An Introduction to Direct Debits
Direct Debit Payments are a crux of modern living for the majority of consumers and businesses. As a method of payment it is only going from strength to strength. It has even found itself firmly in the Cambridge Dictionary and the Collins Dictionary! According to a broad study from 2017, at the time it was revealed that 9 out of 10 people in the UK with a bank account had at least one Direct Debit. In addition, over a third of combined households were totalling over 6 Direct Debit payments.
What we are trying to say is that this isn’t something that will scare customers away. The Direct Debit is an ingrained and accepted part of everyday life for most consumers. Direct Debits are something that many younger (Or tech-savvy older!) consumers will be able to manage and manipulate on their phone with ease.
As such, it is a system and methodology to be embraced and we are here to lay out the reasons why Direct Debits will help make life easier for your business and your customer.
Here is a list of just some of the points we will be covering today.
- How a direct debit can help reduce the running costs of your business
- How a direct debit will increase membership retention and customer satisfaction
- How a direct debit will give you give you more control over your business
- How a direct debit gives you the freedom and flexibility to make price changes with ease
- How a direct debit contributes to an easier administrative load with reduced admin costs
- How a direct debit system will integrate and enhance the potential (or continued) automation process of your gym.
Quite a hefty list, can we back it up? Be assured that with over 25 years of handling payment management within the fitness industry, we hope to convince you swiftly that we know our stuff.
1. Direct Debit lets you increase fees when you need to
Flexibility has always been key to surviving in any business. But with the advent of digital technology, agile work methodology and ever more competitive business practices, it matters now more than ever.
How could this relate to direct debit payments? Well the clue is in the section title.
The price of any given service will always be subject to flux, whether it is due to external factors such as Covid-19 or currency, or internal factors such as the renovations on a gym or increased membership. With other, more archaic payment systems, keeping track of who is paying what could be a significant challenge. Let alone attempting to instigate any sort of mass increase in member fees.
If you take the relative of the direct debit, the standing order for instance. This would require the customer to cancel their existing standing orders and create a brand new one in it’s place. Often this cannot be done as simply as a direct debit on a mobile phone and even if it could, it is still an inconvenience. And a dangerous one at that.
The last thing you want is for a customer to have to cancel a standing order and have to do tedious admin whilst suffering the indignity of an increase in fee.
Safe to say that all of this can create hassle for your customers, it could cause delays or even lead to your customers letting their membership lapse.
With the direct debit this ceases to be an issue at all. You are able to monitor, review and most importantly, change the amount you are collecting without needing any input from your members.
This flexibility can bring a lot of new options into the picture. Given our recent experiences in the Covid-19 pandemic, the direct debit proved its strength as a format that could be quickly amended, paused or continued. In unprecedented times it is all the more necessary to have an adaptable, reliable system in place.
2. Direct Debit reduces administrative load and it gives your business more control
The administrative load associated with more traditional methods of membership payment collection are daunting to say the least. Cash, cheques, standing orders. If you are collecting a combination of these then it can quickly add up to long nights of tedious reconciliation activity.
But how could the direct debit ever compete as an alternative to cash or currency? That tried and tested method since Mesopotamian shekel? Well, it might’ve taken 5,000 years but we think we have an alternative.
With direct debits, unlike standing orders, they can be easily and effortlessly set up on a computer terminal, phone or tablet.
This means that it is as easy to whip out a portable electronic device and arrange the bank as it would be to say, hand over £10 (or Mesopotamian shekels if you are feeling nostalgic).
In many cases this might be easier. A lot of modern sports equipment (running bands, gym shorts, etc) is being outfitted with a place to hold your debit card or credit card securely. But the same isn’t to be said for cash, which is obviously bulkier and impossible to recover if lost.
As such, the direct debit is a natural fit for the transforming habits of most gym-goers.
Sounds pretty good? Well, as an added bonus, you’ll receive an added layer of control and data feedback regarding what has been paid and what is due to be paid. This is something you don’t get with standing orders.
With direct debits, you will be aware as soon as one has been cancelled, even if it isn’t pay-day. This is due to the nature of the direct debit (as discussed in security and regulations). It isn’t like a standing order, which exists only as an instruction on a given day.
The benefits that this can afford you are numerous. It can allow you to react quickly to a cancellation, perhaps even contacting the member in question to understand what has occurred. It also has the very tangible benefit of allowing you to understand how much money can be expected from your members in real time. Invaluable.
It is no surprise that changing from Standing Orders and Cash to direct debit can be like switching on a flashlight for many gym and club owners. We have had it stated that it is like being fully in control for the first time.
Which makes sense when you consider that a drabble of cash and standing orders that need to be painstakingly reconciled and catalogued at the end of each month would cause massive admin costs and consistency issues.
Which brings us effortlessly onto our next point.
3. Direct Debits can reduce administration costs
It may seem like a no brainer with the reduction of administration load but we think this deserves its own section.
The amount of wage saved in the potential reconciliation of cash, cheque and standing order could be massive, especially to a small business. It used to be taken as a given that any physical business would invariably have to deal with multiple streams of income in different formats. But as we move forward into the digital age, this is becoming less and less likely.
