“To pay by direct billing or not to pay, -- that is the question: --
Whether ‘tis nobler in the minds to suffer
And collect membership fees by check
Or to use payroll deduction and EFT
And by minimizing time maximize efficiency?”When developing a membership fee structure, the first challenge is to identify a reasonable cost, which is affordable to the majority of the employee population. Some of the factors to consider include employee feedback, income levels, cost of living, services and amenities provided and corporate goals. The next challenge is to determine if there are any additional revenue sources. Is membership critical to ensuring that your program is break-even and self-supporting?Once the membership fee structure is established, the next step is to provide members with a variety of payment options. Flexible payment plans reduce the potential barrier to membership. Automated systems such as payroll deduction and electronic funds bank transfers are the least labor intensive and reduce the amount of time staff will have to spend on membership collection. Manual systems such as direct billing (annual, bi-annual and quarterly payments) require more staff time, but by offering financial incentives such as paying once or renewing on time can also help reduce administrative time. Payroll deduction, electronic funds transfer and direct billing are the most common fee collection systems. Here is a brief overview of each of processes.

Payroll Deduction:
When using payroll deduction, members fill out a payroll deduction form electing to begin deductions from their paycheck. The forms are then sent to the company’s payroll office for processing. Generally it is recommended to collect the first deduction either by check or cash (if applicable), since a lag can occur before the paperwork is received and deductions begin. The member’s information is then added to a database created by staff so they can reconcile it against payroll records (provided by the payroll office) to accurately determine if revenue matches membership. Members wishing to cancel their membership complete the same payroll deduction form to stop their fitness or wellness center deductions. Electronic Funds Transfer (EFT):
When using EFT, members can elect to have their membership fees debited from their checking or savings account. Once a member has selected the account the monies are to be deducted from, the information is entered into the computer for a test transmission. Generally, EFT’s are transmitted only once a month. After the test has been made, the staff make any corrections to make sure the “batch” is correct and process the final transmission. Membership fee collection occurs electronically through a clearinghouse, usually a local bank. Monies are then deposited into the company’s account. Members wishing to cancel their membership complete a cancellation form and their information is then removed from the EFT system. Monthly reports from the bank are compared with membership records to determine if revenue match. EFT membership collection requires a computer and a specific software program. These programs can be purchased through local banks, or through commercial club management software companies.

Direct Billing:
When using direct billing, members select their billing period (annually, bi-annually or quarterly) and pay their first installment by check. Generally cash is not accepted, but if an exception is made, make sure there are established procedures for its collection and handling. With any form of direct billing, safety precautions should be in place to safeguard against theft.

Member information is added to a database with their billing cycle information. Bills are generated by staff and are usually sent 30 days in advance of due date. Options include distributing second notices and/or making a telephone call to check on status of the payment. If payment is not received within an established period of time though, membership is cancelled. Fees should be collected with three days of receipt and deposited directly into the company’s account. Reconciliation occurs monthly to ensure that membership records are accurate.

Today, there are a number of reliable and affordable club management software programs available, and each one of them offers customers a variety of billing options. The key is determining which system is best for handling your membership collection needs, and then making sure your staff is trained to administer it.

Published with permission from:
Fitness Onsite Magazine Winter 2004