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Conquering Club Collections
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The Collections System
People used to tell us how they run their racquetball clubs to collect $75 a year with $3 fees every time members played. This is called "retail recreation".
Renewal rates on those $75 memberships were about 30 to 33%. So barely one-third of the people would renew. That's the reason racquetball clubs and pure clubs pretty much hit the skids in the mid-70s. Bad business model.
The whole premise is that when you sell something, it's not always the price but rather the terms that tilt the person's decision to buy your product. For example, you go into a car dealer and the car dealer says this car is $20,000. You say well, can't you finance it? No. Well, then you go to another car dealer that has the same car at $22,000, but they'll finance it for you at 7% so that you can make payments; "You can you afford $200 a month $200 a month to control a $22,000 car, can'tcha?"
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Terms are the key to collection system success and that's why most clubs are on monthly dues with some sort of EFT system.
"Could you please give me your autograph? Preferably on a personal check?"
And considering the EFT system in retail sales, that can help you do one of the things that we all strive to do: get more money out of your profit centers. More Cokes, more t-shirts, more personal training, more sun tanning, etc. One of the ways to do that is to make it easy for them to buy. There are still some high-end clubs around that will allow members to buy things at point of purchase and later send them a bill. Installing a debit card machine at your club makes it an instant transaction. Like having an in-house account.
Sample Collection Letters
"Dear Member: Just a reminder that we've not yet received your overdue payment." A boring, but initially-friendly standard. Here's some more eye-opening variations:
- "When people inquire about you, what will we say?"
- "It's as embarrassing to write this letter as it is to receive it."
- "How's our ChillMaster air conditioner working for you this blazing summer?"
- "Certainly a good reputation is essential to a prospering business."
As you can see, there's lots of different languages and tones that can be used. If you want to include a little bit of humor, it's O.K. at first. ("Could you please give me your autograph? Preferably on a personal check?"). As you get closer to the end, things get more serious. Collection Letters
Collections letters have four key points:
- State or imply that it is a collections letter.
- Offer the facts: what they owe, what the deal is; what you're asking for.
- Ask how the debtor can be helped and the positive benefits of paying now. In other words, "Can you call me and set up a resolution? Do you want to give me another credit card number?
- Make the request for the payment ask for your money. Don't be shy.
As time goes on and your only reward is silence, the letters need to become more stern in tone and demand. 1st Stage Language:
- "Many clients appreciate a reminder when they run slightly past due."
- " Please consider this a reminder."
- "If you've overlooked the attached invoice."
- "Please send check sent for the amount of $72.14."
- "If there's a problem..."
- "Please call me."
1st Stage Letters:
Dear Mrs.:
Hello! This is just a routine reminder that your membership account shows a past due balance of $72.14. This payment has probably just been overlooked. We would appreciate it if you please process the enclosed bill for immediate payment. Should there be some problem, please let us know. Thank you.
Dear Mr.:
When we see a good customer getting behind in their payments, we believe there must be a good reason behind the problem. In our last letter, we asked you to contact us if there was a reason for any further delay. We have yet to hear an answer from you. Is there any confusion about the club's services, membership terms of payment or any other problem? Please tell us. We appreciate your business, appreciate you as a member and don't want to lose you. The amount of money owed is $72.14 to make your account current.
Dear Mrs.:
Your account remains in good standing but for the enclosed, past due invoice. Your electronic funds transfer did not go through. If there's a reason that your payments are withheld, please let me know. If not, please send your check by return mail.
2nd Stage Letters:
Dear Mr.:
In the real business world as well as pretend playground games, time limits and rules need to be set and followed. The time limit for carrying your overdue membership account has been breached. You have not told us reason for non-payment and have no idea how to help you. We must receive a check for full payment of $72.14 by April 1, 2003 or our collections department will automatically start their procedures.
Dear Ms.:
We've had no answer to recent notice of your past due account. We still believe the items called to your attention must have been overlooked or delayed for some reason. Would you please let us know that reason? Otherwise, we continue to send your EFT through on the 10th of the month. Please make sure it will be covered.
Dear Mr.:
What did we do wrong? If this is the case, please let us know so that we might correct any wrong. We're confused at the delay since, to our knowledge, you've been involved with fitness programs, classes and have been a member in good standing for years. Please ensure your EFT clears on the 10th of the month or call me and we'll make other arrangements.
Terminal Stage Letter:
Dear Mrs.:
We've called. We've written. We've tried every pleasant avenue we could think of to discover the underlying reason why your account remains overdue and the ignoring of our inquiries. We have no other choice than to immediately terminate your membership and initiate collections procedures. Please contact us today to avoid further unpleasantness.
Collecting By Phone
The telephone has some serious advantages over other methods of collecting. It's inexpensive compared to mailing stuff out. It's immediate providing some sort of answer right away and the ability to take more additional action as needed. Once again, time is of the essence. It's personal and allows an exchange between two people and the personalities. It allows you to ask specific questions, obtain current information and come to an equitable solution. It allows flexibility in your approach to what may be a fluid situation. It could result in an agreement and you're going to get your money.
Managing Bad Debt
So we're pretty strong about having a person on hand doing collections. Use an established process within an established system. Know the conditions that you're working under. Know what they owe. Know who the people are. Review your information before you call. Check their past records maybe you made a mistake. Find out what's going on. Check your general information about the economy. Did they lose their job? Make sure that you do your planning in advance. Then make the call. Make sure you build and follow your script.
As with sales, the whole idea is to come to an agreement and getting the final collections "close". After you make the agreement and what the action's going to be taken, the next step, of course, is to thank them. Always follow-up. If they don't do what they're supposed to do, your job is to call them again, "Hey, Frank... regarding that phone call, I sent the EFT through but didn't go through again. Something must be drastically wrong. Should I just stop by and get the money or can you stop by the club and make another agreement?"
It's the basic rule of commerce: provide a product, provide a service, collect your money.
About Mike Chaet
Go to About Mike Chaet.
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