Optimizing the financial management of associations – Part 2
You invest a lot of effort in attracting new members. However, some do not participate in the activities offered by the association and, at the end of the year, complain about not getting a return on their investment. What can be done?
Active member participation is essential for the success and vitality of any association. Many associations face this problem. To encourage member participation in activities, more and more associations are introducing membership credits.
Summary of the article
What is a membership credit?
To answer this question, let's look at the following scenarios:
Association A offers its annual membership for $300. The average cost of activities is $100. The member buys the $300 membership but, despite being solicited via email and calls from the association, does not attend any activities. Result: the member feels dissatisfied and believes they did not get a return on their investment.
Association B, on the other hand, offers annual membership of $450, including $150 in membership credits. The average cost of activities is also $100. With this credit, the members can attend the first activity for free and pay only half price for the second. Although selling the membership may be slightly more challenging, this approach demonstrates the added value of the association throughout the year. The members are thus encouraged to actively participate in activities which strengthen their engagement and satisfaction.
Some associations go even further by reducing the price of the annual membership if the member opts for membership with a large portion of membership credits. For example, a $1000 membership including $800 in membership credits. This strategy encourages members to engage more and fully enjoy the services offered.
Membri 365 allows you to configure all types of memberships to meet your business needs. Offering this type of membership does not create any additional work for the association's staff. Moreover, this flexibility allows you to tailor offers based on members' preferences and behaviors, maximizing their satisfaction and loyalty.
Duration of credits
In most cases, associations make the membership credit expire at the same time as the membership. However, this practice is not mandatory. You can offer your members the possibility of subscribing to an annual membership with membership credits, while making these credits valid for a longer period, for example, 2 years, if the member maintains an active membership.
If the member has not used their credits during the first year, they can renew their membership for another year without losing the already paid credits. This flexibility provides an additional selling point during membership renewal, reassuring the members about the continued value of their investment.
Additionally, by extending the validity period of the credits, you encourage members to participate more in the association's activities, which strengthens their engagement and loyalty. This also allows for better planning and distribution of the association's resources over a longer period, optimizing the management of activities and finances.
Exceptions
Many associations organize highly lucrative annual events, such as galas, golf tournaments, or poker competitions. These events represent a significant source of revenue for the association, and it is crucial not to cannibalize these revenues by offering membership credits.
For this reason, it is possible to restrict the use of membership credits to certain activities and/or products. For example, membership credits can be excluded from major events or flagship products of the association, ensuring that these revenue sources remain intact. This flexibility allows associations to maximize their revenues while offering attractive benefits to their members.
Revenue recognition
From an accounting perspective, membership credits are not considered earned revenue at the time of membership or renewal. They are recognized as such when the credits are used for the payment of an activity or when the credits expire. This method allows for financial statements that reflect the true financial situation of your association.
Membri 365 can be configured to manage the duration of credits, the activities and products excluded from the use of credits and can even automatically perform the required accounting entries in your accounting system. This automation simplifies financial management and ensures increased accuracy in revenue recognition.
Additionally, if desired, all revenues generated from ticket sales for an event can be recognized as revenue only on the date of the event. Prior to that, these revenues will be treated as deferred revenues. This approach better aligns revenues with the periods when services are rendered, providing a more accurate picture of the association's financial health.
Advantages for associations
By using membership credits and applying the revenue recognition policies described in this blog and the previous one, you gain several significant advantages:
Increased cash flow during renewals: Membership credits encourage members to renew their membership, resulting in increased cash flow for the association.
Increased participation in activities: Membership credits encourage members to actively participate in the activities offered, increasing participation rates and member engagement.
Additional selling point during renewals: The ability to retain and use unused credits is a powerful selling point during renewals, reassuring members about the continued value of their investment.
More accurate revenue distribution: By applying revenue recognition policies, you achieve revenue distribution that more accurately reflects the financial situation of your association, offering better transparency and optimized financial management.
With Membri 365, all of this can be quickly and easily configured, allowing you to fully benefit from these advantages without additional effort.
Discover how Membri 365 can help you tackle your member retention challenges by watching this video:
Contact us today to find out how Membri 365 can transform your association's management and maximize member participation!
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