How to Avoid Financial Disputes with Your Gym Members

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:

  1. You were likely going to receive no payment. Now that you have made an exception, you are likely to receive some compensation.
  2. You increase the odds that this member pays on time going forward.
  3. If this member is leaving, it’s more likely that he or she will return to your gym.
  4. 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 relationships with your members

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.

10 Ways to Reduce Your Delinquency Rate & Increase Cash Flow

Business charts and graphs

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. Get email addresses from 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 when payments are due when a new month starts. 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, but it also will list any customers with an active follow up that is preventing or delaying billing.

Member Solutions Managed Billing Solution - Software on Monitor

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 the 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 days delinquent, 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.

New Chip Cards, New EMV Rules for Merchants: Are You Ready?

Whether you realize it or not, a major change is happening in wallets throughout the U.S. Perhaps it’s already happened to your wallet. If it hasn’t, it soon will.

The magnetic stripe credit card you’re used to using to make purchases has been – or will soon be – replaced by what is called a chip card.

Actually, there are a bunch of names for it: chip card, smart card, smart chip card, chip and PIN credit card, chip credit card. And you’ll often hear the cards referred to as EMV chip cards, EMV smart cards, EMV cards.

E…M…what?

EMV. It’s an acronym you should know. Named after its original developers — Europay, MasterCard, and VISA — EMVis a global standard for the cards equipped with computer chips and the technology used to authenticate chip card transactions.

You see, not only is a change happening for you as a consumer (where you’ll use a chip card instead of magnetic stripe card to make purchases), there are big changes ahead for you as a merchant too. All U.S. merchants are being urged to use EMV-compatible payment terminals in their business on or before Thursday, October 1, 2015.

Why the migration to EMV technology?

EMV chip technology is proven to significantly reduce card fraud resulting from counterfeit, lost and stolen cards.

Currently, when you use the magnetic stripe card, data is exposed. It’s decrypted and then encrypted several times through the transaction. Also, data from a magnetic stripe card does not change. It’s static.

Because the data from a magnetic stripe card doesn’t change, it can be skimmed easily which leads to fraudulent use and the production of counterfeit cards.

The chip card, on the other hand, is much more secure. Data passes through the same stops as the standard methods, but data is NEVER decrypted and therefore NEVER exposed.

On top of encryption, each EMV chip card transaction is also assigned a unique one-time-use token, which is then destroyed once the transaction is complete.

Change for Consumers, Change for Merchants

Changes to chip cards mean a new shopping experience as a consumer. No longer will you swipe your card. You’ll insert your card into an EMV-compatible terminal. The card must stay inside the terminal while the chip information is accessed and updated.

As a merchant, the switch to EMV means adding new EMV-compatible payment terminals—and—complying with new liability rules.

For everyone, it means greater protection against fraud.

Take Charge(back): How to Handle Payment Disputes

Chargebacks Guy Calling Bank to Dispute Charges

“What do you mean they’re disputing the charge? They signed a contract!”

Chances are you’ve been in this circumstance before. One of your customers has contacted their bank to dispute a charge. It can seem like an invasion on your bank account, causing unneeded work and aggravation on your part to settle the situation. Fortunately, there are ways to minimize payment disputes. Let’s talk about payment disputes, why we get them, and how to prevent them.

Why Do Chargebacks Occur?

A chargeback occurs when a cardholder contacts their credit card-issuing bank and asks for a refund on a transaction for a purchase or service made on their card. There are a variety of reasons a customer will charge back a payment. Here are the most common:

  • The customer doesn’t recognize the charge
  • The customer claims that they cancelled services
  • The customer didn’t receive a credit
  • The customer claims fraudulent charges (stolen card)
  • The customer is unhappy with the service or purchase

It’s important to note that consumers have the right to charge back payment when they believe there has been fraud or a product has not been delivered as specified. The Fair Credit Billing Act defines the rules for credit card fraud and billing disputes here in the US. However, disliking a product or being unhappy with the merchant or product does not give the customer the right to charge back a payment through the bank.

