is about as accurate as tying a rope to the steering wheel and putting a brick on the gas pedal and saying you just built a self-driving car.
It works great if you don’t need to change anything.
Since I see data from studios daily, I know for a fact lesson days and times are constantly changing. Sometimes it is the parent changing their time and other times it is the studio changing the time, either way, change happens regularly.
If you were able to build a magic billing system, it would let you automatically bill that Fictional Fiona for the 2 lessons she got in July and 5 lessons she got in August, and show her that clearly online when she registered and in her account, so she would know how the billing works and why.
(Since this system is magic, it would have actually let Fiona book those lessons online too without her having to contact you to register, which it does)
If Fictional Fiona switched days in September, your magic system would change the billing to charge for the 5 lessons in October and clearly display it so she could see the amount and the number of lessons.
Then if Fiona came to the studio in late October and continued, she would not be charged for the November Thanksgiving closure date because you clicked a couple of magic buttons for November dates and it would automatically adjust all of the billing, teacher pay calculations and everywhere it displays. (Sorry Canadians, politely pretend I said October Thanksgiving dates)
What Fiona sees on the calendar would actually line up to what she was billed for. It would be fully logical. She could see it at any time. No guessing, no confusion.
If Fiona switched days mid month from a 4-lesson day to a 5-lesson day for that month and got an extra lesson this smart system would automatically bill her card on file instantly for the extra lesson when the change happened. No “I’ll remember that later” option for admins to forget and lose you money on.
If Fiona already paid for 5 lessons but switched to a 4-lesson day for the month the system would automatically credit her. No one would ever owe anyone anything on either side and when she eventually does leave, you and her will be fully squared up. No confusion.
This utopian billing system called StudioAutoPilot exists and works very well and makes sure studios collect much more money from switching and quitting students who stop before things “all work out”.
Studio owners are scared stiff that their existing studio parents who are on their current flat rate billing system will be too unsophisticated to understand that if the month has 4 lessons, we charge you for 4. If the month has 5 lessons, we charge you for 5. If the month has 3 lessons, we charge you for 3.
Yes, I know, super confusing for everyone. What you see is what you get.
They somehow think their parents want to be constantly undercharged and overcharged because they are incapable of understanding how numbers or calendars or basic math work. Please remember, your parents drove a car to get to their lessons, they can figure it out. I’m shocked that these same freaked out studio owners don’t just pay their teacher for 4 lessons every month too, because it will “eventually work out” too!
BUT SAM! What do I say to my parents when we are going to switch from billing the even amounts now to the actual lesson billing? How do I “make” them understand? What if I tell them and they “can’t” do it because they are budgeting and absolutely counting on it being exactly the same each month. I mean they have been used to it for YEARS! I mean yes, we did do a fee increase so their price changed, true, but they need it to be the exact same, actually the different “higher” same price each month! Like nothing else in the world has changed at all over the last 3 years. It’s all stayed totally the same for them. Like a big Groundhog Day.
If you are freaked out about those parents who will approach you at night like the 3 ghosts of Christmas past and say: Ebeneezer Scrooge, how could you change our billing like that wooooo..
Here’s how you slay those imaginary dragons.
Call 10 of the scariest families who you think will lose their “stuff” over the actual billing thing and say these exact words.
Do it now before you even decide to apply to use StudioAutoPilot. Take a dry run and it will save you a lot of trouble if I’m wrong about this. I’m serious, do it.
Ok here’s the script. Say these exact words (not my name or the banana part)
Hi Mrs. Adams,
It’s Sam the director at Banana Music School.
You’ve been a good long-term family with us so I wanted to call you personally.
We are switching to a new lesson management system which will let you get practice assignments online from your teacher and get messages about your child’s progress. It will also allow you to manage your make-up lessons and schedules yourself so it is a lot more convenient.
Our new system will also bill you for the actual number of lessons each month so if there are 3 lesson you will be billed for 3 if there are 4 or 5 lessons you will be billed for that in the month. It will be more logical and less confusing than us trying to average things out.
After you say those exact words to the Scary Adams Family, say absolutely nothing.
No words. Let them talk first.
They will say 2 things that both start with the letter “O”.
This first will be “OH”.
The second will be “OK”.
Then as you are sitting silently, biting your lip, wringing your hands, waiting to exhale, they will say. Is there anything I need to do now?
Then, you can finally talk and say:
No, I just wanted to let you know. We will send you an email to set up your own account on the new system over the next few weeks.
Then do it again, then again and again. Until you are convinced it is no big deal.
