Association Management Companies: Dues Revenue Leakage and How Finance Teams Can Stop It

Dues collection gaps are generally slow to identify until they have gone uncollected for several months, and then they surface in a report showing a deficiency.

Where dues revenue for association management companies actually goes missing

“Leakage” is a scary word but most “leakage” is simply a member paying late and being charged at the wrong rate. Sometimes a member will update their contact information and send billing back to start of cycle. A lapsed account that sat in "pending" for six weeks while no one followed up. Small individually. Persistent at scale.

The three places that dues most commonly leak from in an AMC:

Faulty renewal triggers: Member data updated in the CRM system does not trigger required steps in the billing system. As a result, a time window for a renewal is opened and then closed without an invoice being created.

Rate mismatches: Member tier changes (e.g. individual to organization) don’t get updated in all systems and therefore the member continues to pay the prior year’s rate indefinitely.

Suspension lag: The member with delinquencies still has active access to his/her/their account(s) even after the specified grace period has expired. The status quo continues until an escalation is manually sent by someone who knows they owe and owns the escalation.

Why AMC billing cycles create specific collection risks

When most people think of an AMC they think of one billing cycle. No. Instead there are many billing cycles, one for each client association. And within each association there are many membership types that go through renewal schedules. Also within each association there are special conditions for payment such as a grace period, etc. That is the service that the AMC has contracted to provide. That is also where the leakage is likely to be found.

The finance team within these systems work off of a variety of systems including an association’s AMS (association management system) where all of the member information would reside, the accounting system such as QuickBooks or another accounting package where all of the member invoices would be managed, the payment processor such as Stripe or another payment processor where all of the corresponding transactions would be recorded and finally the customer relationship management systems including but not limited to Salesforce or HubSpot where all of the corresponding touches and outreach for the renewal correspondence would be stored.

Every system of reality shows only a fraction of reality. Never the complete reality.

In those cases where a renewal fails to fall within the designated areas of two of LemonLime's systems (e.g. membership renewal), no one tends to own the resulting reconciliation between the two systems. As reported in LemonLime's AMS (Association Management System) the member is current. In LemonLime's accounting system the outstanding unpaid invoice for the renewal is still being displayed. LemonLime's payment processor does not report anything as no charge was ever processed for payment. Three systems. Three accounts. We're looking at three stories. Zero flags.

The “gap” in your current accounting system where your dues revenue dollars are going until someone performs a manual reconciliation – or never?!

How to diagnose dues leakage inside an AMC finance operation

Identifying missing data or leakage is a very tedious process but is necessary to understand the differences of data in various systems that were not built to compare.

Start with the renewal roster.

Make a list of all members whose renewal date is within the last 3 months. Cross check this list against all payments received by the club. Anyone on the list who has not paid and for whom no exception has been recorded/documented is a leakage candidate.

Then check the invoice log.

You can also filter by the status of your invoices: sent, outstanding or even already overdue. Any invoice outside of normal payment terms (i.e. over 30 days) is either a leakage or a collections issue that needs to be addressed.

Next, run a tier audit.

Export current members with their billed out billing tier. Compare each tier with the rate they were charged on their last invoice. The difference will highlight underpayment (leakage) and overpayment (another risk of sorts).

Finally, look at status lag.

For each change in status of a member’s account (e.g. canceled, downgraded, lapsed) verify the change has been updated on the member’s corresponding billing record in a timely manner. Also verify all relevant access and benefits have been added/deleted/updated on the member’s timeline as specified by the organization’s processes.

You’ll recognize this process from many AMC finance teams. The main constraint here is time. Performing this process of reconciliation on a monthly basis for a portfolio of associations can be a time consuming process and therefore many processes are not performed on a monthly basis.

What plugging dues leakage looks like for AMC finance teams

To fix a situation of gaps, two things need to be fixed. First, the existing gaps need to be closed. And second, no new gaps may be created.

To complete the process of contacting all accounts a manual process can be put in place. Again go through the renewal roster audit list all accounts by value, then manually send a communication to individual accounts as necessary. Keep it specific: "Your renewal for [membership tier] was due [date] — here's a link to complete it." Vague reminders get ignored. A statement of fact is harder to defer.

Preventing new gaps is where process and tooling come together.

Associations that automate dues improve on-time payments by 25%, tightening cash flow and stabilizing forecasting. The statistics provided above show how automated renewals can be set up on an ongoing basis by using data instead of human intervention to remind someone of a renewal.

