Sterling Subscriptions

Most LETS groups operate on the model of a traditional voluntary organisation, in that funds are raised for essential expenses by charging joining and annual renewals in sterling currency. However, this flies in the face of modern social media, which are invariably offered free of charge, and encourage members to expand their networks. A rigid requirement for sterling renewal fees needlessly leads to an annual loss of members and uses up a lot of time, taking energy away from other more useful activities in the running of the scheme. With lower outgoings due to the advent of online systems, this can be reviewed.

In fact, some LETS groups now operate on joining fees only, and this is why recording sterling subscriptions is not a major feature of the online system - there is an Admin Note field where such data can be recorded. However, the software has now been updated to enable renewals to be managed on the system, so that if due date is recorded, sterling fees can be invited as they become due, which is managed separately from taking fees in local currency. All you need to do to make use of this feature is to forward the Expire Date once you've resolved renewal with the member (it might need a phone call or individual email), then when you sort by Expire Date, the next one comes up, so that you can "rotate". This runs in parallel with Annual Renewals in local currency, which could be managed by another member of the committee.

Acknowledging Sterling Donations

If renewals are treated as "donations" or more precisely as "a trade" and exchange is given for them in Local Currency, this allows for maximum flexibility, in that all members pay the same Annual Fee in local currency, but if and when a member makes a sterling payment, the equivalent amount is paid back from the Sterling Fund. This will be visible in the global list of trades, so it's a good idea to adopt a standard way of describing it, eg: Acknowledgement of Donation or Subscription.

So a new member who paid £10 will find that they have an opening balance of 10 units in their account, and an organisation which has paid £100 will have a budget of 100 units to pay members who work for them. If, for example, you are going to ask for £5 sterling renewals, then you need to make the annual fee 5 + 12 = 17 units, to include both, which means that sterling donations are a bonus. You can keep this simpler by rounding the figures, ie Annual Fees are £12, and any proportion of that paid in sterling is acknowledged back in local (but read on....).

The Need for Annual Fees in Local Currency

Practice varies considerably from one group to another about payments being made in local currency for work done on the system. Most groups confine payments to genuine admin work, others are more generous, some even pay members to attend committee meetings (!), while others feel there should be some voluntary element in running the scheme, otherwise a kind of oligarchy develops, along with a massive system deficit. If there is a high level of trading, this has less impact, but if member-to-member trading wanes, such payments can dominate the pattern of trading. Thus there is a case for very careful budgeting and management of the system funds. You can balance these payments by taking monthly or annual fees in LETS currency from member accounts, and this function is well-supported in Local Exchange.

Budgeting in Local Currency

To create a budget for managing the system in LETS units, a set monthly amount may be taken from all active accounts, or better still, annually, using the "Take One-Off Service Charge" function. This omits "exempt" accounts, eg the system account, and other central accounts - which can be set in the configuration file. These payments will show in the individual accounts of members, but do not show in the list of trades - as the list would be too long. Before doing this, you can "Send an Email to All Members - advising them that this payment is about to be taken from their account.

For example, from 100 accounts @12 units, one per month, you can create a budget of 1200 units. Payments can then be made from the system account into particular budgets, eg the Admin Fund for administrative work, a Social Fund for helping at trade fairs and running local socials, a Pastoral or Community Fund eg for visiting sick members, etc, and, say, a Green Fund for environmental projects, plus the Sterling Fund,as mentioned above. The process can be started with perhaps an initial 200, then further amounts as required. To keep these budgets in balance a Fund Manager may be appointed for each of them. Time-sheets can be kept, and/or the invoicing function can be used by individuals to make claims for work done, and the Fund Manager, will have the password for the specific "Fund" accounts and make the payments online. This diagram summarises the procedure outlined above.

Positive Management and Engagement

It is important that core-group members understand and are confident about these procedures. The naming and approving of the various funds is a positive discussion that can engage members, and the fund managers will report back at each committee meeting on how the budget has been spent and ask for more if necessary. The advantages of adopting these policies are that (a) poorly members can be taken care of and not excluded from trading, (b) sterling funds can be raised other than from subscriptions, (c) trading activities can be stimulated by the organisers of the scheme, (d) they are a very useful mechanism for outreaching into the mainstream community and engaging in areas previously reserved for volunteering, and (e) you introduce the idea of proper governance of LETS expenditure in the same way as for sterling.

Enrolment and Renewal Procedures

The most elegant way of managing annual fees is to take them in arrears, ie for the previous year, so that when you enrol a member, you compensate them for charges that will be made annually. For example, if the fee-take is in January, and the member joins in December, you will give them 11 units of Local Currency when they join which means they will have paid the correct amount of one unit per month (12-11=1), but if they enrol in June, you would make this 6 units of currency (12-6=6). Together with acknowledgement of the sterling joining fee, this works as a "sweetener" for new members, putting a small amount into their account to give them the confidence to begin trading from a positive base. For example, if the member joining in June and paying £10 sterling would receive 16 units of local currency, which makes it fair if you operate concessions, or allow some people to join for free.

Managing Members who become Inactive

NB There is an option in the system to switch off the listings of members who have not logged on for a specified period of time, eg six months or a year - it sends out a reminder which prompts them to update their listings. This does not switch off their account - you would have to de-activate it manually, but it does reduce the out-of-datedness of offers on display, whilst still allowing a fee-take from those members. NB if a member is no longer engaging, it may be that they are ill and needs more support, so it's always worth having a member-support or "Broker" role on the core group to investigate what's happening with members who are falling away, and find out how their needs can be met.

Additional Support for Funds

Members can also tithe into these budgets, via the system, which is a way of engaging the generosity of members, and of making LETS relevant to the community, enabling those who are high earners to support other members.

Is All This Really Necessary?

There was an idea out there when LETS was first set up, that systems would be self-managing. However, this was wishful thinking in view of the complexity of these projects, which are a cross between running a local bank and supporting a self-help system of mutual aid. A high level of co-operation and inspiration is needed for a multi-talented team to keep these systems moving forward. In good economic times, the tendency is for members to get to know each other and become friendly so that formal trading falls off. This can be seen as some form of success, if all you wanted to do is to form a social network. Alternatively, due to mismanagement, a scheme can simply "hollow out" over time, leaving the oligarchs with excess funds and nothing to spend them on. For these reasons, it behoves us to learn how to develop and manage LETS as sustainable economies, as they may become more important, given the problems in the mainstream economy. The diagram below attempts to summarise what we have described above.

Raising Sterling Funds

You can also use the "Exchange" function for raising sterling funds at public events, by accepting cash for local currency vouchers, enabling members of the public to immediately trade in the system, and accounting for this from the System Account or Sterling Fund. This can be used as a way of integrating with "Local Currency" operating in some Transition Towns, but it should be noted that it will contribute to the overall system deficit, as the funds are not held as "backing" for the vouchers, but are used to manage the scheme.

To summarise,

LL/MF/ May 2010 - updated July 2012