Finance Archives - Member Solutions

Why Involuntary Attrition Is Killing Your Member Retention

Posted on December 3, 2018October 16, 2019 by Miranda Pruitt

When you’re losing the battle for member retention, it’s impossible to ignore. Complaints, poor attendance, and painful cancellations show a clear problem. But what about when content members disappear without notice?

While on the surface it seems like your member retention is rock solid, a silent killer may be lurking. Due to failed, expired, or delinquent credit cards, you may lose members without knowing to a phenomenon called involuntary attrition.

In this article, we’ll take a closer look at involuntary attrition, its impact on your business, and how you can prevent these needless cancellations.

What is involuntary attrition?

Involuntary attrition occurs when memberships are automatically cancelled due to failed payments. On average, 15% of recurring credit card payments decline. Some industries experience more than a 30% decline rate. When these payments fail, they are rarely retried. The delinquency goes unnoticed and ultimately results in a lost customer.

Causes of involuntary attrition

To fight involuntary attrition, you must understand and address each of its underlying causes.

Credit card expiration

Credit cards expire about every three years. That means that about one-third of your members will need updated payment information every year. If you don’t have a system for keeping credit card data up-to-date, you risk losing a significant amount of revenue and members.

Credit card declines

Credit cards can decline for over 130 reasons. The most common reasons for credit card decline include credit limits, suspected fraud, late payments, and deactivation. Even when consumers are notified of declines, they may not remember to update their payment information with your business. Relying on members alone to troubleshoot declines will result in missed payments and unwanted cancellations.

Delinquency

While most membership management software platforms offer robust and reliable recurring billing, many still lack the features to handle delinquent accounts properly. Most software will not automatically retry a payment after it is declined. Likewise, automatic payment reminders via email and text message can help to prevent missed payments—but they do little to correct the situation once an account is delinquent.

If ignored, delinquent accounts can turn into lost members. Software helps streamline membership payments. However, solving delinquency requires you to employ staff to review accounts and work with customers to resolve issues.

How involuntary member cancellations impact your business

Although other business challenges often overshadow involuntary attrition, it can do significant damage to your finances and member relationships.

Lost revenue

The most obvious result of involuntary attrition is lost revenue. With each needless cancellation, you lose money not only in the current month but every subsequent month that the member would have stayed.

Losing money in the first month stings, but losing money every month afterward crushes your bottom line. This long-term multiplier effect means you must replace the lost member with a new one if you want to make up for the missing income. This puts additional strain on your business because it requires more time and resources to obtain a new member than keep an existing one.

Damaged relationships

Generally, cancellations come from your least engaged and lowest-quality members. Involuntary attrition, on the other hand, can impact any member. For example, a member who attends regularly may come back from vacation to find that his or her membership was cancelled due to an expired credit card. In some cases, this member is locked out of the facility and unable to access their workout history and progress.

Of course, involuntary attrition may not be permanent. Your best members are more likely to notice the error and return to your facility. However, the experience is unpleasant and may damage your relationships. As a business owner, it’s your responsibility to safeguard your relationships with members—especially your financial interactions with them.

A shrinking community

In some industries, involuntary attrition accounts for 20-40% of total attrition. This means that one out of every five cancellations is unnecessary and avoidable.

The loss of members has a compounding effect on your business. The smaller your community becomes, the less likely you are to benefit from word-of-mouth marketing and referrals.

Limited growth

If you’re constantly fighting attrition, it’s difficult to grow your net profit. The combined challenges of lost revenue, damaged relationships, and a shrinking community will limit your potential for growth in the short and long term.

How to stop involuntary attrition

Despite its devastating impact, involuntary attrition is relatively easy to fix. Because these members (generally) want to stay a part of your community, you don’t have to change your service, facility, or staff.

To end involuntary cancellations, you need to make the billing process seamless and keep members’ payment methods up-to-date. Below are some of the strategies that we include in our managed billing service to reduce involuntary cancellations:

1) Update credit card information

Keep payment information current to avoid losing members to expired cards. Our team follows up immediately to get updated credit card information and to collect outstanding payments.

2) Communicate with members about missed payments

Catching overdue payments before they lead to involuntary attrition requires speed, skill, and determination. You need to follow up immediately, give customers multiple chances to resolve the issue, and phrase your request in the right way to make members act. At Member Solutions, we handle the scripts as well as reach out to your customers to resolve payment issues quickly and effectively.

3) Offer convenient payment methods

Often, members will proactively manage payments if given the opportunity. Our system allows members to make a payment or update payment methods 24/7 through an online payment portal or by phone.

