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Top 10 Tips on Improving Your Health Club's Cash Flow

Dru Hill
Dru Hill
Published on Thu, Jul 3, 2014

Cash flow is important to your gym… without it your business stops. Putting in some simple systems to maintain good cash flow is essential to your business' success.

1. Standardize how and when you collect money

Having a dozen different ways you collect money from members makes your life harder. It becomes a lot harder to manage members dues if they are all paying different amounts, at different times and by various means, eg: credit card, over the counter or internet banking. I’m often amazed by the different arrangements of billing providers, frequency of payment and surrounding procedures. If members are paying in full for their membership, you should offer the various options to them. However, if they opt for regular payments throughout the year, then you should limit their options to make life simpler for you. Many billing providers and banks charge by the transaction, as opposed to the total amount charged. So the fewer transactions you do, the lower your costs.

2. Manage bad debtors.

Manage your debtors on a regular basis. Don’t let debts build up to high levels, and know the reasons for the failure. Often when people want to leave the gym, they will notify their credit card company or bank that they no longer want the automatic payment to go through, but never notify the gym of the cancellation. Continuing to try and collect money from the same non-existent or cancelled account will only cost you money and wrongly show inflated sales figures. If you can keep them as a member, offer to get them to pay back their debt at an agreeable rate, and make sure they keep to it. Don’t leave failed automatic payments until the next billing cycle. If the member has come in, use the opportunity to collect the payment then and there to improve your cash flow.

3. Block entry to the gym sooner, rather than later, for non-payers.

If a member defaults on a payment, then make sure they are flagged so when they come into the gym it’s much easier to deal with straight away. Staff in the gym should know immediately when someone who has an issue with their account comes in. If you’re a 24/7 gym, and have already notified a member their account is overdue, you could block access to check-in automatically if they haven’t cleared their overdue account within a specified time frame. Make sure your members know their account is overdue, and allow a grace period for the member to pay. Have automated actions to manage the failures.

4. Verify new members accounts are correct sooner rather than later.

Offering the first month free in a membership is a great incentive to get members to sign up and thereby improve sales. However, not collecting any money from the member upfront via their account, leaves you open to incorrect bank account details, which, in turn, takes time to chase up and correct. A signup fee of $2 from the member through their bank account, credit card etc is a good way to ensure they are on track to pay. A failure of this small amount will provide early warning of potential problems with the member. Many members sign up, but don’t have all the necessary bank details with them at the time. A good system needs to be put in place where outstanding details are provided so you can collect their money when the time comes.

5. Send an SMS to the member as soon as they default on a payment.

Leaving defaults longer will stretch your cash flow and make it harder for the member to catch up their payments. Having the system automatically send an SMS or Email to the member as soon as they default, will put the responsibility back on the member to try and get the account settled as soon as possible.

6. Charge up front for membership fees.

If members pay weekly, fortnightly or monthly then charge them upfront for the period, i.e. if a member is paying monthly, ask that they pay a month in advance.

7. Collect the difference between the signup date and first payment date.

Many gyms gift the first 1-4 weeks gym membership to the member. Often this time is when the member is most proactive and wanting to come in the gym. There is often a time delay between the end of the gifted period and when the first bill is sent out. Ensuring those days during the transition are charged for will help improve your membership revenue.

8. Sell memberships that are ongoing revenue generators.

If you can sell memberships that continue forever, they will continue to provide you cash flow. Having to chase regular members to re-sign up at the end of 12 months can really hurt your cash flow.

9. Avoid collecting weekly, collect fortnightly or monthly instead.

While many employees are paid weekly in some countries, collecting money fortnightly or monthly instead will improve your cash flow if you are charging up front. Our research shows there is minimal difference in dishonour rates between charging monthly and weekly. However, charging monthly gives you more of the members money up front, supporting your cash flow, therefore reducing the amount of work you have to do chasing failed payments. Monthly is best for credit card processing, fortnightly can be best for direct debits and ACH processing. If a member is paying monthly, and gets behind, it is a lot of work to get them back on track if it is a major cash flow issue. Though it’s easier to let a weekly payment slip by, than a monthly payment, if you are reliant upon the member paying you by internet banking (automatic payments) and without the right tools, there is a greater risk that you will not notice the member has missed a payment.

10. Have end dates on membership holds.

Giving out membership holds freely when members are still within contract opens the system up to abuse by members. Members typically go through cycles where they are passionate about going to the gym and then they are not. An ideal period for a membership hold is 1-5 months, depending on the circumstances. You want to have members agree to a length of time for which they want their membership suspended, and have an automated SMS or email going out notifying them when billing starts again. Having the members account automatically resume and come off hold as soon as they come back into the gym is also useful.