One of the top reasons gym owners find themselves short on cash each month is because of the large number of overdue accounts among their all star parents. This can happen for a variety of reasons, leading gym owners to wonder when to extend grace and when to stand firm on payments:
- Suzy’s account declined. When you reached out, her mom said she’d stop in with a new card. Now she’s ghosting you and dropping Suzy off but not coming inside.
- Suzy’s mom went through tough times and asked if she could pay late. Maybe this happened once so she’s only a little bit behind, but maybe it happened once and she just kept bringing Suzy but never actually ever paid you again.
- Suzy’s account was overdue, which means she’ll need to sit, but competition is right around the corner, and you really, really need her for the routine, so you let it slide until after the competition.
- Suzy’s mom got behind but was kind enough to come to you. She set up a payment plan and made a couple payments, but it’s been a while without any now.
Balancing Compassion With Financial Responsibility
I’ve seen gym owners in all of these situations, and those of you reading this likely have been in a few yourself. When I first opened in 2013, I allowed a bit of this, but I’ve always been fairly strict on parents making payments on time every time. “But then Danielle, obviously you care more about the money than the child!”
Nope. Not true. However, I care about all my athletes equally, and when Suzy’s mom doesn’t pay on time, I can’t order uniforms on time. I can’t register for competitions on time. I can’t pay my staff on time. (Even if you can do these things because you’ve got money in savings, please recognize you’re robbing Peter to pay Paul. Little Sarah in recreational tumbling essentially just covered Suzy’s competition fee …)
I have always been strict on parents making payments on time because I want to be fair to everyone—but that doesn’t mean I haven’t recognized hard times in the past for my gym families.
Extending Grace
Many years ago, I had a parent who was a contractor in Afghanistan. Through an unforeseen tragedy, he was rushed to a hospital in Germany where his leg was amputated. His wife and four children at home lived entirely off his income. The two youngest girls were each on two cheer teams and a hip hop team at my gym. This all occurred right in the middle of the season. Though insurance covered some of the medical bills, the parent returned and was unable to work for a while. The mom was focused on raising her children but was honestly in a deep state of depression and needed to take care of herself before she could work. The girls had practically lived at the gym, and taking away that would have been heartbreaking to the family and mentally depriving to the children.
The family wasn’t new to my gym either. They had enrolled the day we opened and had even taken classes with me at the community center before we opened. It was a tough situation and not one that I was able to make decisions about easily. I knew I needed to extend some grace, but it had to be done carefully.
I told the mom we’d give grace for 90 days to give her some time to figure out what was happening. In the meantime, the girls (the youngest of whom was eight) could come into the gym and help staple packets and vacuum as part of our deal for extending the payment deadline. That would give her some time to figure it out. I was clear—I was not trading tuition for her eight- and 11-year-olds’ labor. In fact, getting the girls out of the house was helpful for her and provided a small amount of support around the gym.
She was grateful. A few days later, some family had come to visit, giving her some relief. When the 90 days were up, I reached out to her and let her know the total balance along with a proposed payment plan that would pay the $1,800 over the next six months. Yes, I was allowing Sarah to essentially cover Suzy. It was an extraordinary circumstance. The mom agreed. I allowed this payment plan on two conditions:
- The current payments would resume on normal due dates. In addition, I would automatically charge the card on file on the 1st and 15th of each month to make payments toward the previous balance. If for any reason it didn’t go through, the girls would have to sit until the balance was paid in full. It was important that she and I were both taking the payment plan equally as seriously. I put not only the payment schedule but also this information in writing, which we each signed.
- Any payments made for anything at all would go toward the balance. So, she was not going to be able to purchase additional items in the proshop or private lessons until her balance was paid in full. (She had no intention of this, but I know some of you have parents who would do this, so I wanted to cover all my bases.)
Between you and me, I knew there was a 50/50 chance that I had just taken a hit on this account. I was fully prepared for this parent to not make her payments and for the kids to have to stop cheering. Though I hoped I’d be able to mitigate that, I had mentally prepared.
Do you know what happened though? Six months later, the account was paid in full. The mom was grateful we had given grace, and I was pleasantly surprised to have a zero-balance due on her account.
Standing Firm
However, during that time, another parent came to me and said she got a new job. Our payments were due on the 1st of each month, but she wanted to know if she could pay on the 10th. This was a very different situation. Her monthly amount due was around $129. Though she had a job change, this was not a near-death experience. I wasn’t willing to budge. I told her she could have the same grace we offer anyone else, but a late fee would be assessed on the 6th, and her child would have to sit out beginning on the 10th if the payment wasn’t made. For two years, she paid on the 10th—a total of $240 more than she would have otherwise paid due to the late fees.
Every month, I would think, “If you just made one month’s payment early, you could use your next paycheck (that arrived on the 11th) to make an early payment toward the next month.” For fear of overstepping, I didn’t say that though … until year two that is. (If you know me, you know holding my thoughts in is a major challenge.) When I finally suggested that, the mom’s eyes lit up. “Ohhhh, I could do that!” My eyebrow raised. She simply hadn’t thought about it before. Instead she resolved to make late payments and had essentially budgeted for a late charge every month.
Practical Tips for Handling Overdue Accounts
I was incredibly surprised by how many overdue accounts are the result of:
- Parents in unimaginable situations
- Parents who just aren’t good with money
- Parents who are trying to scam you
I’m going to say the third one is probably rare. Their behavior might come across that way, but in all reality, when someone can’t afford something, they’re likely embarrassed. Have compassion, but don’t solve their problem for them by accepting less money each month.
Here are three tips for getting overdue accounts up to zero:
- Set up a payment plan in writing that is agreed upon by both parties. Require an automatic charge. I never allow a payment plan that doesn’t have a clause agreeing to auto charge if not paid by a certain time on a certain date.
- Get your agreement in writing with signatures.
- Ensure it’s a plan the parent themself believes they can stick to. If you’re asking someone who has been paying zero dollars per week to now pay $1,000 per month to get caught up, it’s not realistic, and it’s not going to happen.
At the end of the day, you’ve got to remember a few important things about account balance recoveries: First off, if you’re the owner, and you continued providing service while this parent racked up a bill, you’re the first person to blame. Make sure your accounts receivable process is accurate and systemized. If an employee is in charge, have systems in place where you would know if they allowed something outside of your system.
Secondly, it’s necessary to try to get accounts back in good order, but this is not a regular money-making strategy. You may get that money one day … or you may not. You can’t rely on parents who are massively overdue to pay up by the time you need to pay the electric bill, so don’t let them get behind in the first place—especially if your gym is running month-to-month on finances.
Finally, try not to ruin relationships over this. Some parents are bad with money, but so are a lot of gym owners. Have compassion for hard situations, but don’t make decisions based on your emotions. The world’s problems are not your problems. It’s not your job to fix a family’s financial problems. You can choose to work with them, but you need to be in an excellent financial position yourself in order to do that, and most gym owners are not.
If you don’t have a huge cushion of savings for unexpected expenses, emergency facility maintenance, your upcoming tax bill, and three months of rent or mortgage payments in the bank, you’re likely not in the position to allow people to get behind. Set terms that define your ability to provide temporary assistance. If you’re not meeting those terms yourself, then helping one kid continue participating puts the rest at risk of not having a gym to call home.