4) Provide customer service for members’ billing needs

Your members’ needs are not limited to learning good fitness habits and training techniques. Maintaining a healthy financial relationship with members requires effort, too.

The customer service team at Member Solutions is trained to respond to the unique financial needs of your members. They practice responding to members’ concerns about contracts, personal financial challenges, and data security. The additional support strengthens relationships and makes members less likely to be lost to involuntary attrition.

5) Track overdue payments closely

Stay ahead of involuntary attrition by constantly tracking a list of delinquent accounts and past-due invoices. To make things easy, we track missing payments for you. All you need to do is check reports on collected payments, accounts receivable, and active members periodically.

Winning the war for member retention

Member retention is the key to your increased profitability and long-term growth. You can stop needless cancellation and build a strong community by learning to recognize the causes and signs of involuntary attrition. Through a payment recovery system and superior customer service, you can boost revenue and provide a better member experience.

Want to eliminate the threat of involuntary attrition? Get a demo of our managed billing services.

7 Ways to Handle Late Member Payments

Posted on August 16, 2018October 16, 2019 by Miranda Pruitt

Mobile invoice for member payment on cell phone

Asking your students for money is never easy. When a member of your martial arts school doesn’t pay on time, it’s tempting to let the delinquency slide to avoid confrontation. But you run a business. You deserve to be paid for the valuable services you provide. Still, how can you ask for late payments without sounding cold or impersonal? These seven tips will help you navigate how to collect and prevent late member payments:

1. Automate member payments

Automating credit card and ACH payments through your member management system is an easy way to prevent late payments. Talk to your members about switching to one of these methods if you notice them struggling to pay on time. Be sure to highlight the added convenience of auto-payments and address any concerns about data security.

2. Set expectations with new students

Review key points of your membership contracts with new students and families. Make sure students or parents sign off on payment amounts, due dates, and the membership duration. Be honest and open about your expectations for on-time payments. Just like your members expect consistent, high-quality martial arts instruction from you, you will expect prompt, full payments from them.

3. Charge fees for late payments

If late payments are a chronic problem for your martial arts school, you might decide to add late fees to your contract. Some gyms and martial arts schools charge late fees of $5 to $25 per overdue payment. For some individuals, the extra incentive will motivate them to stay on top of payments.

Before deciding to use late fees at your school, consider how this will impact your relationships. Ask yourself how new members will react to hearing about late fees before they’re even a part of your community. In the end, you’ll have to determine the best balance to protect your business without harming your relationships.

4. Send email reminders

You probably already use your martial arts software to automatically remind your members about upcoming payments and due dates. Hopefully, these reminders help prevent late payments before they occur.

Once invoices become past-due, you can use another type of email reminder to collect late payments. Create a short series email scripts to ask for late payments. Be polite but direct. Make sure to clarify any consequences of late payments, including interest fees or deactivation of the membership.

5. Make a phone call

Because phone calls are more difficult to ignore than emails, they’re particularly effective for collecting late payments. Be friendly but firm on the phone. Clearly and calmly explain the details of the past-due invoice and ask for the payment in full. While on the phone, you may uncover new information about your member’s situation that reveals the true reason for late payment. Use these insights to find a long-term solution to help you and your member avoid future missed payments.

6. Be kind, not argumentative

Your students are only human. They make mistakes. They forget to update expired credit card information or to check their bank account before payments are due. There are hundreds of reasons students miss payments. Avoiding financial disputes is crucial to maintaining a strong, long-lasting relationship. Before jumping to conclusions, see if a friendly reminder is all that is needed.

In some cases, your student may be dealing with a difficult or complex situation that has impacted their finances. Use good judgement to come to an agreement that’s fair and mutually beneficial to you and your member. It may make sense to be flexible or forgiving in order to preserve your relationship and retain your member.

7. Call in an expert

Collecting late payments is complex and challenging. To truly be successful, you’ll need to dedicate resources to make sure someone is responsible for follow up and collections. If you handle this follow up in-house, make sure to incorporate this task into one of your job roles so it does not become an afterthought for one of your busy employees. You can also outsource payment collection to a team of managed billing professionals to bypass the awkward conversations and eliminate the complicated follow up process.

If you follow the steps above, you’ll see your overdue invoices decrease while your relationships with your students improve. In the long run, the combination of these two factors is what will keep your martial arts school financially stable and successful.

Have you tried these tips? How do you encourage students to pay on time? Tell us your thoughts below.

