Tutoring centre bookkeeping: a 20-session package is not revenue yet

Packages are liabilities; sessions are revenue

Every package sale lands in deferred revenue, and each delivered session releases that package's per-session rate into income. The mechanics matter: a 20-session package sold at a discount has a different per-session value than a 10-session package or a drop-in, so we recognize at each package's own rate rather than a blended average. Refunds come out of the liability, not out of revenue, and the unredeemed balance across all families is a number the owner should see monthly — it is both an obligation and, read well, a demand forecast for the coming term.

Expiry policies need a bookkeeping rule too. If your published terms let unused sessions lapse after a set period, the lapsed balance is recognized as income when the entitlement actually dies — not silently, and not before the policy says so. Centres with no written expiry policy carry stale packages as liabilities for years; we flag that early because it distorts both the balance sheet and pricing decisions.

The session ledger runs the whole close

Scheduling software — Teachworks, TutorBird, or whatever your franchise system mandates — is the real subledger of a tutoring business, and the monthly close is one reconciliation done three ways from the same session list. Delivered sessions times package rates gives revenue to recognize. The same list times tutor rates gives the payout accrual. What is left unredeemed must equal deferred revenue on the balance sheet:

When those three outputs come from one source, margin per subject, per tutor, and per location becomes a report instead of a guess — and a second location or a tutor rate change can be modelled on real numbers.

Tutor payouts and the classification question

Most centres pay tutors per delivered session, which makes the payout calculation easy and the classification question the real risk. A tutor who sets their own methods, works for other centres, and invoices you looks like a contractor and gets a T4A; a tutor you schedule, train to your curriculum, and supply with materials looks a lot like an employee who needs a T4 with CPP, EI, and source deductions — and the CRA decides on facts, not on what the contract says. Misclassification lands as retroactive deductions plus penalties, so we review the setup honestly rather than assuming the label. Either way, payouts accrue in the month sessions were delivered, and the mechanics — pay runs, T4A vs T4, WSIB questions — live on our tutoring centre payroll page.

Franchise royalties come off the top — verify the base

Kumon-, Mathnasium-, and Sylvan-style systems charge a royalty as a percentage of gross revenue, usually plus a marketing or ad-fund contribution, and the agreement defines exactly what the base is — recognized revenue, collections, or gross receipts. We track royalties and ad-fund payments as separate expense lines and recompute them against the ledger, because with package-based selling the difference between royalties on cash collected and royalties on sessions delivered is real money in both directions. When the franchisor is a US company, royalty payments generally attract Part XIII withholding with NR4 reporting on the Canadian side — the treaty rate, gross-up clauses, and the filing mechanics are covered on our tutoring centre cross-border tax page.

HST is not one answer in a tutoring centre

Tutoring an individual in a course that follows a curriculum designated by a school authority is GST/HST-exempt — but general enrichment, study skills, and much test prep is taxable. A centre offering both has to code every program to the right side and charge HST only where it applies, and the split drives registration too: only taxable revenue counts toward the $30,000 small-supplier threshold, and input tax credits are claimable only in proportion to taxable activity. We set the program list up once, correctly, so invoicing and the GST34 return stop being judgment calls. For how the rest of the monthly close runs — bank feeds, receipt capture, month-end reports — see our bookkeeping services.