They pay double next time. I've never had any problems with this and I've never had anyone forget their money. That said, I am flexible if a rearrangement will do instead, for instance in the case of minor illnesses. I don't charge for illness, no matter what the notice, even if I can't rearrange. With singing the body is the instrument, so illness affects the technique, and besides, I don't want to catch anything that will affect my ability to teach, so I don't want ill people turning up for lessons just because they have to pay. A few cancellations are better than me having to take a whole week off ill. There is, of course, an element of trust here, but you get to know who is genuine and I find most people are honest*.
I allow missed lessons for any reason without charge with adequate notice, (24 hours as per my Ts & Cs), because I teach throughout the year. In practice the vast majority actually take more lessons than if I observed school terms, so the only weeks without pay are my own holidays. I appreciate that this takes more of a toll on your income if you don't work for 12 weeks of the year.
*I've even had someone pay for four hour-long lessons in a row because they were unavoidably delayed at work and didn't know until the last minute. Not my problem, of course, but they could have said they were ill and avoided at least some of the fees.