Your questions about membership answered
When dealing with membership management, there are few questions that might be confusing to those new to the field. You may have questions such as, well, what exactly is membership. Perhaps you what to start your own association and find individuals who share same ideas as you do. Perhaps you are just wondering, if fees collected from members are considered taxable. Here are some of the questions we have seen asked by our readers:
If you work in association management, you may have heard of terms like membership system, membership body, membership fees and membership dues. But what do these terms mean and how are they related to your organization? In this blog post, we will answer some of the most frequently asked questions about these concepts and help you understand how they affect your association's operations and finances.
What is a Membership System?
A membership system is a set of rules, processes and tools that define how an organization manages its members. A membership system includes aspects such as:
- Membership criteria: who can join the organization, what are the eligibility requirements, what are the benefits and obligations of being a member, etc.
- Membership database: how the organization stores and updates the information about its members, such as contact details, preferences, interests, activities, etc.
- Membership communication: how the organization communicates with its members, such as newsletters, emails, social media, etc.
- Membership engagement: how the organization involves its members in its activities, such as events, programs, committees, surveys, etc.
- Membership renewal: how the organization retains its members and encourages them to renew their membership, such as reminders, incentives, feedback, etc.
- Membership recruitment: how the organization attracts new members and converts them into paying members, such as marketing, outreach, referrals, etc.
A membership system is essential for any association that wants to grow its membership base, increase its revenue and deliver value to its members. A membership system can also help the organization achieve its mission and vision by aligning its strategies and actions with the needs and expectations of its members.
What is a membership body?
A membership body is an organization that has members as its primary stakeholders. A membership body can be a professional association, a trade association, a nonprofit organization, a club or a society. A membership body exists to serve the interests of its members and to provide them with opportunities for learning, networking, advocacy and recognition. A membership body can also represent its members in various forums and influence policies and standards that affect them.
A membership body differs from other types of organizations in that it relies on the voluntary participation and contribution of its members. A membership body does not have customers or clients; instead, it has members who pay fees or dues to belong to the organization and to access its services and benefits. A membership body also does not have shareholders or owners; instead, it has a board of directors or a governing body that is elected by the members and that oversees the management and direction of the organization.
Is Membership fees an asset?
Membership fees are the amount of money that an organization charges its members to join or renew their membership. Membership fees can vary depending on the type, size and scope of the organization and the level of benefits and services that it offers to its members. Membership fees can be paid annually, quarterly, monthly or even one-time.
Membership fees are considered an asset for an organization because they represent a source of income that can be used to fund its operations and activities. However, membership fees are not recognized as revenue until they are earned by the organization. This means that when a member pays their fee in advance for a period of time (such as a year), the organization cannot record the entire amount as revenue at once; instead, it has to defer a portion of it until it delivers the value that corresponds to that fee (such as providing access to events or publications). This ensures that the organization matches its revenue with its expenses in each accounting period.
How do you calculate membership fees?
There is no one-size-fits-all formula for calculating membership fees. Each organization has to determine its own fee structure based on various factors such as:
- The cost of providing benefits and services to its members
- The value proposition that it offers to its members
- The market demand and competition for its membership
- The financial goals and sustainability of the organization
- The feedback and preferences of its members
Some common methods for calculating membership fees are:
- Cost-based: The fee is based on the total cost of delivering benefits and services to each member divided by the number of members.
- Value-based: The fee is based on the perceived value or benefit that each member receives from being part of the organization.
- Tiered: The fee is based on different levels or categories of membership that offer different benefits and services.
- Flat: The fee is based on a single amount that applies to all members regardless of their characteristics or preferences.
Regardless of the method used, an organization should review its membership fees regularly and adjust them as needed to reflect changes in costs, value, demand and feedback.