BY SUSAN CANTWELL
ow will your clients pay for services? There are many different ways to structure your company's receivables, and the methods you choose can affect your long-term success. Payment and billing policies that are too restrictive make it difficult for some potential clients to use your services. Policies that are too flexible will, at some point, cause conflict and cost your company time and money. The way your company collects receivables also carries certain risk factors. For example, if you bill at the end of the month, the client can refuse to pay. If you collect in advance and a client does not show up for a training session, you don't risk losing the money but you probably will deduct this session from his or her package (provided this policy has clearly been stated before the no-show has occurred). If a client pays in advance and is unhappy with the training, he can demand a refund. All payment options carry some risk. It is up to you to settle any dispute, based on your company's policies, values and beliefs. While trainers can never prepare for every single problem they might encounter in business, they can minimize some risk factors. If you are a small company, lower-risk collection options are certainly more attractive. If you are a larger company, more risky options may be advantageous from an accounting point of view. In either case, you may find combining several methods best serves your needs.
Low-Risk Option: Advanced Payment
Payment and Billing Options for Personal Tr a i n e r s
A c o mp a r a t ive lo o k a t t h e d if f e rent w a ys p e r so n a l t r a in e r s c a n c o ll ect f e e s f r o m c lie n ts.
Advanced payment for the total sales price of the contract is certainly the lowest-risk option. Generally, most companies will complement advanced payment with at least one other payment option. Why? To use total payment in advance, your company must be attracting higher-income clients and your company's reputation must be impeccable. If there is a fairly good demand for your services (training more than 35 hours per week per trainer), then you may want to examine how you receive payment from new clients and ask for payment in advance. Remember supply and demand. You have to be very confident in your abilities and your company's services. By receiving payment in advance, your company has the ability to enforce a training contract. Since payment has already been made, the client is less likely to cancel without notice, not show up for sessions, or try to renege on his agreement. Payments in advance may not be an option in some provinces or states. Check with your local chapter of consumer and corporate affairs or a lawyer to determine if this can be done in your area.
Medium-Risk Option: Accepting Post-Dated Checks
This is an option to offer clients who cannot afford payment in
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full, because it allows them to spread their payments over the term of the contract yet still creates the commitment of "pay in advance." This option carries more risk than payment in advance, but allows for more flexibility. Please make sure potential clients are aware that this payment option is not a month-to-month training program. Otherwise, they may simply cancel the post-dated check. Before you use this method, check with your attorney, because some states may have statutes prohibiting this. The key to making this option work is for payment to be rendered before training occurs in any particular month. For example, a client purchases a package of 30 sessions for $1,200. One-third ($400) of the contract price is due and payable when the contract is signed. The second payment of $400 is due and payable one month from the date the contract is signed, and the third $400 payment is due and payable two months after the contract is signed. The client leaves post-dated checks. The training company is still receiving the payments before the training occurs in any given month.
Medium-Risk Option: Pre-Authorized Payments
Pre-authorized payments are a convenient option because clients' payments automatically come out of their bank accounts. On a pre-agreed date, a client's account is debited and the money is transferred and credited to your company's bank account. This also makes training contract renewals more convenient for clients who pay in advance. This payment option might be better suited to a larger personal training company, as many banks charge a minimum fee for each debit entry. Contact your company's bank to see if it can provide this service. Although banks vary in their procedures, generally, clients provide you with a voided check and complete a form provided by the bank. In Canada, most banks charge about 25 cents per debit and/or have a minimum payment of $50 and up. Once the actual debits exceed the minimum payment, a straight fee of 25 cents per debit is charged. Some banks charge per check you deposit, and others charge a flat fee. To see if this method is cost-effective for your company,
find out how much you are paying per month in bank fees and/or per-check fees. Keeping in mind the minimum bank charges, compare your typical monthly charges (whether per check or for the account) to the estimated pre-authorized debit fee. This should give you a general idea of the costs associated with offering a preauthorized payment option. After evaluation, you can determine if the convenience of using this option outweighs the cost.
High-Risk Option: Collecting at Time of Service
using this method, and are comfortable talking about money as part of the session. Some clients prefer to pay at the time the service is delivered and always do so. This option works best when the payment terms are very clear and the trainer immediately and consistently enforces them.
High-Risk Option: Invoicing and Statements
Some trainers collect at each session, or request payment for the week or month in advance. Collecting at the time of the session is higher risk because you are scheduling a session that is not paid for, and if the client cancels you have lost the revenue. If the client doesn't pay, even though the terms of payment are in the contract, you will have to decide whether to pursue payment. It likewise requires the trainer to function as a bill collector. On the other hand, some trainers report they have no problem with clients paying
problem solver: collecting money in advance
Janice is the only trainer in her company and is relatively new to business. She is training clients eight to 10 hours a day. When a potential client calls to set up an appointment to discuss training, Janice finds Miriam to be the sweetest, most engaging person she has ever met and--to top it off--Miriam has clear, realistic goals. Hanging up the phone, Janice wonders how she can accommodate her. Her schedule is very full. Janice has a few options. 1. She can say, "No, I don't have time to train you." 2. She can train the new client and add more working hours to her day. 3. Because she has a hard time saying, "No, I am fully booked," Janice can take the easy way out and request the training fee be paid in advance, which she assumes will not happen. What happened? At their meeting, instead of deterring the potential client when she requested advance payment, Janice was surprised when the client took out a check and paid for a 60-session contract in advance. Janice has now trained this client for nine years, and working with her is truly one of the high points of Janice's days. This experience taught Janice that unless you ask for something, you will never receive it. It also taught Janice to be confident in her abilities and policies. Today, more than half of Janice's company's clients pay in advance. Some actually prefer it.
Invoicing or billing clients at the end of the month carries a higher risk because the training has already been rendered before payment has been received. Therefore, the balance of power in any disagreement over the bill now rests with the client. Some payments may arrive late or be less than agreed upon. A client can move, leaving you with the only option of sending this unpaid account to a collection agency. This may not happen if you bill at the end of each month; however, it is a possibility. Also, be aware that you are extending credit. If you have other trainers that work for you who are paid bi-monthly, then your company's cash flow must be able to support a minimum of two pay period wages per trainer before actually receiving the money from the client. It should be pointed out that some personal training companies prefer billing at the end of the month and find it saves them time. Any client with whom you have a long-term relationship (more than one month) should receive a statement of account once a month.
Every company should have a policy in place in case a client does not have sufficient funds to cover a check when presented to the bank. Your company will be charged for this check. If you don't know what your bank charges, you should inquire. This cost should be added to the amount the client currently owes. You may wish to increase this fee to cover your administrative costs. For example, if your bank charges you $5.25 for the check that has been returned
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points to remember
© 2001 by IDEA Health & Fitness Inc. All rights reserved. Reproduction without permission is strictly prohibited.