A couple of calls will reassure you that parents don’t “need” to be billed for the wrong number of lessons each month because they are used to it.
This one conversation will give you the confidence to push a few buttons and stop underbilling for lessons which everyone is doing now with flat rate.
New families who register won’t care about the logical actual lesson billing which fully displays upcoming amounts in their account. They very rarely ever check upcoming payments or really care, but it’s there and easy to find. Existing families won’t care either. I’ve done it over a thousand times at my own studio and so have other studios.
Thankfully most studios do not believe the lie that they must take all forms of payment in 2023 but a few still do. Paying by cash and check just does not work for online transactions. You can’t mail Netflix a check or wait for the Amazon driver to stop by and give them cash. I’m not even going to waste time talking about those payment forms because they are obsolete and cause multiple issues. The only exception is if a family pays the whole year by cash or check. We have one family that did that this year out of over 1100 active registrations. A homeschool association they are with paid the entire year for their 2 kids. It is still a bit tricky because if they switch days they may get more or less lessons but it is only 1 family to watch so we did it.
If you do deal with homeschool groups and associations that pay for lessons tell them your studio policy is payment for the whole year by check, or what I tell them, they need to deposit the lump sum for the year directly in our studio bank account, forget about checks, or they need to use an association credit card for monthly billing (they have them). They will do it.
These groups are doing it for other vendors. They are just trying to make you do their limbo and see how low can you got. Don’t fall for it.
Their policies are made up just like yours are. Just make a new policy that works for you. Done. It’s a clerical employee making the check or doing the deposit so it is not their money anyway.
Before StudioAutoPilot we would take credit cards and we would also offer an option of debit on bank accounts to try and “save” money on merchant fees, but we quickly realized that for online commerce and automated registration to work you need to take credit cards only.
When switching to StudioAutoPilot if you need to, you can bypass the credit card payment option for your current customers and let them pay without using a credit card, but I highly encourage that you do not do that. Just make them use a credit card. Its 2023 everyone has a credit card or bank account card with the visa or Mastercard symbol.
What? And pay 2.59% more??!!!
Yes, just use StudioAutoPilot which will register you students 24 hours a day, 365 days a year to get 2.59% more students to get over it.
Saving on credit fees is the worst way to try to save money.
The problem with charging bank accounts is that the approvals are not in real time. You need to submit the numbers, wait a few days and then see if the transaction was approved. Credit cards on the other hand are instant.
The other issue with entering numbers from a check into an auto debit system is that the numbers are pretty hard to read for admins and customers. That’s because the oddly shaped numbers on check were never really meant to be read by a person.
They are MICR numbers. MICR stands for magnetic ink character recognition. The ink is magnetic so a machine can automatically enter the number when you slide it through a scanner instead of having a person enter them in.
Trying to get a consumer to input confusing check numbers for an online customer transaction would be a potential error waiting to happen so we just don’t accept bank account debiting for online registrations, and we don’t set them up for ongoing registrations. Our system auto updates fees based on changes to months with 3,4 or 5 lessons and interfacing with bank systems to do that is problematic so we do 100% credit card.
And besides, trying to get our admin staff to enter the bank account numbers correctly before was hard enough.
I have heard a lot of horror stories from auto bank debiting gone wrong. Hopefully you will go the route of 100% credit card and enjoy the benefit of automation.
Thankfully only the minority of studio owners believe the lie that they need to bill a few days before the month, like billing for upcoming lessons on the 28th or 25th or, in some cases, I’ve seen as early as the 15th. I’ve seen studios who do this say they need it to make sure they are paid.
Well, first of all, if you charge someone on the 1st of the month and their lessons are later in that month, you are getting fully paid before they have had their lessons. Prebilling is confusing for the consumer especially on a online transaction so we do not do it.
Most consumer billing transactions for the month bill on the 1st day of the month. Rent is due on the 1st of the month. It makes sense. It’s easier to ride a horse in the direction it’s going. Trying to put in an illogical billing date because you are afraid of chasing potential declined payments will confuse customers and cost you online registrations so we stick with the 1st. We are about maximum online registration conversion.
We’ve seen studios who did bill as early as the 15th of the previous month switch to the 1st of the month instead with StudioAutoPilot and they still get fully paid. No scary huge delinquent issues. It’s an imaginary fear. Our system auto recharges declined payment on the 1st, 4th, 8th and 12th so it is very automated and not one has collection issues. Don’t worry, let our Rent-a-Robocop handle the billing from now on.