Which payment method is right for your SGPT gym?

This is a good question. Selecting the right method(s) can make a difference to your workflows, your cashflow, and the experience that you present to your members.

Many gym owners don't fully appreciate or understand the nuances between different payment methods, or the mechanisms behind how they work. Whilst it's not necessary to know the detail, it is important to know the rules surrounding certain payment mechanisms and your legal responsibilities as 'merchants'.

In this article we shall take a look at the different types of payment method you might use in your SGPT gym, along with the pro's & con's of each - whether it be cash; standing order; credit/debit card; direct debit; or cryto-currency.

Ultimately, the method(s) you choose are up to you and what suits your business model the best. Your SGPT Infinity account manager and our business advisors will be happy to discuss with you what may suit you best.

Even though very few people in the UK get paid cash-in-hand these days (especially since COVID-19), you will find that some members still like to pay you with dutty cash.

Outside of retail, cash has ceased to be a popular method of payment. It is cumbersome, brings security challenges, requires very high levels of trust, and can cause headaches with HMRC (Her Majesty's Revenue & Customs).

When dealing with cash, you will need to ensure that you keep strict records of cash received in your business management system. You will need either a till or a lockable cash box to keep your money secure, plus ensure that these are outside the reach of members of the public.

If it known, if you opt to allow payment in cash, that HMRC expect a certain ratio of cash to other payment methods.  If your ratio is out-of-kilter with their expectations, you should expect to receive a deeper level of enquiry - and potentially a full VAT investigation.

A further hassle of cash is that, to account for it properly, you need to get it to a bank.  With fewer and fewer banks existing locally to many gyms, this is an additional consideration.

As a general rule, if you're operating high-ticket memberships in a small group training environment, you should consider declining cash. Bottles of water etc. are readily purchasable via contactless payment or, perhaps better, you should be able to tabulate these and charge them through your management system.

A "Standing Order" (SO) is a recurring bank transfer setup by the member where, on a given day each month, a given sum of money is transferred from their account to yours.  For example, on 1st of each month, £299 is paid from their bank account to yours.

Now, in the second-decade of the 2000's, standing orders are seldom used in business.  Most business that tend to still use standing orders are needing to save literally every penny, and this isn't necessarily "a good look" with your members.

The upside of a standing order is that it is, in most cases, cost-free to your business. You receive the sum of money sent by the member without charge. Some banks are charge for inbound funds, but still relatively few.

The primary downsides are:

• a SO is wholly under the control of the member.  They can cancel it at will, and you won't know until you don't receive the funds.
• The onus is on the member to set it up, and to set it up correctly - from the amount; the timing; to the receiving bank details. This is a hassle for them.
• Tracking and reconciliation for the payment either has to be done manually or through your accounting system. It can be exceptionally tedious to tie-up monies received from SO's with their corresponding members, and validating that they are the right amount being paid at the right time.
  Almost every gym that uses standing orders will be losing money without even realising it.

If you offer high-ticket memberships, SO's aren't a payment mechanism that you should wish to entertain.

Credit & debit cards are widely considered one of the two best forms of payment for small group training gyms in 2022.

Your gym management software should integrate with a card payment provider. Quoox GMS, for example, integrates directly with Stripe.

You should beware that some management systems sit as the "middle-man" in the payment process, transacting your membership money into their bank account, and then paying it on to you. This is a very old-fashioned way of doing things, and benefits only the software provider. You should ensure that your payment transactions go from the member, through the merchant (E.g. Stripe), and then directly to you.

Credit/debit card payments incur a transaction fee from the merchant that processes the transaction. As at the time of writing, in the UK, Stripe presently charge 1.4% + 20p per transaction. Some cards, such as American Express, may incur higher fees - as the fees with AMEX are, themselves, higher.

One major advantage of credit/debit card transactions is that you know immediately if the transaction was successful.  If the payment was declined, you know there-and-then.

The time between the transaction occurring and you receiving the funds is normally quite short. The actual timing will be dependant on a number of factors, including the business credit score and history with the merchant. Often, pay-outs start at 7 business-days and then, after a few months of 'honourable trading' they reduce to 3 business-days. Some high-throughput business may even receive pay-outs in as little as 1-day, although this is rare in the SGPT sector.

If  you use the Quoox GMS system, either you or your members may add their credit/debit cards to the system. Members cannot remove their cards, but the law requires that you remove it if the member so requests.

