Club News

Fit the Bill

John Agoglia, contributing writer Jan 1, 2006 7:00am

Billing and collections are certainly not the two most exciting aspects of the fitness industry. Most likely (okay, most definitely) they weren't even any part of the reason that you decided to get into this field. But if these two aspects of your business infrastructure are unfit, they could be the reason you may get out of the industry long before you planned.

While most clubs, regardless of size, still do some part of billing and/or collecting of dues in house, most have turned to third-party companies to handle transactions electronically — with all but a scant few facilities doing little more than taking some pre-paid memberships and point of servce transactions at the club level.

While EFT is common practice among most facilities — especially as consumers become more accustomed to electronic bill pay, online banking and other electronic money transfer methods — and cuts down on staff time taken up with collecting payments and often ensures money in your company's account on a specific day, it is still not as automatic as one may believe. In fact, outsourcing any part of your business requires continued diligence from management.

“EFT is a generally accepted business practice method of payment today,” says Sean Kirby, national sales director of ASF International, one of the companies providing billing and collection services to the fitness industry. “But it has to be remembered by fitness facility operators that EFT is by no means guaranteed funds.”

With all payment options there is an inherent risk of non-payment, especially as the economy tightens, the housing market shrinks and consumers find themselves overextended. EFT payment is no different.

“Members can stop payment with their banks and credit card companies, especially as money tightens up. They can also dispute charges with their card issuer, and odds are the company will side with the customer regardless of your contract,” Kirby says. “This can lead to some sticky situations for owners and operators — sticky situations that can add up quickly.”

The stickiest of these situations often lead to an increased need for debt collection from facilities. But, be it through calls or letters, it is important that matters are handled diligently to help keep a club's image as positive as possible to the market it serves.

“You have to be aware that it is important to track your revenue flow and head off problems as early as possible,” says Steve Roma, chief executive of New Jersey-based WOW! Work Out World. “It takes time and man hours to monitor it, but you have to know what is going on. It is your bottom line.”

This is part of the reason that WOW! Work Out World and others still prefer to handle billing and collections in-house, at least in the early stages. In fact, WOW! had an entire phone and e-mail system installed about a year ago that in addition to other functions, helps to handle the finance end of the business.

“We want to stay on top of things, but if we had to employ people to do all of these functions, we couldn't really do it. In fact, there was a point before we leveraged technology that we turned the collections end over right away,” Roma says. “Now we do 30-, 60- and 90-day collections through our phone system and e-mails with minimal man-hour time, making the initial investment well worth it.”

But that doesn't mean that WOW! — or any fitness facility for that matter — wants to be seen as a collection agency or have it become too large a part of its business.

“Fitness facilities want to be able to concentrate on what they do best: finding customers, selling memberships and servicing those members,” says Kirby. “The last thing they want to do is be seen as the collection company. That doesn't do any good in getting past-due funds, rebuilding relationships and hopefully getting those members back and paying.”

It's that image of collection companies that keep many facility owners from doing collection in-house. That is part of the reason WOW! started a separate collections company.

“You have to be licensed in New Jersey to do collections, and we have our own collection agency to handle matters, so WOW! itself is taken out of the mix,” Roma says. “So all the automated calls, e-mails and letters come from that collection agency for the first 90 days. We use more of a soft-sell approach than a traditional agency would, and we get 100 percent of the collected funds. After that time, though, we do turn it over to an agency and get a 70/30 split on collected accounts.”

ASF's Kirby warns that more traditional collection agencies may actually cost you more than the fee taken for their services.

“Often a collection agency will just slap a lien on the debtor's credit rating and then wait for them to try to get a loan or sell their house and let them come settle that,” Kirby says. “That works out okay enough if you've sold the debt up front, but if you are waiting for that money or hoping to get that member reinstated, it could be a long time in the coming this way — if at all.”

Regardless of whether doing billing and collections in house or not, it seems to some — especially newcomers to the industry — that getting a handle on this important and murky topic is key to sustaining viability.

Billing and Collection Companies