3 Solutions to Uncollected Funds
July 6, 2017 | Categories: Blog, Facility, Club Director
Uncollected funds are a significant problem for youth sports organizations across the United States. It does not seem to matter what sport we're talking about, what part of the country we're talking about or whether we're talking about major sports or fringe sports. The plain and simple truth is that youth sports, travel and club sports in particular, are expensive and tough for people to afford. The best estimates available indicate that the industry average with respect to uncollected funds is 8-12%, so we thought it might be helpful to offer a few solutions for club directors to consider when budgeting and figuring out how to address this problem.
Front-End Load Payment Schedules
Managing cash flow and avoiding uncollected funds is a major priority for any small business, especially for youth sports clubs due to the fact that many are not trying to make a profit. Given this fact, it is often helpful to structure payment schedules so that a parent pays a little more at the beginning of the season and a little less at the end of the season.
For example, for a club trying to collect $1,000 in registration or team dues over a 4 month period it is often beneficial to structure a payment schedule that requires payments of $350, $350, $150, $150 instead of just breaking the payments up into 4 even increments.
This serves to enhance cashflow and avoid uncollected funds because more money is being collected at the beginning of the season. In this example payment schedule, 70% of what is owed is being collected in the first 2 payments.
Stop Taking Cash & Check
Over half of all clubs in the United States are still taking cash as their primary form of payment. This fact is a significant contributing factor toward uncollected funds.
Your club can offer a reasonable solution to parents who feel they must pay in cash. Communicate to the parent "the next time they are at the grocery store, take that cash, pickup a pre-paid card and take care of your payment." This is a simple solution that seems to work for most. Checks can easily be handled as Bank ACH transactions just by using the routing number and account number found on the bottom of the check. ACH transactions are much cheaper too.
Establish a Process for Following Up On Missed Payments
Following up on missed payments and custom payment schedules gets super messy and often this is where a lot of money is left on the table. In our experience, most clubs are just not setup to handle the ongoing administrative burden associated with addressing missed payments or the ongoing maintenance of managing custom payment schedules.
Understanding that hurdle, one solution is to set payment dates that are uniform across the entire organization. For example, setting all payment dates on the same day of every month at least allows a club director to allocate time toward managing this important process because they know what day of the month failed payments will require follow-up. Clearly this isn't always the best solution for the parent, but at least it establishes a manageable process for the club and any staff or volunteers responsible for managing payments.
Hopefully these are solutions that can be implemented immediately and certainly in advance of the upcoming season. Happy collecting and good luck planning next season!
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About the Author
Allan Rayson is an accomplished banker with a fifteen year track record of supporting privately-held business owners. Allan started his career with Comerica Bank in Dallas in 2001 where he spent the first five years of his career as an analyst and corporate banker. Allan joined Bank of Texas in Dallas in 2005, working primarily in corporate banking and private wealth management where he supported privately-held business owners and their underlying middle-market businesses. In 2013, Allan and his family moved to Austin to join the commercial banking team of BBVA Compass later joining Regions Bank in 2017 to build the Central Texas region as Market Executive.