Most clubs understand the importance of having a budget in place. The budget is an essential tool for supporting business growth, improving profitability and gaining an edge year over year. However, successful budgeting extends beyond its creation. It is important to continually review the existing procedures to ensure that the budgeting needs of the club are still being met. Part of the budgeting process also includes proper forecasting, which can prove to be challenging, especially in times like these.
One of the latest webinars in the HFTP Archive Library was presented by club finance expert Geoffrey Benedict, partner at PKF O’Connor Davies with more than 21 years of public accounting experience. He is also the president of the HFTP Maryland Chapter. In this virtual education session, titled “Club Budgeting and FUN-damentals,” Benedict walked through the key areas of the budget and the critical factors to consider.
The full webinar is now available for you to watch in the HFTP Webinar Archive 2021 Library. You receive the added benefit of collecting valuable continuing education credits for the CHAE and CHTP designations when you watch the full recorded session. This blog post recaps some of the best practices that positively impact how your club approaches its operating budget. It is important to watch the full webinar for valuable takeaways on the capital budget, cash flow budget and forecasting.
The Value of Budgeting and Forecasting
- It allows management to monitor and project operations.
- It helps to ensure positive operating results.
- It provides a financial benchmark for department heads.
- It holds managers accountable.
- It aids in controlling expenses.
- It assists in planning cash flows.
The Standard Budgeting Process
- Map out the timing and assign responsibilities. This is important for organization and accountability.
- Prepare the budgets. This includes the operating budget, the capital budget and the cash flow budget.
- Make sure it is in line with the club’s mission. You need to make sure that you are providing the value that your members want.
- Apply and review the budget results. Determine if there are variances when comparing the budget to actual spending, what causes the variances, and adjusting what needs to be adjusted.
- Keep in mind that the budgetary process and format can vary by club. It should be customized to fit your needs.
The Operating Budget
This is where clubs spend most of their time, and many parties should be involved and providing input in the process – including the general manager, CFO, controller, department heads, and the budget/finance committee.
Where to Begin
To start: “I think a great source is HFTP,” Benedict said during his presentation. As the HFTP Maryland Chapter president, he has seen first-hand the benefit of members sharing knowledge and information during meetings. “I think the members that join us for the meetings take enough away to find out what’s happening with the other clubs. How are they dealing with certain issues? What are some of the challenges they have? And a lot of that information does build back into the budget. So, I think that’s a great start.”
Determine the Type of Budget: Zero-based versus Incremental
The zero-based budget really makes you take a step back and look at it from a completely fresh, clean slate. Basically, you start from zero and build those numbers. In comparison, there is the incremental-based budget, where you take the prior year budget, or prior year actual results, and you apply percentage or dollar increases to come up with the current year budget. Determine which budget you will use.
Fixed versus Variable
A fixed budget is not impacted by sales volume. It is defined as set expenditures for a fixed time period. It primarily applies to the capital budget. A variable budget is impacted by sales volume. It also has the ability to be revised.
Where to Go Next: Best Practices
- Department heads prepare their budget.
- The general manger preliminarily approves the budget.
- The controller compiles and reviews.
- The budget/finance committee reviews and approves.
- The board reviews and approves.
Additional Factors to Consider
- Make sure to put the budget together on the same basis as which the books are maintained, so that it is measurable. The Uniform System of Financial Reporting for Clubs (USFRC) is a great resource to make sure your budget is in line with industry standards. You want to make sure that there is comparability for the numbers.
- Look at the economic environment, which has been particularly key this year with occupancy limitations, social distancing requirements, and periodic economic shutdowns.
- Other items that have a direct impact to the budget and must be considered include dues increase, other departmental revenues, labor costs, cost of goods sold, repairs and maintenance, leases, insurance and utilities.
Final Thoughts
- Don’t guess the estimates, even in the absence of past experience. Taking the time to understand each line item and the potential implications for the particular department involved can go a long way in future planning.
- Revenue and expenses should have support and rationale.
- Continually review the budget for opportunities and cost savings. Be sure to go back over the budget consistently to see where to trim expenses and where there are new opportunities to generate revenue.
- Reviews should be made on a monthly and quarterly basis.
Don’t Miss: Capital Budget, Cash Flow Budget and Forecasting
In the full webinar recorded session, Benedict presents a sample operating budget and also covers the capital budget, the cash flow budget and forecasting. Don’t miss this informative class on budgeting for clubs – view the webinar today. If you want to collect continuing education credit for this webinar, you will need to self-report your credit through the Certification tracking sheet, available on the HFTP Webinars webpage.
Save the Date
Club professionals should also consider attending the HFTP Hangout taking place on Tuesday, February 9 at 2:00 p.m. CST. “The 2020 Election Results: What Do They Mean for You and Your Club?” will be presented by Brad Steele, J.D., founder of Private Club Consultants.
Now that the dust has settled from the 2020 U.S. elections, what does it all mean for growth and prosperity in the club industry? In this HFTP Hangout, we’ll discuss the Biden administration’s legislative and regulatory agenda to see how those priorities will impact clubs in the very near future. Additionally, we’ll delve into what Congress is likely to do regarding tax policy, labor and employment law, immigration policy and environmental issues over the next two years.
This virtual Zoom session is complimentary and open to all to attend. Register to attend today. Then, make sure to bring your questions to the session and get ready for a lively discussion.