Chargebacks are a great tool in the consumers’ hand. As a merchant, we give this power to the consumer when we don’t clearly state the return policy, cancellation policy, or identify ourselves to the customer—which brings us to some tips to prevent chargebacks.

Tips to Prevent Chargebacks from Happening in the First Place

Protecting yourself from chargebacks can be tricky. However, the best defense is the best offense. Put these best practices in place to prevent chargebacks from occurring:

  • Provide the customer with the name and phone number of your company so that they recognize your charge. This is the first reason you may receive a chargeback.
  • Have your return/cancellation policy clearly stated on the contract and on your website.
  • Provide accurate descriptions of your services.
  • Get authorization for your charges with a valid signature.
  • Keep your contracts and agreements updated.
  • Credit cards should always be valid. When possible, get a signature when customers update their cards.
  • Get a signed proof of delivery for products.
  • Talk to your customers to resolve issues before they talk to the bank. That personal touch can go a long way in dealing with and preventing chargebacks.

So You Received a Payment Dispute, Now What?

Chargebacks are unfortunately something every small business owner faces at one time or another. So let’s look at what to do when you receive one.

The lifecycle of a chargeback can start two different ways.

  1. Retrieval: In the event that you receive an inquiry/dispute or “retrieval,” you still have a chance to avoid the chargeback. Disputes are most likely from a customer not recognizing the transaction on their credit card statement. In an ideal world, customers call the number that is associated with the transaction to determine the merchant, but in many cases, this does not happen.
  2. Dispute: If you receive an inquiry, retrieval or dispute, immediately respond with a signed contract or agreement confirming the charge. In most dispute cases, the transaction is confirmed, the bank is satisfied, and no further action is needed.

Managed Billing Services by Member Solutions

How Does Your Billing Company Handle Chargebacks?

If you’re a Member Solutions billing client, we handle the chargebacks for you.

Here’s the process:

When we receive an online request from the credit card company, we look up the customer account to see if we have a contract on file. If we do, it is immediately sent to the credit card company with an explanation of who is billing the customer. If we don’t hear back from the credit card company, it means they accepted our documentation and the case is closed.

On some occasions, credit card companies ask for further documentation or clarification. We contact you, the merchant, if necessary. If these steps are not taken in a timely manner, the dispute will most likely become a chargeback.

If the customer claims the transaction is a fraud or that they canceled the services or product, the bank will issue an immediate chargeback with a chargeback fee of (in most cases) $25. However, we, at Member Solutions, still respond immediately with an explanation of the charge and a signed authorized contract or agreement showing the valid transaction. It can take up to 45 days before we know if the bank will send a chargeback reversal. A chargeback reversal is when the bank agrees with our documentation and gives back the money.

There are, of course, instances of true fraud. In those cases, that money will be lost. We sometimes receive a chargeback reversal, and in another 45 days, the bank will send a second chargeback. This means the customer and/or bank has decided that the charge is invalid and that decision is final. We must then take the money from the merchant account. At that point, the case is closed.

This, of course, isn’t what any of us want to see happen. Your best action is to be clear with your customers about their contract and services—and keep in constant contact to make sure that the customers are satisfied.

What’s an ACH/EFT Chargeback?

It’s important to know that there is another kind of chargeback: an ACH/EFT chargeback. ACH/EFT stands for Automated Clearing House/Electronic Funds Transfer. Automated Clearing House is an electronic banking network used for direct deposit and electronic bill payment.

In the case of an ACH/EFT chargeback, the consumer notifies their bank that a payment initiated by a merchant is not authorized. In most cases of ACH disputes, Member Solutions receives a request from the bank telling us a customer is disputing their ACH/EFT payment from their checking or savings account.

What Happens When You Receive an ACH/EFT Chargeback?

The merchant has 14 days to respond with a signed contract or agreement stating that this payment is valid. The burden of proof is with the merchant to prove the customer signed an agreement authorizing them to debit the customer’s account.

