The Problem with Budgets

By David Roy CCM

The problem with budgeting is that we rely on historic data to create our forecasts and the past is increasingly unreliable as a measuring stick for the future. We do our best when we work up a budget for approval by the Finance Committee and Board but what can we do to match up reality with our predictions?

For a start, there are many aspects of expenditure that can be insulated against change, such as signing up for a four year energy contract, or a long term agreement with your cleaning supply company, or insurer. The hard work required to pin down expenditure on regular contracts certainly pays off and it is certainly worthwhile testing your contract costs with your CMAE network.

However, we often find that managing costs is the simplest part of club life and it can sometimes be more difficult to spend money than to generate it. Predicting income is notoriously difficult despite using the best information available to assess what an achievable income is likely to be.

The challenge for the club manager is that once the financial year starts, what nudges can you use to achieve the now expected income levels? Here are three tools that can help.

Set Targets
The F&B income is one area that can be boosted through the careful use of targets. Whether your target is a break-even position, or a massive surplus, make sure that the staff understand what that means in terms of sales. A small incentive can make all the difference when asking the F&B staff to sell events and high margin products.

Share the Sales Load
There are a remarkable number of clubs that never ask their front-line staff to sell memberships. Ensuring that everyone in the clubhouse, Pro Shop or gym know what the membership offer is and how to issue application forms is a very simple aid to increasing membership sales. If the application forms have the staff initials on the back, then they may even get a cash bonus for every new member.

Selling Is Hard Work!
It is impossible to avoid the hard work required to sell Green Fees, weddings, corporate days or whatever, especially when at the same time trying to upset the least number of members when access to their facilities is denied to them. It is therefore very tempting to avoid the issue altogether, or overuse some online platforms (such as Groupon) that offer access to a large local market at an apparent low cost.

Direct sales are in fact far cheaper and although time consuming, they often produce the best return on investment. Consider using a student, bright junior member or intern to trawl through your database to send out relevant offers to members and visitors.

The Ultimate Problem with Budgets
The ultimate aim of financial reporting is to ensure that the Board make decisions based on objective, non-emotional data. However, at a club, this rarely happens, or is even desirable at times.

For example, it may make no sense to fund the hospitality required for a friendly match that you struggle to raise a team for but if it has been a fixture for 150 years, what club President is going to be the one that says it ends during their tenure?

Use the budget process and the resultant monthly financial statement as best you can to nudge your Board to make sensible decisions but don’t get too upset if they stick with their emotional response, rather than their objective judgement.