Revenue Management: #8 Revenue Recognition in Educational & Training Institutions
Educational Institutions and training centres typically collect course fees at the time of enrolment, sometimes for a one-day workshop and sometimes for a year-long certification course. You might also charge separately for course materials or evaluation. But when can you actually recognize that income? Would you be able to recognize it on payment? Spread it across the course period? What happens if a student cancels midway?
How do institutions manage revenue when learning is delivered over time?
Revenue Recognition Scenarios in Education & Training
Education institutions and training providers often deal with varying course durations, delivery models (online, in-person, hybrid), and fees collected upfront. Though the five-step revenue recognition model remains constant, the timing and allocation of revenue depend on the learning service's structure. Here are common revenue recognition scenarios for this industry:
Upfront Free for Long-Term Course
When a learner enrols in a course that runs for several months and pays the full fee in advance, the institution cannot recognize the entire amount immediately. Instead, the revenue should be spread out across the period the training is delivered.
Example: A $6000 certification course runs for 6 months. Revenue should be recognized at $1000 per month during the course period.
Short-Term Workshops & Seminars
For one-day or short-duration workshops, revenue can often be fully recognised once the sessions are delivered, assuming there is no refund window.
Example: A $500 weekend workshop is recognized on the day it occurs.
Course Materials & Exams
Institutions that charge separately for materials, exams, or certification must split those payments and recognize those amounts individually.
Example: $1200 total course fee, including $900 for training for three months and $300 for materials. Revenue should be recognized $300 upfront and $300/month for three months.
Cancellation, Refunds, and Attendance-Based Pricing
Refund policies and partial completions must be factored into recognition. If a student drops out after 1 month of a 3-month course, only one-third of the revenue should be recognized unless a refund is issued.
Example: A $900 course is cancelled after 1 month. You must recognize $300 and defer or refund the rest based on the policy. Credit note will be created, and the deferred $600 will be reversed to the customer as credits or issued a refund.
These scenarios show that educational institutions must align revenue with actual learning delivery and not merely based on fee collection. Automating this alignment avoids revenue overstatement and ensures compliance.
Scenario :
A training company signs up a student for a three-month Data Analytics certification program for a fee of $3000. The payment is made in full at the start. The course includes three months of training and $600 worth of course material.
Zoho Billing for Education Institution Revenue Recognition
Zoho Billing enables learning platforms to automate revenue recognition by setting up roles that separately reflect course delivery and service components.
For the above scenario, you can configure the recognition rule as follows,
Component | Recognition Frequency | Recognition Method | Recognition Time |
Course Material | Once | One-Time (Daily) | Period Start |
Training Session | Monthly | Evenly Distributed | Period Start |
Although $3000 is collected upfront, only $600 for the course material can be recognized immediately according to the performance obligation. The remaining $2400 will be spread evenly across the three-month training period.
Reports in Zoho Billing
i) Recognized Revenue Report
Two months into the course, the course material is delivered, and one month of training is pending.
Component | Recognized Revenue | Description |
Course Material | $600 | Recognized fully at the start |
Training Session | $1600 | out of $2400 for two months of training given |
Total Recognized | $2200 | Recognized in two months |
ii) Deferred Revenue Report
After two months, it will be left with the training session payment alone as deferred.
Component | Deferred Amount |
Course Delivery | $0 |
Training Session | $800 |
Total Deferred | $800 |
iii) Revenue Waterfall Report
Month | Course Material | Training Session | Total |
Month 1 | $600 | $800 | $1400 |
Month 2 | ---- | $800 | $800 |
Month 3 | ---- | $800 | $800 |
Total | $600 | $2400 | $3000 |
Best Practices for Education Institution Revenue Recognition
- Separate Instructional & Non-Instructional Items: Classify course material, training, certification, and exam components distinctly
- Align Revenue with Course Delivery: Ensure the recognition rule is set based on course delivery and that the revenue is recognized when the student receives the instruction.
- Set Return/Refund Policy Clearly: Establish a clear policy and terms to account for students who drop out or cancel courses after signing up.
Up Next: Revenue Recognition in Media & Publishing
Topic Participants
Hari Hara Sudhan. S
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