Bank on It

A standard in payment processing, EFT makes dues collection easier and more efficient for health clubs.

If you think EFT is the little-known cousin of Steven Spielberg's beloved E.T. character, then you might want to rethink your current billing practices. Better yet, hire an accountant.

EFT, or electronic funds transfer, has revolutionized the billing departments of health clubs (and other businesses) since the practice became widely adopted in the '80s. EFT is a service that automatically collects payment for bills from your clients' credit cards or checking accounts each month, transferring the money to your business. The process helps to eliminate billing, collections paperwork and other hassles — no more mailings, processing checks, chasing late payments or resubmitting bounced checks. Most impressive of all, cash flow becomes more controlled with EFT. You know how much you are getting each month, and when you're getting it. All the money comes in at the same time so you can budget accordingly.

“If you don't use EFT, you are continually having to sell memberships to cover the costs [of running the club],” says Brad Neste, president/owner of 11 Gold's Gyms.

And, for club members, EFT offers an advantage over paying in full with cash or check. Instead of having to come up with a daunting sum of money up front, members can pay smaller, more manageable amounts each month. Best of all, members don't have to worry about writing out checks or getting bills from their club. The money is automatically transferred for them.

“It's simply the most effective way to price a membership over the course of the membership as well as collect on those memberships,” Neste explains.

Case in point: Steve Goodwin is the director of information services for Brick Bodies health clubs. Several years ago, he switched over one of the clubs to an EFT system after calculating that 60 percent of the club's members did not pay their dues in a timely fashion.

“We no longer allow monthly billing for that reason,” Goodwin says.

In addition, by signing up for EFT services, Goodwin cut the staff needed to take care of billing. Prior to EFT, “we had to become a collection agency as opposed to a customer service agency,” he says.

Indeed, members who pay dues with cash or coupon book may not be reliable when it comes to their contracts. They may stop coming to the club — and stop paying. “They feel like if they don't pay, they've cancelled [their membership],” Goodwin says. “It's not the same with EFT.”

Specifically, EFT drafts the money regardless of whether the member comes to the club. This, in turn, gives members an incentive to keep using the gym, thus improving retention.

Putting Members at Ease

Still, members may be reluctant to participate in an EFT program. They may feel uncomfortable sharing information about their bank account or credit card. Fortunately, clubs can put members at ease by explaining the EFT process to them.

Dana Smith, the controller for the Little Rock Athletic Club in Arkansas, says some of her club's older clientele are often nervous about the security of their credit card and checking account information. The club alleviates their fears by showing them the locked storage cabinets where this information is kept. If they still insist on not using EFT, the club will offer to let them pay in full, but with an added fee tacked onto their dues. However, this option is only given as a last resort. The best bet is to not offer any choices other than EFT up front.

“The main thing is we tell them [EFT is] a requirement right off the bat,” Smith explains.

Naturally, an EFT system that works well will quell any concerns members may raise. Therefore, implementing the best process is important. Clubs with the proper expertise can handle EFT themselves, but this approach does present challenges.

“We tried to do [EFT] on our own, but it's a massive undertaking,” says Scott Davis, the general manager for the World Gym in Sterling, Va. In the end, Davis chose to go with a software company that could handle the delinquent accounts and follow through for the club.

Since many clubs want to handle their financial transactions with EFT, a variety of software vendors are stepping up to the plate with programs designed to take care of the process. With so many choices available, however, how can club operators decide what to invest in?

The first step: Talk to your bank and your credit card company, advises Goodwin. You want to make sure that whatever software system you are considering is compatible with their systems. You'll also want to research every software company that interests you and call their clients. And, advises Neste, make sure to call some of the customers not on their referral list since the software companies will obviously only publicize customers who are satisfied with their services.

You may also want to call clubs that are similar in style and size to your own, Goodwin says. After all, a software program that works fine for a single facility with a membership base of 500 may be a disastrous choice for a 20-site club chain with members totaling 50,000.

Finally, you'll want to test-drive the software and see how it works in your facility. You also have to recognize what software requirements are crucial to you and your club. “What's important to you? To have EFT? Is it the member check-in?” Goodwin asks.

“It's trial and error,” he continues. “We looked at roughly eight or nine packages before we switched in the past year. You have to see what fits for you.”

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