One often misunderstood law in the UK is that you cannot legally charge a debit/credit card unless you have been authorised by the cardholder. So, even if the member owes you money, you cannot take that money unless they agree. To do so would be breaking the law, and a court would find in favour of the client.  Under UK law, the small claims court is considered your "route of recourse" should you be owed money and it's not being paid.

Refunds
One area where some gyms get into trouble is refunds. The card networks (E.g., VISA; Mastercard; AMEX) track the ratio of refunds-to-charges on your account. It is their responsibility to ensure they honour any refunds and thus, if you do not have the funds, they take the hit. Clearly is not something they want so, if your ratio of refunds-to-charges becomes too high they will likely either increase your fees and/or delay your payouts for a longer period.

The Quoox business advice team have always recommended that refunds be handled by direct bank transfer, outside of the card system.  This way your client gets their refund (often quicker); you avoid transaction fees; and your refund-to-charge ratio stays nice and healthy!

Direct Debit (the term used in the UK, but overseas variants exist, such as ACH in the US) is another very popular and suitable payment method for small group training gyms. It is, in some ways, similar to standing orders, but without the downsides.

Unlike SO's, the setup of Direct Debits are under the control of the vendor (I.e. your facility). You choose the amount being charged and the date that the payment request is initiated.

Direct Debits (DDs) in the UK are based upon the BACS technology of the 1990's. As such, there are some key points to be aware of.

• Direct Debits are all 'protected' by the Direct Debit Guarantee. These are a strict set of rules which, in essence, mean that a client refuting a payment made by Direct Debit has the money refunded without any quibbling. This money is recouped from the vendor, and the vendor has to address the issue separately.
• Whilst a vendor can setup a Direct Debit, it can be cancelled by the client at any time. Some systems, including Quoox GMS, will alert you in this event.
• It is a legal requirement that a member be notified 3-4 days prior to a charge being taken from their account. In most cases, the merchant (E.g. GoCardless) will handle this process on the vendor's behalf - so as to ensure their own compliance with the banking rules.
• It can take 7 or more working days for a Direct Debit mandate to be setup by a bank. If the bank account is a joint account, both parties may need to approve the Direct Debit being setup.
• A Direct Debit charge is an additional 3 working-day process, on top of the 3-4 day notification period.  Thus, the full DD cycle could be 7 working-days or more.
• The BACS system does not operate on bank holidays or weekends. Therefore, if the payment cycle spans either of these, the charge and pay-out will be delayed accordingly.

Direct Debits tend to be cheaper than card payments. As at the time of writing, GoCardless charge 1% + 20p per transaction - 0.4% less than Stripe for a card payment.

To try to compensate for DD timings, Quoox GMS submits DD's for payment 3-days prior to the target charge date.  So, if your membership charge date is 15th, this is submitted for charging on 12th.  Subject to weekends and bank-holidays, this often brings the pay-out date to be on (or close after) the membership due date.

The Quoox business advice team recommend that, for many customers, a combination of credit/debit card and Direct Debit is the best approach. Either add the member's card on file (or have them do it), and also setup a Direct Debit. This gives you the benefit of being able to take the first of a membership payment immediately (by card, akin to standard online insurance practices) and then, once the direct debit is in place, this will take precedence.  This also has the bonus that, if the member cancel's their DD (and they haven't forbidden you for taking payment), payment will instead be taken by the payment card on file.

Refunds
Refunds through Direct Debit are very tricky, and should generally be avoided.  It is possible to refund DD's through the GoCardless interface, but this option is not made available through the GoCardless APIs - and thus is not a feature available within Quoox GMS.

As noted above, the Quoox business advice team have always recommended that refunds be handled by direct bank transfer between your business and the member. This avoids complications, additional fees, plus potential harm to your "merchant score".

No! Just no! I mean, are you actually being serious? I put this section here largely for completeness.

Cryptocurrencies, such as BitCoin, are highly-volatile and, presently, are largely unregulated. Unlike regular currency exchange rates, cryptocurrencies can fluctuate wildly in a matter of minutes. So, you may charge your member what you think is £199 and then, by the time you receive the money, it might only be 80 pence!

As at the time of writing there are a few "attention seeking" businesses that profess to (and maybe even do) take cryptocurrencies, but it is largely a gimmick.  It has no current place in "the real world", and the position of the Quoox business advice team is that we would strongly urge our clients not to even consider using cryptocurrencies as a form of payment for their members.