Debt collection can be difficult — no matter how big or small your club is. Each month you electronically bill your members for recurring dues, annual fees, services and any other incidental charges. After traditional billing methods are completed, if a billing item is returned, what do you do? If you don’t follow up on these returns or cancel the member for nonpayment, you are allowing an “I Owe You” situation. Thankfully, there are a couple options you can consider to recover the unpaid billing.
1. Attempt to do it yourself.
To be successful and do it the right way, there are a few things you should consider. First, you need an efficient billing and software program that will inform you of returned items without delay, including details of who was billed and why it returned. This should be automated whenever possible.
Second, make sure you have systems to track the payments you collect and log conversations — there is nothing more insulting than bothering a member who has already paid.
Lastly, you need someone to do the job. Members can be confrontational, rude, even threatening — it takes a special kind of person to embrace a job like this and be able to conduct themselves accordingly. You should consult your legal advisors before beginning to be sure you don’t break any laws. This includes a review of your membership agreement to make sure it covers your right to collect. You would be surprised by what you can and can’t do.
2. Find a service to do it for you.
A softer approach without credit reporting may be a good start and help retention. Credit reporting agencies can be used at a later date. Some club management software (CMS) companies offer a program for debt collection services. Depending on how they are configured, this is a good starting point.
If the program is not affiliated with your CMS company, it could negatively affect your relationship with the members. They may not allow you to waive any fees and can be hard to track. Make sure you know how they are charging you and exactly what options you have. You could be required to buy credits (one return is one credit), which means you pay up front regardless of whether or not anything is ever collected.
Beware of debt buyers, who will purchase your debt for pennies on the dollar and keep everything they collect. They have no interest in keeping the member. The better option is a service where the fee is paid for by the member; meaning a member pays a service fee on top of the owed dues. When funds are collected you get the dues and the service fee goes to the collector. Qualify them before signing on. There are many laws and guidelines that govern debt collection. Make sure the debt service you choose is a member of ACA International and understands and adheres to regulations that govern their industry.
No matter which path you choose, make sure you consider the following:
The sooner the member is contacted, the better your chance of collecting. Letters, emails and phone calls should all be started within 24 hours of the item returning.
Train your staff on how to handle a member that walks into the club and wants to pay or has a question on the balance owed.
Give the member several ways to pay. They should be able to pay at the club, through the debt collection sources options or through a member portal.
Focus on retaining the member. You don’t need to negotiate per say, but you do need to assist them with getting their balance cleared up and possibly taking new billing information for future transactions.
Pay attention to return codes — clean up your receivables and write off bad debt.
Members end up in debt collection for a variety of reasons — some just forgot to have funds available or changed account information and forgot to tell you. Talk with your billing company to see what options they have. Focus should not only be on collecting the funds, but also retaining the member whenever possible to keep them on billing.
Susanne Nauseda has an exercise science degree she put to use in the industry for 10 years prior to joining Twin Oaks Software, where she has worked for the last 17 years. Contact her at 860.829.6000 x 269 or firstname.lastname@example.org.