We count on our membership renewals to fund our mission and our budget. So, when members haven’t renewed after sending the first or second invoice, we get concerned. I see many association pros posing questions such as, “How can we collect on these past due invoices?” and comments like “These are businesses that invoice and wouldn’t appreciate non-payment of bills from customers.”
After observing and sometimes commenting on these social media posts, I decided to weigh in on common perceptions. First thing we need to acknowledge: Membership renewals are optional.
But They Owe Us the Money, Right?
No, not technically or legally, unless they agreed to renew. There is a legal distinction between an “invoice” and a “renewal notice.” A good explanation of the difference was provided in a blog post by Tony Rossell, senior vice president of Marketing General Incorporated, a firm held in high regard in the association industry: “An invoice is a bill sent by a provider of a product or service to the purchaser. The invoice establishes an obligation on the part of the purchaser to pay, creating an account receivable. However, when a membership is up for renewal, there is no obligation to pay and no account receivable. The member has not received anything and has the option to pay, but no legal obligation to pay. Therefore, a renewal notice is not an invoice and cannot use the word ‘invoice’.”
Yes, Tony is correct in that dues renewals are not receivables and if they are recorded as such, an independent CPA firm will likely recommend audit adjustments. Membership dues are considered as deferred income and recognized after receipt and posted as earned revenue over a 12-month period. For more information on effective non-profit accounting practices, see sources such as Not for Profit Budgeting and Financial Management.
Negative Renewal Notices Can Backfire on You
I know, we want to create a sense of urgency for members to renew. Our letters or emails threaten to remove their listings in the upcoming directory and or that log-in credentials will be invalidated to prevent event registrations. We want to pressure members to renew immediately or give them a sense of loss. But how well does that approach really work? And more importantly, how does it make members feel?
The blog post by Eric Moeller, a non-association professional, How One Email Can Destroy a Customer Relationship is quite revealing as he shares the negative tone members might experience when reading a renewal message. There are various reasons why members have not renewed and this approach may result in the very consequence we want to avoid. Eric offers an alternative version that resonates with reselling benefits while asking for members to renew—a request rather than a demand.
Don’t miss my next blog post, 5 Tips to Improve Your Membership Renewal Approach, which will provide you with great ideas to develop renewal messages that produce positive results!
Cathi Hight helps organizations manage constant change, deliver benefits that members value and effectively communicate the value of membership. She serves as the SVP of Growth Strategy and Investor Relations for the Greater Austin Chamber and is the President of Hight Performance Group. Cathi is the developer of The Member Retention Kit and A New Approach to Tiered Membership. Learn more at www.hightperformance.com.