What unspent loyalty card points are worth on your books
Every point you have issued and not yet honoured is a promise to give something away. Accountants treat that as a liability, and most small schemes have no idea what theirs is.
The number, and how to get it
Outstanding liability is the points your members hold, multiplied by what a point is worth in pounds, multiplied by the share you expect to be redeemed. Two of those three you should know exactly. The third you estimate and then correct with experience.
| Assumed redemption rate | Outstanding liability | What it means |
|---|---|---|
| 100 per cent | £1,440 | The worst case, and the one to hold in your head |
| 70 per cent | £1,008 | A well run scheme with an active membership |
| 40 per cent | £576 | Typical of a scheme where points expire or are forgotten |
| Unknown | Unknown | Where most small schemes are, which is the problem |
Why the estimate has to come from your own data
Redemption rates published by big loyalty operators are not yours. They depend on how easy redeeming is, whether points expire, how often your customers come in, and whether your staff remind them. The only rate worth using is the one your own scheme has produced over a few months.
Which means the thing to insist on from a platform is not a clever report. It is that every point issued and every point spent is recorded in a way you can still read in two years, per member, with dates.
Three habits that keep the number honest
- Never edit a balance. Add an entry that corrects it, so the history explains itself and last year's figure still adds up when somebody asks in April.
- Make sure a refund takes points back. A returned item that leaves its points behind quietly inflates your liability and rewards the wrong behaviour.
- Know your oldest unspent points. A scheme five years old with no expiry is carrying promises made to people who have moved away.
On expiring points
Expiry reduces the liability and annoys customers, so it is a judgement rather than a rule. If you do it, say so plainly when they join, remind them before it happens, and never shorten the window on points already earned. Loyalty schemes lose trust through quiet devaluation more than through anything else.
What to ask your accountant
Show them the number and the assumption behind it before your year end, not after. The figure itself is rarely large for a single shop. The conversation is short if you have it, and awkward if the first they hear of the scheme is a question about a balance sheet.
Related
Written for shopkeepers rather than for a search engine. The arithmetic here is yours to check, and if a figure looks wrong for your trade, tell us and we will correct it.