House accounts and prepaid credit for members clubs

Members clubs give members two main ways to pay without handing over a card each time. With a house account, members charge food, drink and services to their account and settle a statement later, usually monthly, so the club is extending credit. With prepaid credit, members load money onto their account first and spend it down, so the club holds the money before anything is served. Clubs can run either model, or combine them with a minimum spend.

The choice affects cash flow, credit risk, how much work finance does each month and, in some cases, which regulations apply.

How does a house account work?

A member signs for a purchase with their name or membership number, staff post the charge to their account, and the charges build up over the period. At the end of the period the club sends a statement, and the member settles it by card on file, direct debit or bank transfer. A club can set a credit limit for each member, stop charging when a statement goes unpaid, and keep the right to close the account.

The appeal is that nobody handles a bill at the table, which suits clubs where service is meant to feel like being at home. The costs sit with the club: it carries the risk that a member doesn't pay, it waits weeks for the money, and someone has to send statements, answer queries about charges and chase late payers.

How does prepaid credit work?

With prepaid credit, a member tops up a balance by card or bank transfer, and purchases are deducted from it at the bar, restaurant, spa or shop. A club can add an incentive, such as bonus credit on larger top-ups, or include a monthly credit allowance in a membership tier. The rules need to say where credit can be spent, whether and when it expires, and whether unused credit can be refunded or transferred.

Until it is spent, a prepaid balance is value the club still owes the member in goods or services, so finance needs to track it as a balance owed, and your accountant will advise on how to treat credit that goes unused. Check VAT too. HMRC's guidance on vouchers in VAT Notice 700/7 separates single-purpose vouchers, taxed when they are sold, from multi-purpose vouchers, taxed when they are redeemed, so ask your accountant how your credit scheme is treated, including whether it counts as a voucher at all.

House account or prepaid credit: how do they compare?

Do consumer credit rules apply to house accounts?

They can, depending on the terms. A house account is running-account credit: the member buys now and pays later. Under article 60F of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, running-account credit from the business supplying the goods or services can be exempt from regulation where the member repays each period's balance in a single payment, the periods are three months or less, and there is no interest or other significant charge.

Outside the exemptions, entering into a regulated credit agreement as the lender is a regulated activity that needs FCA authorisation. Charging interest or other significant charges for the credit, or letting members repay a period's balance in more than one payment, can take an account outside the exemption. Take advice before you write house-account terms, and again before changing them.

Which model suits your club?

A house account suits a club with a settled membership, members who spend regularly, and a finance team able to run statements and credit control. Prepaid credit suits a newer club, a broad membership, or any club that wants the cash before service and no debts to chase. Corporate memberships can suit a house account, with charges invoiced to the company.

A hybrid can work well. The club sets a minimum spend each quarter, loads it as credit at the start of the period and lets members top up beyond it. Whichever model you choose, members should be able to see their balance or running total before they ask for it. Prepaid credit is also a loyalty tool, which our guide to loyalty programmes compares with points and tiers.

How Tiquo handles member credit and open tabs

In Tiquo, stored credit is held on a customer's or a company's profile. Staff issue credit to the balance, and when that member or company is attached to an order, the order shows the credit available so staff can apply some or all of it and take the rest by card or cash. A refund can go back to the balance as store credit. Every issue, redemption, adjustment and refund appears in a transaction history on the profile with the balance after it, and balances are kept per currency and can't go below zero.

Because the balance is a running ledger, finance can see what the club owes each member at any point. Tiquo doesn't expire credit automatically, so if your terms say unused credit lapses, staff apply the expiry to the balance themselves.

For members who settle at the end of a visit, Tiquo's POS can save an order as an open tab linked to a customer or a company, add to it as the visit goes on and take payment when the tab is closed. At 180 Studios, a member can order coffee at one cafe, add lunch at a restaurant and buy something from the gift shop on one open tab, then settle it with a single payment. A tab is paid when it closes, so a club that runs monthly house accounts will keep statements and credit limits in its own finance process.