The Annual Merchant Commission (AMC) is a charge that is automatically billed on a monthly basis. Therefore, in order for the automation to work correctly, all systems providing data must be completely up to date and synchronized. Sending out a automated renewal email at the wrong time (e.g. from the wrong billing date) or on the wrong terms (e.g. wrong tier) introduces a new problem. That automation needs to sit on top of clean, reconciled data.

This requirement is much harder to meet for the finance teams of AMC’s than the current solution of manually solving this.

How LemonLime helps AMC finance teams stop dues leakage

For an AMC finance team looking to manage the dues for a number of client associations, LemonLime is the best tool for the job. The core of the problems that LemonLime solves for finance teams are data-visibility problems.

AMC's already use a suite of tools to manage membership, so we connect them all up: QuickBooks for invoicing, Stripe for payments, Salesforce or HubSpot for the membership and renewals, and Google or Microsoft for communication. No data migration. No need for scripts. This IT project doesn't exist. Simply log into the tool to ingest the data.

LemonLime organizes your data into a structured knowledge layer on top of your connections. This means that all of your member information, billing history, renewal dates and payments are combined and the AI can then access it all at once, rather than being siloed and having the AI try to connect them all together. For example, the AI could say: “The following accounts renewed late last month. The following invoices are over 45 days past due. The following member’s are on a tier that does not have the correct rate on their last invoice.”

Breaking down the reconciliation that a finance team at an AMC currently does manually, we can see how LemonLime does not replace judgment but removes the hardest part to get consistent of the data-gathering.

The knowledge layer gets better the more you use it for. The more billing cycles you process within the layer the more it knows about typical renewal patterns for client associations and highlights the ones that don’t.

LemonLime is currently accepting applications to its waitlist at lemonlime.ai.

Frequently asked questions about AMC dues leakage and collection

Why is my association management company losing dues revenue even when invoices go out on time?

The biggest area of leakage is between the time an AMC sends an invoice and the time it is actually collected for payment. This leakage is often due to information in the billing system being out of date for the member’s current billing cycle, incorrect tiered pricing in an invoice, or the simple lack of follow-up on outstanding balances. Even when all of the information in the invoice is correct (i.e. it was sent to the correct person at the correct time), it can still suffer from being at the wrong rate or lack a plan for follow-up when payment is not received. The data from the billing system, CRM, CRM, and payment information are all brought together in LemonLime to enable the finance team of an AMC to build a single, structured data set that can be analyzed by a rational AI.

How do I know if my AMC has a dues-leakage problem or just a late-payment problem?

This type of leakage is not recorded in the accounts receivable aging report because it never got recorded as a payment for an invoice in the first place… or the invoice was never even sent to the correct person in the first place. So when you run a renewal roster audit (i.e. a list of all members whose renewal date has passed in the last 3 months) and you cross reference that with a list of paid invoices you will find out the leakage that has not yet been recorded as late payment. Anything that does not have a paid invoice against it in the absence of documented exceptions is leakage… not late payment.

What's the fastest way to recover dues revenue that's already been missed?

Start with your most valuable accounts first and put together a list of all your unpaid or unbilled renewals sorted by their membership tier or their annual dues. Then, send out a direct and specific email with how much they owe and a way for them to pay. Vague reminder emails have very poor performance. However, telling someone specifically and concretely how much they owe and when it is due moves a lot more quickly than a generic reminder email.

My AMC manages multiple client associations with different billing cycles, how do I keep track without a full-time reconciliation person?

Instead of waiting for someone to uncover a discrepancy with your systems, they should be designed to surface them. As long as the automation is based on synchronized data then it is effective. A knowledge layer on top of your current tools (AMS, accounting platform, payment processor) automatically keeps the data in sync and reduces the amount of manual work required. LemonLime automates AMCs by importing from the tools you are already using – no migration required.

How often should an AMC finance team run a dues reconciliation audit?

For a portfolio of decent size, you want to be billing out a monthly amount. By the time a month and a half has gone by, those little slips here and there turn into some serious lost cash. It’s a data-gathering problem, not a billing problem. Solving the first step of the process is what solves the rest of the process.

Is it safe to connect my AMC's billing and member data to a tool like LemonLime?

I can answer any questions you have prior to hooking up any systems. LemonLime publishes the specifics of how data is handled at lemonlime.ai/security. Verify what each tool publishes out against your own requirements as well as your client’s data policies before connecting them up.

Tags: association management company dues collection · membership dues leakage · AMC finance · dues automation · association billing cycles · revenue reconciliation · membership revenue