With the release of Triib Engine we wanted to bring to light how plans (memberships) with Term based Payments, are handled in Engine, and how you can save a lot of confusion to both your staff and your members by understanding what Term Based payments mean, and how they affect a plan based on your gym and plan settings!
Defining Term Based Plans
A term based plan is typically setup to ensure that you, as the gym, are paid a known amount of money for a membership plan. This is most common with contracts on plans, but a few gyms also utilize this structure to help them forecast their revenue. Another scenario is based around ensuring a member is only charged an exact number of payments, after which the plan automatically cancels. A couple common examples we see:
- 1 Month On Ramp Plan - 1 Payment Term - No Auto Renew. This would result in 1 payment for the plan, which automatically cancels at the end of the paid month.
- 6 Month Paid In Full Play, 1 Payment Term - No Auto Renew. This wold result in 1 payment for the plan, which automatically cancels at the end of the paid 6 month period.
- 3 Month Plan, 3 Payment Term - Auto Renewing. This would result in a monthly plan, that after 3 monthly payments the plan ends, and a new plan starts automatically after that first plan ends, and goes on until the plan is cancelled.
Some Term Based Plans don't make a lot of sense to setup. For example, a monthly plan, with a 1 payment term, which auto-renews, means that you want a Plan to start one month, end at the end of that month, and a new plan to start the following month, until cancelled. This creates unnecessary overhead in your Plan setup as well is confusing to your members, when it's the exact same setup as a Plan that bills monthly, and auto-renews until cancelled.
Gyms with a Billing Day Set
Gyms with a specific billing day set in their gym settings run into a few issues with Term Based plans. The desire of a term based plan is to ensure you bill a specific amount for the duration of the Plan. For example: A $100 monthly plan with a 3 payment term means you should receive a full $300.00 for that term. Let's see what happens with a gym that is set to bill everyone on the 1st of the month:
- Member Bob Jones starts on 1/15/2018 and setup with the $100 monthly Plan with the 3 payment term.
- Bob Jones FIRST invoice is for $54.84*, for period 1/15/2018 - 1/31/2018 (the 1st of the month setting forces the first payment to prorate 14 days)
- Bob Jones Next payment is $100, for period 2/1/2018 - 2/28/2018
- Bob Jones Next Payment is $100 for period 3/1/2018 - 3/31/2018
- Bob Jones Last Payment is for $45.16 for period 4/1/2018 - 4/14/2018
*Note: the proration is calculated as: $100 - ($100.00 / 31 days in January * 14 days) == $54.84
This ensures Bob is charged the full $300.00. What happens, however, if the plan is also auto-renewing? Bob will now have a new set of payments due:
- Bob Jones NEXT invoice is for $46.67, for period 4/15/2018 - 4/30/2018 (the 1st of the month setting forces the first payment to prorate 14 days)
- Bob Jones Next payment is $100, for period 5/1/2018 - 5/31/2018
- Bob Jones Next Payment is $100 for period 6/1/2018 - 6/31/2018
- Bob Jones Last Payment is for $53.33 for period 7/1/2018 - 7/14/2018 (amount remaining from the original proration to equal out to $300.00)
*Note: the proration is calculated as: $100 - ($100.00 / 30 days in April * 14 days) == $46.67
And this continues on until the plan is cancelled. You can see how this will become confusing to your member, as they will be billed an amount on the 1st of the month, and then again on the 15th of the month, at the plan date perimeters. This is extremely confusing when you have a 1 month 1 payment term auto renewing plan!
Triib recommends that gyms who have TERM Based Plans to use the Billing Day Override Feature on a plan to start the billing on the day the plan is setup. In our scenario above, this would mean that Bob Jones is billed the full $100 for each period on the 15th of each month.