How to Avoid Financial Disputes with Your Gym Members

Posted on July 26, 2018October 15, 2019 by Miranda Pruitt

Member-owner relationships are a bit like marriages. You work hard to cultivate strong, long-lasting bonds. You do all you can to show you care and provide what your member needs. Despite that effort, you can still find yourself dealing with absences, arguments, and painful breakups caused by disagreements about money. Among married couples, financial disputes are the second leading cause of divorce. Likewise, uncomfortable conversations about missed payments can make members feel like your gym is not the right place for them. To avoid losing members, put a plan in place to prevent financial disputes and strengthen your relationships.

What can you do to avoid financial disputes with your members?

At Member Solutions, we have over 25 years of experience providing billing services and collecting member payments. Think of us as a financial counselor who wants to help alleviate some the strains money puts on your member relationships.

Follow these 5 tips to avoid financial disputes and keep your billing practices running smoothly:

1) Talk about your billing policies

Clear billing policies allow you and your members to stay on the same page. Put yourself in your members’ shoes. Would you enjoy surprise charges to your credit card? While surprises can be fun, financial surprises can damage your relationships.

Create a membership welcome packet that clearly details what your members can expect financially. Address the when and how of payment processing, late fees, cancellation policies, payments dates, and how members will be notified if fees change.

2) Be flexible when members have money problems

Eventually, one of your members will show up to your gym after months of racking up an unpaid balance and overdue fees. They’ll say they had no idea it was happening. They’ll ask you why you didn’t remind them and possibly tell you they can’t afford to pay.

While it’s important to enforce your policies, sometimes it’s important to find a middle ground. Ask yourself, “What’s best for my long term relationship with this member?”

Sometimes it’s in your best interest to give a member a break. You may decide to waive fees or set up a payment plan to get a member caught up. When you make an exception, let them know that you’re doing it because they are a valued, long-term member. Explain that your policies are in place because newer members—who don’t have strong relationships like yours—might try to avoid paying.

This method has a variety of benefits:

You were likely going to receive no payment. Now that you have made an exception, you are likely to receive some compensation.
You increase the odds that this member pays on time going forward.
If this member is leaving, it’s more likely that he or she will return to your gym.
The likelihood that member talks highly of your gym will increase.

Every gym owner is unique and has different opinions on this situation. All we recommend is that you consider the value of each customer on an individual basis.

3) Automate member payments and billing

Automated billing services virtually take you out of the dues collection process at your gym. All you have to do is set up client accounts, due dates, and payment amounts. Voilà! Your clients’ accounts will be billed automatically.

What does this mean for you? It means that you no longer have to directly collect member payments. This saves time on administrative tasks and reduces strain on relationships with your members.

4) Offer secure online payment processing

The convenience of online payments has obvious appeal for both businesses and members. However, when it comes to online payments, choosing a service with maximum security is critical. The last thing you want is for your or your members’ financial information to be compromised.

Choose a Level 1 PCI compliant provider to protect your business. Providers that follow these data security standards offer the highest level of protection against credit card fraud.

5) Enlist a professional team to bill your members

In addition to damaging relationships, tracking down member payments is confusing and time-consuming. Pursuing missing payments can take up to 10 hours every week. That’s time you could spend with your members, growing your business, or relaxing with friends and family.

Outsourcing to an affordable managed billing service that specializes in tracking down delinquent accounts can reduce stress and help preserve relationships. Billing professionals have an in-depth understanding of the payment processing business and are better able to troubleshoot issues with failed credit card payments or delinquency. In fact, members are more likely to settle monetary issues with a billing company than a gym owner.

If you decide to collaborate with a third-party billing provider, choose a team that will uphold your policies while still offering flexibility to your members. A good billing company will be able to advise you on when to make exceptions for members who are having trouble paying.

Overcome financial disputes to strengthen member relationships

Financial disputes are one of the main reasons relationships end—whether it’s between spouses, business partners, or band members who pursue disappointing solo careers. To beat the odds, you need to be proactive. Talk to your members about your expectations regarding payments. Be open to a financial partnership with your members. If you decide to partner with a billing company, choose a team with the same commitment to customer service and fairness that you do.

How do you manage the financial aspects of your member relationships? Share your comments below.

Webinar: Uncover the Hidden Profit Center Inside Gyms & Martial Arts Studios

Posted on July 27, 2017June 19, 2019 by Member Solutions

Can you turn a profit on your billing expenses? Expert sales consultant and school owner Erik Charles Russell says yes.

