Joining fees: income on the day or over the membership?
Whether a gym counts a new member's joining fee as income on the day it is paid or spreads it over the membership, and how each choice is recorded.
By Achekam · · 5 min read · For Fitness businesses in South Africa, Nigeria, Kenya
January is the best month of the year for most gyms. New members sign up in numbers, and each one pays a joining fee on top of the first month's subscription. The January income figure looks wonderful. By April, when sign-ups have slowed and the joining fees have dried up, the figures look much worse, even though the gym is serving more members than ever.
Part of that swing is real: more people joined in January. Part of it may be an accounting choice. Whether a joining fee is income on the day it is paid, or income earned over the months the member trains, depends on what the member actually gets for it. That is a question worth settling with your accountant once, so the monthly figures tell a true story.
What the joining fee actually buys
Start with your own sign-up process. A joining fee usually covers some mix of:
- Setting up the member's account and debit order.
- An access card or tag.
- A fitness assessment or body composition scan.
- An induction session with a trainer.
- A welcome pack: a towel, a bottle, a T-shirt.
Some of these are administration that the member never experiences as a service. Others, like an assessment or an induction, feel like something the member receives. The distinction matters.
The test for a separate promise
IFRS 15 recognises revenue in five steps, and the second is to identify the performance obligations in the contract: the promises to transfer goods or services that are distinct. ACCA explains that a good or service is distinct if the customer can benefit from it on its own, or with other readily available resources, and it is separately identifiable from the other elements of the contract.
Apply that to each part of the joining fee:
| Part of the fee | Can the member benefit from it on its own? | Separate from the membership? |
|---|---|---|
| Account and card set-up | No; it only lets them use the membership | Not separate |
| Fitness assessment | Possibly, if it is a real service with a result they keep | Arguable; often tied to the training that follows |
| Induction session | Mostly useful only for using this gym | Usually not separate |
| Welcome pack goods | Yes, the goods are theirs | Possibly separate, if significant |
For many gyms, the honest conclusion is that most of the joining fee pays for activities that only make sense as part of the membership. If a club sells assessments separately to non-members at a published price, that is a sign the assessment could be a distinct service.
If the fee is not separate, it belongs to the membership
IFRS 15 says revenue is recognised when a performance obligation is satisfied, which is when the customer obtains control of the promised good or service. If the joining fee is not a separate promise, it is part of the price of the membership, and the membership is delivered month by month as the member uses the gym.
So the joining fee is earned over the membership, not on the day it is paid. For a fixed-term membership, that period is usually the term. For month-to-month members, discuss with your accountant what period to use; your own records of how long members typically stay are the evidence.
If, after the analysis, a part of the fee is genuinely separate, such as a substantial welcome pack, that part is income when the member receives it, and only the rest is spread.
Deferred revenue sits on the balance sheet
Investopedia defines deferred revenue, also called unearned revenue, as a payment received in advance for products or services not yet delivered, shown as a liability on the balance sheet until the business fulfils its obligation. It explains that when the upfront payment arrives the business records cash and a deferred revenue liability, then moves a portion into revenue as it delivers, for example each month for an ongoing subscription. Investopedia's explanation of deferred revenue sets out why it is a liability and how it is released.
For a gym, the deferred joining fees are a measure of service still owed to members who have paid for it. A large balance after a strong January is not a problem; it is income the gym will earn over the coming months.
Recording it in Achekam
In Achekam, a new member's invoice is created as a draft and, when issued, takes the next number in the sequence and posts to the ledger as debtors, sales and output VAT. A joining fee on that invoice therefore reaches sales on the day it is issued.
If you and your accountant decide the fee is earned over the membership:
- At month end, total the joining fees invoiced that month.
- Post a manual journal moving that total out of sales and into a deferred joining fees liability account.
- Each month, post a release journal moving the portion earned that month back into income, based on your agreed period.
Achekam refuses a journal that does not balance or is dated in a closed month, and a posted journal is corrected only by reversing it, so post the releases before each month is closed. A simple schedule, one row per intake month, showing the amount deferred and the amount released each month, keeps the balance easy to check.
The management accounts give an income statement for a chosen period beside the period before, and a balance sheet at period end, built from the business's own journals and exportable as PDF or CSV. With the joining fees spread, January's income is lower and the following months are higher, and the comparison between periods reflects how many members you are actually serving.
If you and your accountant decide the fee is a separate service delivered at sign-up, no journal is needed: the income on the invoice is already in the right month.
Agree the policy once, then apply it every month
Whichever answer fits your club, write it down: what the joining fee covers, whether it is separate from the membership, over what period it is released if not, and who posts the journals. Apply it the same way every month and every year. Changing approach from one year to the next makes your figures impossible to compare.
Review the policy when the sign-up offer changes. A promotion that waives the joining fee, or a new premium onboarding programme, may change the answer.
The next step
Take your current sign-up process to your accountant, go through the table above together, and agree the treatment before the next January rush. How the first invoice for a new member is put together is covered in the joining fee and first month's invoice, and members who pay a year in advance in annual memberships paid upfront.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
