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How to Reduce or Eliminate Late Payments for Your Fitness Business

Managing late payments as a fitness business owner can be a royal pain. Why? Fitness studio customers tend to be delinquent in an inconsistent manner. In this week's post, we cover how to significantly reduce or eliminate late payments for your fitness business.

May 23, 2022

Managing late payments as a fitness business owner can be a royal pain. Why? Fitness studio customers tend to be delinquent in an inconsistent manner.

If you offer membership plans, chances are you use a fitness business software to automate credit card processing, making most billing “set-and-forget.” 

What many new fitness business owners don’t realize, however, is that it’s common for customers’ credit cards to be lost, get stolen, have updated expiration dates and bounce back with insufficient funds. Sometimes customers cancel cards not realizing what accounts they are tied to, or purposely cancel cards to avoid giving advance notice on things like gym memberships. 

When you have countless members to manage, keeping track of late or delinquent payments and chasing down reimbursement can be costly, in terms of lost revenue on the missed billing cycle and in terms of you and your staff’s valuable time spent chasing down late payments. 

According to the Federation of Small Businesses (FSB), one payment in every three made to small businesses is late. The problem is exacerbated by the time it takes to chase these payments up – an average of 1.2 working days a month.

It can be extremely difficult to maintain financial balance when payments don’t come in on time. Indeed, the FSB figures confirm that some 37 per cent of small businesses have reported running into financial difficulties as a result of late payments.

Over time, late payments can cause major disruptions in monthly revenue, and make predicting your fitness business’s financial future difficult. Without a steady income, it can be hard to make hiring decisions, equipment purchases, expand your business, or secure a loan from a bank.

So, how do you reduce or eliminate late payments for your fitness business?

Monthly Memberships Make Managing Late Payments Easier – If Set Up Correctly 

If you find yourself chasing down customers who’ve racked up multiple unpaid classes beyond the punch card they’ve paid for, then you might want to consider creating or emphasizing a monthly autopay membership option. 

Monthly memberships help gyms and fitness studios in multiple ways. They:

  • Provide a way to automatically bill customers’ credit cards – making it super easy for both the client and the business owner
  • Give fitness business owners a much more predictable projection of what monthly income will be over time
  • Are trackable when using fitness business software and allow for automated “past due” reminders as well as late fee set up

Membership plans are often offered alongside other common fitness club pricing options such as class passes and single class drop ins. The upside for customers is that they can get a certain number of classes or even unlimited classes or gym access at a discounted rate in exchange for committing to a contract. 

In today’s competitive fitness industry, most fitness businesses over flexible month-to-month membership packages with no long-term commitments. Generally speaking, the longer the customer contractually agrees to the membership terms and payment schedule, the deeper the discount they can expect. 

For example, a 6-month or 1-year contract should offer the customer a lower monthly fee than a month-to-month program that can be canceled after the first month.

Recurring memberships should be set up to bill the customer’s credit card or automatically draft from their bank account. Cash payment doesn’t work here, because as a business owner you want to be able to have your members billed automatically. You do not want to be handling cash payments from hundreds of customers a month, where you have to manually remind clients to pay and track down late payments later. 

Automatic Membership Renewals

Another way to stabilize membership numbers and therefore revenue is to set up your membership plans to automatically renew after a set time time period (this depends on the type of membership you are offering). For month-to-month memberships, for example, set up the pricing option to automatically renew after 6 months or a year so that the customer knows that their membership will continue indefinitely until they take action to cancel it. 

This format can save you tens-of-thousands of dollars on membership plans that customers might otherwise allow to sunset, especially disengaged customers. 

Manage Late Payments By Eliminating Unpaid Classes

Another tool fitness business owners have for managing late payments is to use a fitness business software platform to manage client contacts and class sign in so that at check-in anyone who does not have a class pass or whose membership is delinquent is flagged before they enter the gym or class. 

As the staff member is taking attendance, they can easily – and gently – let the customer know that they have no punches remaining on their pass and can sell a new one, or that their membership dues have not been paid, and take payment. 

It helps to establish a culture at your fitness studio where staff know that allowing customers to accumulate unpaid classes is not acceptable. Both because it’s costly to the business and because it demonstrates sloppy management and ultimate can lead to a poor customer experience when someone has to track down and ask for payment later. 