Members love convenience. In this webcast, Erik Charles Russell shares how to create a new revenue stream by appealing to members’ desire for convenient billing options. Through this model, you can generate higher income from fewer members as you reduce administrative costs. What you’ll learn:

How to create a profit center from service and transaction fees
How to raise prices and retain current members
Why low prices do not lead to more members

Presented by Erik Charles Russell.

Erik Charles has been in the Martial Arts and Fitness industry for more than 25 years and is the owner of Premier Martial Arts and Fitness in Watertown, NY. In 2015, he published a book based on his successes called The Art of Selling Memberships. The book became an international best seller—hitting number one in three categories in the US, Australia, and Germany on Amazon.com.

10 Ways to Reduce Your Delinquency Rate & Increase Cash Flow

Posted on April 7, 2017August 21, 2019 by Member Solutions

In the 26 years that Member Solutions has been in business, we’ve discovered that there are ways to alter member payment behaviors to ensure prompt and predictable cash flow to your facility. Here are 10 tips to reduce your delinquencies and facilitate collections with our managed billing services.

1. Avoid statement or coupon billing methods whenever possible.

Customers that pay by statement or coupon are 23% more likely to become delinquent than those who sign up for auto-pay. Enroll customers for bank draft or a credit card option. It’s a double win for you. Customers are more likely to pay on time and electronic payment options save you money.

2. Acquire e-mail addresses for every customer.

Email is one of the fastest ways to communicate with your customers. It has become an effective tool in delinquency management. When we send email reminders as part of our payment collections service, we provide a direct link to our customer-only website where your members can make payments and update their billing information.

3. Provide a contract copy promptly when requested.

Your agreement is legal proof of the customer’s obligation to pay. The quicker we receive the agreement, the better chance we have in recovering your funds.

4. Select due dates early in the month.

If a customer does miss a payment or has a declined or returned payment, Member Solutions has a better chance to recover your funds within the same billing cycle. We recommend setting the 1st or 5th of the month as the due date for all of your members.

5. Know who’s delinquent.

Our most successful clients know how and where to find this information online. Here are ways to stay informed:

Review the delinquency report at least twice per month.
Sign up for Email Alerts. We’ll email you and any staff member you designate whenever a customer has a returned or declined payment.
Examine the Activity Report on a weekly basis. Not only will it provide you with a list of new accounts and funding activity, it will also list any customers with an active follow up that is preventing or delaying billing.

6. Work together with Member Solutions.

The clients we see with the lowest delinquency percentages work with our team to make it easy for members to manage their accounts and make payments. Some clients prefer to be direct with their members, while others prefer a subtle approach. Either method will increase collection results, so long as you’ve communicated your preferences to our team.

Once you know who is past due, you can simply hand your customer a Member Solutions’ business card and say “Member Solutions has informed us that they have been unable to contact you. Here’s a card with their website and contact information.” Once a customer is aware that you may know that they have a billing issue, they are more likely to pay on time to avoid embarrassment.

7. Ask your customer to provide you with their most accurate billing information.

Have them provide it to you directly, rather than obtaining it from a driver’s license or previous billing account which may be outdated. Ask the customer to verify their vital billing information when they are signing the agreement.

8. Make sure that your customer knows that Member Solutions is servicing the billing portion of their agreement to avoid having payments charged back.

Your endorsement of Member Solutions provides your customers with a reassurance of your professionalism and commitment to quality service. Place the Member Solutions Decal in your business and hand out Contact Cards, both provided free of charge. Talk about our Customer Account Access Website, designed specifically for your customers to make payments, update their billing information, print payment history, or contact our Customer Service Team.

9. Offer settlements to members who have trouble paying.

The longer an account remains delinquent, the less likely you are to receive payment. When a customer is no longer attending class or using your facility, they are more likely to stop paying altogether. Once an account reaches 90 daysdelinquent, we recommend automatically offering the customer a settlement for a percentage of the remaining balance. This could bring you income in the form of a lump sum payment, and leave the customer on better terms which could result in new customer referrals or re-enrollment in the future.

10. Don’t accept payments at your business.

Generally, we discourage our clients from accepting payments at your place of business. Accepting payments creates more work for you and increases the likelihood that your customer will receive delinquency phone calls and correspondence when they are not past-due. Worse yet, it also increases the chance of double billing your customer when the payment is not reported immediately to Member Solutions. Finally, once you accept that first payment, chances are it will occur again and diminish our authority when the customer decides not to pay.