Receivables Management

One of the main factors in a profitable fitness center is building and maintaining a strong dues line. Industry surveys tell gym owners to expect 2-5 percent returns on EFT billing accounts. What can a club owner do to keep those numbers down?

Many find that as their volume of members increases so do their EFT returns. Initially, a follow-up on those accounts can take a membership advisor, sales rep or an administrative person a few hours per month. This is when the returns are manageable — meaning less than 30-40 per month. Beyond that, efforts to pursue this uncollected revenue takes more and more time, impacts the bottom line and affects human resources and future revenue.

Prevention

As the old saying goes, “An ounce of prevention is worth a pound of cure.” Keeping member account information up to date is critical in preventing EFT returns. Use your club management software to alert you to expiring credit cards or incomplete entries, so you can contact the member and avoid future billing problems.

If credit card declines are interrupting the dues line and occupying too much time trying to update records, ask your billing provider if they have an account updater feature. It keeps account information and credit card expiration dates up-to-date. Here’s how it works:
• Prior to monthly EFT billing, the credit card portion of your file is submitted to the bank for account verification.
• Upon receiving any account corrections or new expiration dates, the current month’s billing is updated and processed as normal.
• These corrections will then be available to automatically update your system, for use in future billings.

Managing Returns

Even with the best prevention in place, some accounts will still decline. Implementing an organized and structured sequence of follow-up procedures will help minimize the impact on the club. Structure is the key to managing receivables.

Your Returns Policy Should be in Writing

The membership agreement should state and charge a service fee for delinquent accounts. This information should be posted on the entrance door and at the front desk. Having this notification in place allows you to then charge for the extra time, effort, paper and postage needed to pursue the revenue. Typically this fee is around $20, but it can vary. The fee should be in line with the dues amounts that are charged and the amount of bank fees in your city and state.

When an EFT Returns

Send an initial letter within 24-48 hours to members who are delinquent, notifying them that they have not paid their membership dues. Be sure the letter is clear, understandable and explains that the member has not met their contractual obligation. Clearly show the amount due and the service fee assessed. Additional letters should go out at further intervals if the account remains unpaid, and one or two phone calls per week made to the member. The key is that this is done without fail each and every month.

Integration with Your Billing System

Integration with the billing system is critical. Members need easy ways to respond — by phone, mail, web, or of course, in person. An important aspect is that using any of the response methods allows members to easily provide new billing information for their account.

A fully integrated system allows club personnel to simply download a return file with a list of members who haven’t paid, and immediately flag their check-in and accounts-receivable file. If the member comes in to use the club, they are stopped at the front desk and gently told they needed to clear up a discrepancy with their account.

Putting a systematic process in place will lead to recovering revenue and getting members back on billing.

Outside Help

Sometimes this work is too time consuming. Check with your billing provider to see if they provide this service. There should be no additional charge. The billing provider would keep the service fee that’s billed to the member and the club gets 100 percent of its dues. If the account is never collected upon, the club has paid nothing. This keeps the pressure on the billing provider to do their job and recover potentially lost revenue. It’s important to make sure no activator fees or a percentage of what’s collected is charged.

Using outside help allows club staff to have greater focus on doing all the right things to continue growing the business and spending more time with members.

Carole Oat is a national sales manager at Twin Oaks Software and a former club owner and operator for 15 years. She can be reached at coat@tosd.com or 860.829.6000 x 281.

Carole Oat

Carole Oat is a national sales manager at Twin Oaks Software and a former club owner and operator for 15 years. She can be reached at coat@tosd.com or 860.829.6000 x 281.