Many membership type businesses look for ways to maximize revenue, retain members longer and deal with the churn of members coming and going. Each of these present challenges when it comes to membership billing and what is the most efficient way to structure it. Its great to be able to predict revenue for the month and it helps us track our revenue enabling us to plan for growth or adjust in the event that we have a down month. (like the lasts 2 months of the year!)

We work with a number of businesses helping them convert to a structured billing schedule. This allows you to predict revenue and manage cash flow.  Here are a few other benefits to setting your membership billing on set days for the month:

  • Predict revenue
  • Predict cash flow
  • Lower declined transaction rate because most people get paid on the 1st or the 15th
  • Easier to deal with declined/non-sufficient funds transactions because they all happen on set date
  • Members prefer set dates that they can schedule draws or charges for memberships around
  • Gives you TIME back because you aren’t looking at billing every day

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When you convert your current members over from random billing dates to a set date. You want to make sure you have a process in place that ensures you don’t lose revenue and makes the transition as smooth as possible.

There are a couple different processes that you can follow but we have found this one to be the simplest with little risk of any loss.  We choose to pick a day and convert all members at once.

“Convert them all”

  1. Change everyone’s bill date to the date of your choice and credit or prorate the difference. (individually charge them for the prorate amount or credit their account.)
    • Credit –  If you change your billing after a members been charged for that month you will end up crediting them because you will be setting the billing to a date that is sooner than their schedule date that was previously set.
    • Prorate-  If you change the billing before a member has been charged for the month you will end up prorating them because their billing date is further away than the previously scheduled date.

Below are some examples for each process that will describe the steps that you should take to get your membership charges scheduled to be billed on a specific date.

  • Communicate – Send a message out to your members letting them know that you will be converting all billing over the next month and if anyone has any issues or needs to contact your. (send this message our a few times and I recommend doing it on different communication channels like email, text and social)

“Convert them all”

  1. Let your members know (email, text, social)
  2. Go through and set all billing on the date you desire (1st, 15th, 20th, etc)
  3. Calculate the prorate or credit for each member (some billing systems will automatically do this for you)
    • Calculate the days to credit or prorate:
      • Credit = Current Billing Date – New Billing Date
      • Prorate = number of day in month [28] – Current Billing Date
    • Prorate/Credit=monthly rate/# of days (many billing systems use 28 day cycles)
  4. Charge the prorate amount or credit the account to the individual members

Here is example #1: – Changed After the Member was Billed (CREDIT)

  • Membership charge = $100 / month
  • Jon is currently charged on the 5th of each month
  • You want to move the billing to the 1st.

Jon’s Daily Rate : $100 / 28 days = $3.57 /day

Jon’s Credited Days = 5 (old bill date – new billing date)

Jon’s Credit =  $17.85

Here is example #2: – Changed Before the Member was Billed (PRORATE)

  • Membership charge = $100 / month
  • Susie is currently charged on the 14th of each month
  • You want to move the billing to the 1st.

Susie’s Daily Rate : $100 / 28 days = $3.57 /day

Susie’s Prorated Days = 14 (# of days in the month[28] – old billing date )

Susie’s Prorate =  $49.98