Dec 04, 2018
That depends. Tutors should assess the pros and cons of offering prepaid versus postpaid services, and choose which method works best for their clients and business needs.
Should a tutor bill clients before or after rendering their services? The answer depends on a number of factors. Both the “prepaid” and “postpaid” models offer benefits and risks that tutors will need to weigh in deciding upon the right billing model for their business.
The Prepaid Model
A prepaid billing model has the client pay upfront for services to be rendered. Tutors get paid and clients know the costs immediately. What’s the upshot?
Prepaid: The Pros
For a tutoring business, it’s the secure cash flow. With money coming in, you can predict your monthly/annual revenue and anticipate needs and keep expenses under control. When money is tight, your business admins know exactly how much is coming in. This in turn helps you grow your business when times are good using cash in hand.
It’s also a boon for scheduling. Tutors can plan in advance when they know they have a secure, paid workload. If a student doesn’t show up, tutors aren’t left chasing up payment. That means more time tutoring.
For clients, it’s the commitment. Students are more likely to attend sessions when they’ve already paid.
Prepaid: The Cons
However, tutors should beware of overcommitment. If a tutor takes on too many sessions or students, they may not be able to handle the capacity. For prepaid students, this complicates things – and may lead to a loss of revenue (and, worse, dissatisfied clients).
Clients may feel uncomfortable paying large amounts upfront. The prepaid model may therefore deter some potential clients who could otherwise afford to pay.
Scheduling needs change. The prepaid model may not offer the right flexibility for every tutor.
The Postpaid Model
A postpaid model has the client pay for services rendered, usually upon billing. It’s a traditional model that offers greater flexibility for tutors, less costs upfront for clients, and major risks for your tutoring business.
Postpaid: The Pros
Tutors have more flexibility to adjust their schedules according to their capacity and business needs. If they can’t handle a particular session or client, they can cancel without the loss of paid funds.
More clients may be comfortable paying after services have been rendered. It’s a matter of building trust with clients that your tutoring services are worth the cost. Billing after the session may relieve some of the initial apprehension for potential clients.
Tutors are paid for services rendered – and nothing more. Tutors can have the satisfaction of knowing they’re using money that was earned through tutoring.
Postpaid: The Cons
If prepaid offered tutors a secure cash flow, the postpaid model offers the opposite. It can be harder to predict revenue on a regular basis and plan your business needs accordingly. Billing – and following up on bills – therefore becomes a science that requires careful attention.
There’s no guarantee you’ll get paid on time (or at all), while you still need to ensure your tutors and salaried staff are paid. Overheads don’t go away even if clients ghost you!
Worse, you may spend more time – and money – chasing unpaid bills. Non-paying clients can become a major burden on your business’ bottom line. You risk financial ruin (or bankruptcy) if you don’t control your debtors’ ledger.
The prepaid and postpaid models serve different needs for tutors and clients. Weigh those needs and decide upon the model that will satisfy your bottom line and your clients’ expectations. And then get back to what you love doing more than balancing the books: tutoring!