Again, if you’re billing with Member Solutions, we send the bank a copy of the contract or agreement with the checking account or savings account information with a signature in hopes that the bank is satisfied with the proof we have provided.

In most cases, this will save a chargeback. If there is no proof sent in the 14 days, the payment will be charged back. This is just another reason for why it is important to establish that relationship with your customer.

Membership Agreement Contract

Make Sure Your Membership Agreements Contain Important Information

Your membership contracts or agreements should show the cardholder’s name, address, and phone number. It also needs clear contract terms and a concise cancellation/refund policy. Be sure you have an authorized cardholder signature—and at a minimum—the last four digits visible of the credit card number that is tied to the disputed charge. These things make a successful attempt at avoiding a chargeback.

As always, we’re here to help. If you would like more information about the chargeback process or have any questions, please don’t hesitate to contact Member Solutions Client Services at 888.277.4407. We’re happy to assist you.

Good luck and strive to be chargeback free!

About the author: Ursula Carter is the Finance Manager at Member Solutions. Her experience includes an exclusive two-year focus on chargeback management, where she worked with credit card companies and individual merchants to prevent payment disputes and resolve chargebacks. As Finance Manager, Ursula assumes direct responsibility for the day-to-day billing operations, which includes ensuring the correct system functions for all billing-related processes, and working with appropriate personnel to correct system issues, client interaction, payments, and client funding.

How You Handle Membership Cancellations Is Just as Important as How You Handle New Enrollments

"I Agree" checkbox on membership contract Terms & Conditions

20% of calls to the Member Solutions’ call center are about customer cancellation inquiries. It can be the most challenging type of call. A member has stopped attending class, has stopped making payments, and wants out of the membership agreement.

Although you as the business owner are legally correct to enforce the terms of the contract, it doesn’t change the member’s view on what they perceive as “the right thing to do.” Most times, the member does not understand why he/she is being held to terms when he/she voluntarily stopped attending. This situation creates conflict and a disgruntled consumer.

An unhappy consumer will communicate the experience to as many people as possible. With social media and review sites readily accessible, we often see disgruntled consumers post untrue and negative statements. Readers of these posts do not have all the facts, and many times perceive the biased version as the truth.

The good news is that you have the ability to turn a negative experience into a positive by implementing any of the following suggestions into your business policy.

Here are a few ideas to help defuse this situation for your business:

1. Send Member Solutions a hard copy of your signed membership agreement to store.

Many disputes are averted simply by our representative’s ability to immediately present a signed copy of the agreement. The signed document reinforces the terms, including the rights for cancellation. Seeing the terms again in writing is sometimes enough ammunition to diffuse the dispute.

2. Build a cancellation fee in your membership agreement.

Select a dollar amount that may be equal to 30, 60 or 90 days’ notice. Some of our most successful clients use this option.

3. Create a term rate that is more attractive than a month-to-month rate—and include a cancellation fee.

If a customer wants to cancel prior to the end of the term, the cancellation fee equates to the difference between the two choices multiplied by the number of lapsed months in the agreement.

Here’s an example: The month to month rate is $100.00 per month. The term rate is $75 x 12 months. The cost difference is $25.00 per month. If the term customer wants to cancel 6 months into the agreement, the cancellation fee would be $25.00 x 6 months = $150.00.

4. Make sure your cancellation terms are clearly part of the signed agreement.

 
Discussing Contract Membership Cancellation

 5. Offer a settlement when the account becomes 90 days delinquent.

Most Member Solutions clients choose to settle for 50% of the remaining balance. This option saves relationships and provides you with some of the principal balance that you may have not collected otherwise.

Additionally, a contract cancellation opt-out method may assist with your lead-to-membership conversions. Many people, especially in this economy, don’t want to commit to long term agreements and therefore won’t sign a term agreement that doesn’t allow them a method to break it.

Implement these suggestions to effectively handle membership cancellations. Ultimately, ending a business relationship on a positive note will aid member retention and referrals.

What membership cancellation terms have worked for your business? Have a tip to share? Comment below.

Margo Stauffer is the Director of Customer Service for Member Solutions.