The Tuition and Fees Payment Spectrum

The National Business Officers Association (NBOA) reports that about 87% of independent school revenue comes from tuition.  Getting tuition paid on time is critical to your school’s sustainability.  Understanding tuition payer behavior is the first step in deciding how to change behaviors to benefit your school revenue and cash flow.

Generally, faith-based and independent school families fall onto a tuition and fees payment spectrum comprised of three groups.

  1. Great Payers: On one end you have families that pay everything on-time, every time.  Sometimes they are your pay in full families. These are your good planners and your goal is to have more of these families.
  1. Struggling Payers: One the other end of the payment spectrum you have the families that scrape and claw to keep their children at your school.   This group needs grace and flexibility.  Sometimes they communicate with you, sometimes they don’t.  You know who these folks are, and hopefully, you don’t have many of them.
  1. Slow Payers: In the middle is the group that is the most challenging to manage.  They are your slow payers; and they are usually the largest group.  Often, this group takes a large amount of staff time to follow up on missed payments. When payments are not collected in a timely manner, your school’s cash flow is negatively affected.  Re-shaping the behavior of this group is critical.

Business managers often report that they call slow payers with little success.  Sometimes a family responds, “Oh sure, I will put the payment in Johnny’s backpack tomorrow.” But then it’s two weeks before the check appears.   This lack of payment priority and security for school tuition and fees makes cash flow difficult.

So how do you realign the payers on your school spectrum?  How can you increase your school being a payment priority with your parents?   Here are several suggestions:

  1. Clear Guidelines: Distribute clearly written payment guidelines to parents annually.
  2. Consequences: Provide detailed descriptions of the consequences for late payments.  Follow through with the stated consequences.
  3. Late Fees: If a consequence is a late fee, make it serious enough to change behavior.  $40 is now a standard late fee amount.
  4. Monthly Invoicing: Consolidate all charges on one single bill for each month.  Don’t ask families to pay you several times a month. Other vendors don’t do this, so why should your school?
  5. Offer Payment Options: Give families the widest range of payment options.  Mirror the choices they have when paying other bills.  Automatic debit, online banking, payment cards online and by phone are just a few options that families expect.
  6. Payment Cards: Credit and debit cards with EMV chips are now more secure and many cards offer loyalty rewards that many families desire.
  7. Outsource: Consider using a tuition management company to assist your staff. Clear student accounting software, monthly plans, payment choices, and excellent follow up can relieve the tuition collection burden from your school staff.

 

Understanding the payment behaviors of school families and changing slow payer behavior can help your school move in the right direction of on-time payments and improved cash flow.  Analyze the tuition payment spectrum at your school, review ways to improve collections, and consider outsourcing; these suggestions will help your school with cash flow and long term sustainability.

ABOUT THE AUTHOR

Dennis Baumann

Dennis Baumann

Regional Vice President, Smart Tuition. A graduate of the University of Georgia, Dennis Baumann serves independent and faith based schools in Tennessee, Georgia, North and South Carolina for Smart Tuition. With skills including business development and client retention, Dennis works to help schools improve cash flow by analyzing business office activities and offering best practice wisdom for tuition management, financial aid, and payment processing. His work history includes Plasco ID, Tuition Management Systems, Key Bank, and several years with Sallie Mae. Dennis understands business operations and financial reporting and advises on school growth and sustainability.

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