Releasing tuition over the term
Why tuition invoiced on the first day of term is not all income yet, how the Education pack releases it over the term, and what to settle first.
By Achekam · · 5 min read · For Education businesses in South Africa, Nigeria, Kenya
Launching soon. The Industry CRM add-on described in this article is launching soon. This article describes it as it will work at launch.
Look at a typical college's monthly figures and you will see a strange shape. The month the fee invoices go out shows enormous income. Every month after it shows salaries, rent and electricity, and very little coming in. The board sees a record month followed by a long run of losses, and the owner has to explain, again, that nothing is actually wrong.
The figures are not wrong, exactly; they are just early. The institution invoiced the whole term on the first day, but it earns that tuition gradually, one week of teaching at a time. Releasing tuition over the term fixes the shape so that each month's income matches the teaching delivered in it.
Received, invoiced and earned are three different things
It helps to separate three ideas that are easy to blur:
- Invoiced is what you have billed. A term's tuition is usually invoiced in full at the start.
- Received is the cash that has come in. With instalment plans, that may trail the invoice by months.
- Earned is the part of the tuition that matches teaching already given. Halfway through a term, roughly half has been earned; the rest is still owed to the student in the form of lessons.
Your income statement should show what was earned. Your balance sheet should show what is still owed to you by families and what you still owe them in teaching.
What happens when the term is invoiced
In Achekam, issuing a customer invoice gives it the next number in your sequence and posts it to the ledger as debtors, sales and output VAT. On its own, that puts the whole term's tuition into income on the day the invoice is issued, which is where the strange shape comes from.
In the Education pack, each student's Enrolment carries a fee plan of instalments. Collecting the money in instalments changes when cash arrives; it does not change when the tuition is earned. Those are separate questions, and the second is the one this article is about. For the first, see fee instalments as part payments on one invoice.
Releasing tuition as deferred revenue
The pack releases tuition over the term as deferred revenue. In plain terms: when the term is invoiced, the tuition that has not yet been taught is held back as deferred revenue, an amount the institution owes its students in teaching. As the term runs, that amount is released into income, until by the end of the term all of it has been earned. Investopedia's explainer on deferred revenue sets out why payment received in advance for services is a liability until they are delivered, and how it is recognised over time.
A term in words
This is the accounting the release follows; the exact timing of each posting is worth checking in your own workspace. A college invoices a term's tuition on the first day. At that moment it has taught nothing, so the tuition sits as deferred revenue rather than income. By the end of the first month, the part of the term that has been taught is released into income for that month; the rest stays deferred. The same happens month by month. By the last day of term, nothing is left deferred and the whole term's tuition has been recognised as income, spread across the months in which it was earned.
The cash side runs on its own track. A family on an instalment plan may have paid only part of the invoice by the middle of the term, and the unpaid part shows as debtors. Releasing revenue does not touch that balance.
What the balance sheet shows in the meantime
Midway through a term, a college's balance sheet tells a more useful story than its bank balance:
| Line | What it represents |
|---|---|
| Debtors | Tuition invoiced but not yet paid by families or sponsors |
| Deferred revenue | Tuition invoiced but not yet taught, owed to students as teaching |
| Bank | Cash actually received |
Achekam's management accounts show an income statement for a chosen period beside the period before, and a balance sheet at period end, both added up from your own journals and exportable as PDF or CSV. One small point: the year-to-date preset starts on 1 January, not on your own year start, which matters if your academic or financial year begins in another month. Choose the period yourself in that case.
For a board or a lender, deferred revenue is often the most reassuring figure in the accounts: it is teaching already sold and largely paid for.
What to agree with your accountant
Before the first term runs through the pack, sit down with your accountant and settle these questions in writing:
- Which fees are deferred. Tuition is the obvious one. Ask how application, registration and examination fees should be treated, as they may be earned at a different point.
- The term dates. Release is spread over the term, so be clear which dates count as the term and how holidays within a term are treated.
- Students who leave mid-term. Agree how a credit note for the untaught part of a term interacts with the deferred balance, and who reviews it.
- Invoices issued before the switch. Tuition invoiced before the pack was releasing revenue may already sit in sales. Your accountant may correct that with a manual journal. Achekam refuses an unbalanced journal or one dated in a closed month, and a posted journal is corrected only by a reversal, so the adjustment needs to be planned before the period is closed.
- Month-end routine. Months can be soft-closed, hard-closed and locked, and a closed month refuses postings from every source. Agree the order of work so that everything for the month is in before it closes.
The same third wave of the Industry CRM that brings deferred revenue also brings bookings, subscriptions and renewals, milestones and retentions, and donation receipts, so your accountant may already be looking at it for other clients.
The point of the exercise
Releasing tuition over the term does not bring in a single extra shilling, naira or rand. What it gives you is figures you can manage with: a month that looks bad really is bad, and a record month is really a record. Agree the method with your accountant, then use the instalment reminders described in reminders for offer replies and instalments to keep the cash side moving alongside it.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
