I noticed an FAQ on the Intelligent Instructor website just now, where an ADI was asking for advice on how to plan ahead for the winter and Christmas periods.
The answer includes the following:
Think of clever ways of increasing your short term income. … I know an instructor who made over £1000 on Christmas Eve just by advertising his ‘Looking for a last-minute gift?’ marketing ploy!
Whoa! Hold on a minute, here. Until someone has actually taken a lesson – notwithstanding any last-minute cancellation policies you might have in place – the money is theirs, and not yours. In fact, instructors taking huge wads of cash for future lessons then spending it is one of the most common reasons for them to start cancelling lessons, or becoming uncontactable, leading to pupil complaints.
Any ADIs reading this should remember: if you take a block booking payment, the money is not yours until the pupil has taken the lessons. You’re holding it in trust. If they pay you, for example, £700 for 30 hours of lessons – as one of mine did the other day (in cash) when they took up an offer I do – that money effectively comes to you in £23 portions as they take each lesson hour. It most definitely does not belong to you immediately they hand it over. If they only take one hour a week, you only get £23 a week from the pot. If they request a refund at any time, you are duty bound to give it to them minus whatever lessons they have taken, and in the worst case scenario you might have to refund them the entire £700 – which could be fun if you’ve already spent it on Christmas, as suggested by someone in that Q&A, and are asked to refund early in the New Year because they’re strapped for cash and want to postpone lessons for a while.
The same goes for gift vouchers or any other promotion. You can’t take money from people unless you are prepared to refund it in the event of unforeseen circumstances (add the condition “non-refundable” at your peril). Refuse once, and you and your business will probably never recover from the negative press you’d get.
I make it absolutely clear to all my pupils from Day One that any block payment money remains their property until they’ve had the lessons, and that I will refund any outstanding amount immediately upon request. I’ve already pointed out that they might have cash flow issues, but it’s also common for pupils to pay for blocks of lessons, and then move away from the area – especially if they’re students. Whenever that happens to me, I refund in cash, or by bank or PayPal transfer. In one odd case, I did it with postal orders, because I don’t use cheques, and the pupil was a nutcase who wouldn’t give me their bank account details. I wasn’t about to shove £140 in cash through their letterbox, so I shoved postal orders through, instead.
It’s essential to be able to cover whatever money you’re holding in trust at any one time.
Over the years, I’ve picked up a fair number of pupils who have written off fairly substantial sums to other instructors when block bookings have gone wrong. The local franchises around here all seem to wash their hands of whatever their instructors get up to when it goes tits up. Nearly all my affected pupils have had the old “I can’t fit you in” ploy played on them, or the instructor has simply gone AWOL. One recent case – where the franchise refused to do anything – was when an instructor “retired” owing the pupil money.
My opinion of many ADIs is such that I don’t think they should be given such misleading advice about taking money for block bookings, because it’s just asking for trouble. In my experience, far too many pocket the cash and then avoid giving the lessons, so this could be one temptation too far.