Write Clear Contracts and Set Expectations Early

When selling membership programs with a intention of making life easier for both you and your customers, you want to be absolutely clear about the terms and conditions, including how late payments are managed and how the member can freeze or cancel their membership and what penalties, if any there will be for early cancellation. 

Solid fitness studio membership contracts should include:

  • The member’s contact information, including email and phone number.
  • The services included in the membership, including the number of classes or sessions within a giving time period and any additional discounts for special programs or facility access.
  • The start and end date (if there is an end date) of the contract.
  • The cancellation policy. Can the member cancel without giving notice? Are they required to give 30 days notice and pay a final month’s dues? How will the notice be given? In writing? To whom? 
  • Any policy that allows for freezing payments for one, two, three months and any fees charged for the courtesy of being able to cancel. What is your policy if a member cancels while a membership is frozen? Will they be charged their final month, if the contract requires a 30 day notice? 
  • Any late fees for delinquent payments at 30 days, 60 days, 90 days. How will these be billed? After how many days of delinquency is the membership terminated? 
  • A date and signature field and initial fields for any points in the contract you want to emphasize – like the cancellation policy. 

To Charge (Late Fees) or Not to Charge? 

Charging your customers for late payments can protect your business financially, or it could backfire. Here’s why late fees can be tricky and why it’s important to thoughtfully set up any late fee policy at your fitness studio. 

As we mentioned earlier in this post, fitness members’ accounts can be paid late for a wide variety of reasons.

The most common reasons for late payments are expired credit cards and lost or stolen cards that are canceled.

Often your customers may not realize that their card has expired, or that their canceled or changed credit card was the one on file with your fitness business. 

So if you charge late fees to these customers, some can feel unfairly penalized. In these cases you may want to consider being flexible and waiving charges in some circumstances.

You may also want to consider allowing customers under long-term membership contracts who are experiencing financial difficulties to temporarily freeze their membership and payments for a customized amount of time, at no extra charge. 

On the flip side, being consistent with your fitness businesses’ financial policies is critical to your long term authority and success. 

Some fitness businesses forgo late fees altogether to avoid the customer service hassles associated with them. But if you go this route, it’s best to set up system on the front end to prevent as many late payments as you can.

To summarize, these include not allowing unpaid class visits, setting up automatic alerts in your fitness business software so that both members and administrators are notified if a credit card payment does not go through, and making it easy for customers to update credit card information online.

Automated Reminders that Help Manage Late Payments

It’s always a good idea to communicate clearly and often with your fitness business customers. This especially holds true for financial matters. When using a fitness business software platform to manage your gym or studio, one of the biggest benefits is being able to set up automatic reminders – both for gym managers and members. 

Here are a few automated reminders that could help you manage and avoid late payments at your fitness studio:

  • Class pass count running low. This alert will let customers know when they only have a certain number – for example, 1 or 2 classes – remaining on their pass. This encourages them to be mindful when registering for and attending classes and can be a a great reminder to buy a new pass!
  • Monthly payment due reminder. This alert gives customers a heads up that their credit card is about to be charged for their membership. This ensures that they have time to make sure their card or account is in good standing and either transfer funds or update their card information ahead of time to avoid a late payment and any associated fees.
  • Membership payment declined alert. This message is critical for both the fitness studio owner and the client. On the client side, they will know that something went wrong with their credit card and be prompted to check it out and update the information on file if needed. For the fitness business owner, this reminder serves notice that there is missed revenue to keep an eye on and potentially a need to reach out the customer if the issue goes uncorrected.

Smart fitness business owners run a delinquent account report each month and follow up on unpaid or late accounts, which goes a long way in managing client and revenue retention.

Another strategy that can help maintain full classes and discourage late cancelations is to automatically charge your customer’s passes or membership accounts when someone cancels late (or is a no-show).

Lastly, when managing late payments keep in mind that a little grace can go a long way. You want to honor your fitness businesses’ policies, and you can always find a little wiggle room to forgive those going through a tough time financially or who have made an honest mistake. By balancing accountability with flexibility you’ll have no problem managing customer payments.