Imagine replacing all of that costly counting with a single tablet. That counts as your sign-up, your monthly fee and also covers any potential increases in fee, decreases in fee, fee pausing or cancellation?
All of these actions would have required additional admin, in addition to the monthly admin just to make sure that your books are fully reconciled!
And with human reconciliation comes the inevitable human error, which will only lead to more admin. With the direct debit, the cash flow is automatic, regular, easily recorded and instant.
In addition, full integration of a direct debit system into a club management system can reduce administration costs even further if you use it to tackle the actual membership and entry to your club. With digital technologies it has never been easier to seamlessly integrate membership and payment, rather than having to track them on two disparate systems.
And finally, it will also make your year to year easier. No longer will you have to go to 1 of 18 spreadsheets. No longer will you be forced to painstakingly recheck your hand-written notes from 10 months ago to make sure you didn’t misread something.
It is incredible what a powerful effect such a simple tool can have. All the more important to state the impact that a direct debit can have on a gym or fitness club.
4. How Direct Debits can greatly assist your Regulatory Compliance and Payment Security
Regulations are never fun but that doesn’t mean they aren’t extremely necessary. Mercifully, with direct debits you can cross out tedious from that list of attributes.
As we tried to stress in the introductory paragraphs, the direct debit is an industry standard and as such it is not only fully compliant (vital) but incredibly secure.
It is covered diligently and thoroughly by the FCA (the Financial Conduct Authority, the UK government regulator for financial transaction). The FCA covered direct debits in a piece of regulatory mandating known as the Payment Services Regulations directive. We won’t bore you with anything further than that but it is safe to say that this affords the direct debit a large degree of security and compliance that is unmatched.
Once it is confirmed that the chosen billing provider is FCA accredited, you can have the utmost confidence that the transactions and membership fees that occur will be compliant, trusted and most importantly, safe for your customer and your business.
5. Get more from your data and make the data work for you
The data outputs from a traditional gym membership payment system can be, lacking to say the least. Unless it was set up by someone of extraordinary vision it will most likely have fallen to place naturally as memberships are received by cash, cheque and standing order as and when applicable.
This ad hoc process, while perfectly acceptable, isn’t winning any awards for innovation. At best the data will have to be collected and processed into a usable format. At worst? Well, it won’t be, and the business will be stumbling around in the dark like we discussed during Point 2.
With a direct debit system, the data outputs and reporting capabilities are digital, immediate and powerful. With the right systems and support, the versatile data that it will generate naturally will allow you to see a business from angles previously inconceivable.
This will allow you to understand what is happening in your business, whether it be in a given hour or over the span of years, with hitherto unknown speed.
You will be able to make and generate reports to keep others in the loop, allowing you to develop specific areas and quickly inform others of the needs of the business.
6. Customer Service
And finally, and perhaps most importantly. The customer, your members, will also receive significant benefits from this system. We have covered some of these previously, but they will bear repeating together for a true picture of how this change could benefit every aspect of a business.
The effects will be tangible and instant and include:
The ease of signing up to a direct debit when they first enter your fitness club or gym will be immediately noticeable to them. No longer having to worry about bringing cash per session, or the lengthy process of setting up a standing order.
The efficiency of changing members fees will not go unappreciated. No member relishes paying their fee, let alone paying an increased fee. So adding on the unnecessary and tedious bureaucratic hassle of making them update their own increased payment won’t always go down well. Remove the issue and make the unfortunate news of a price increase all the more palatable with clear, professional communication and the reassurance that no action is required from them.
Furthermore, if your gym introduces tiered systems, it will allow customers to easily upgrade to the next tier or section. If your gym or fitness club opens up additional classes, it will be no bother for them to quickly up their fee for the additional services you are offering.
The reassurance of security you will be able to give to your members will not go unappreciated. And the clear paper-trail, compliant regulated practices and easy trouble-shooting of any issues will be an extra feather in any businesses cap compared to the labyrinthine processes of yesteryear.
And finally, your members just get to spend less time thinking about money and payment and more time thinking about the gym. Ideally you want your club members thinking as little as possible about their payments. A direct debit lets their membership payment become part of the background flow of the month for both of you. Allowing you both to focus on the service that is being provided.
INTERESTED IN DIRECT DEBITS? COME ASK THE EXPERTS
Ashbourne Membership Management has been growing over 25 years to handle every single aspect of club management. From direct debits to website maintenance and handling your energy bar sales – Ashbourne handles it all.
When it comes to Direct Debits, we can drastically reduce your admin and free up your staff in 5 simple steps:
- We provide you our software to track all your members
- We provide you with direct debit guarantees and set them up
- We set up your direct debits
- We handle all contact between your members and their payments
- We handle all debt collection for any defaulted payments
If you want to take a look at what your club could be with a system in place for direct debit collection, then we can give you a completely free demo and consultation, simply to run through the process, our systems and answer any questions you might have.
Simply book a free demo with us and let us show you the future of your gym.