Prepaid Package

A clinic might sell ten appointments at a package price, or a training provider might sell a block of lessons, so the customer pays before the business has delivered every session. Cash arrives early while the service commitment remains.

Define what the package includes, such as eligible services, number of uses, location, booking rules, transferability and any expiry, because a vague bundle can lead to disputes about what was promised. Square describes packages as prepaid series of classes or services redeemed against later bookings, and its operational flow tracks the package at sale and applies the entitlement at checkout.

That software example does not set the business's legal or accounting policy. Price the package from the actual cost of delivery, since a discount can motivate commitment but staff time, materials and room capacity still have to be funded.

Capacity can become a hidden liability. If many customers buy discounted packages and all seek the same evening appointments, the business may struggle to honour them, so model likely redemption by day and time and do not oversell beyond staffing capacity.

Keep a ledger of entitlements as well: opening unused sessions plus new sessions sold, less valid uses, refunds, expiries and adjustments should explain the closing balance. A booking is not always a redeemed service, because the customer may cancel within the allowed window and retain a credit, or a late cancellation may consume it under clearly disclosed terms, so track both attendance and entitlement use.

Refund rules require care, since the agreement and local consumer protections may permit or require a refund in some situations, especially when the provider cannot deliver, and not every package should be called non-refundable without checking. Expiry must be clear and lawful, because a date printed after payment may not reflect the terms agreed at sale.

Under IFRS 15, revenue recognition reflects the transfer of promised goods or services, not merely receipt of cash, so a prepaid service package commonly creates a contract obligation before delivery, with exact allocation and timing depending on the contract. Unused rights, often called breakage, need separate analysis, because expected expiry is not a licence to recognise every unredeemed session immediately.

An "unused sessions times list price" calculation may not equal the financial-statement liability, since package discounts and allocation of consideration can change the amount. Trainer or staff commissions need a defined trigger, as paying on package sale or completed session changes incentives and cash timing, and Square's package guidance notes that its default commission handling can differ from ordinary service sales.

Compare packages with pay-as-you-go sales, because repeat visits can improve engagement but a lower per-session price and higher usage can reduce margin. For an owner, prepaid packages exchange an early cash benefit for future performance obligations, so manage the promise, capacity and accounting as carefully as the initial sale.