For many club and resort managers, “budget planning” often means scribbling down a projected-revenue figure—in a Board meeting or during a quick huddle with an owner—as a new fiscal period is about to begin. Then the managers write themselves a big reminder next to the number: DO NOT GO OVER.
And if this is how the operating budget is set at the top, imagine what happens as it trickles down the line to become the “process” for how department heads “plan” their operating expenditures for a new fiscal year, once the general manager decides how to carve up the starting number among the property’s various operating units.
Since many clubs and resorts are relatively small businesses—and those with non-profit status historically have been primarily concerned with just making sure they break even—those that take this approach rationalize that it’s actually more efficient than trying to precisely plan budgets that always end up getting blown to bits anyway. Minimizing the unproductive time that managers and department heads have to spend trying to pull numbers out of a hat, some suggest, pays off by freeing them up to continue to improve service and quality for members and guests.
Beyond Hope and Prayer
But in an era of major renovation projects at many properties—and major new assessments to pay for them—more organizations are recognizing that they owe it to their stakeholders, and themselves, to try to bring more precision to the budgeting process. In turn, this has led Boards and owners to encourage more managers and department heads to start the process from the bottom up, taking a closer look not only at how they can find new ways to cut costs or improve efficiencies, but also new opportunities to build revenue.
In this fashion, the drudgery of budgeting is being recast as “profit planning” and touted as a better way for club and resort operations to meet profit (or break-even) targets while avoiding costly surprises. Forced to both save and make every possible dollar to help pay for the improvements they need to make to stay competitive, these organizations are now recognizing the value of having every manager create plans that aren’t pulled out of thin air.
The road maps that result from these efforts, they find, can be very productive tools for doing a better job of setting, and controlling, the direction of a department or property.
With many fiscal years now ending, and a new budget dance beginning, at many club and resort properties, here are some tips—structured around witticisms that have been made about budgeting through the years—for getting the best possible handle on both the revenue and expenditure sides of your ledger:
• Budgeting is . . . “telling your money where to go, instead of wondering where it went.” Regardless of how tough you may think it might be to estimate your property’s or department’s future (especially if you’re in the middle of a big project or initiative that adds to the normal unpredictability), keep reminding yourself that you will get much closer to reality, and be much better able to control results, if you actively use a budget.
• Budgeting is . . . “a mathematical confirmation of your suspicions.” Any business or unit can be budgeted. But even as you try to bring more precision to the process, you don’t want to spend so much time on it that you neglect actual operations. The trick is to find the proper balance between the time needed to put numbers together, and ensuring that they’re accurate.
• Budgeting is . . . “a reflection of values, in the language of dollars and sense.” Remember that accurately predicting actual results is not the idea. Instead, your goal should be to use budgeting to give your organization or department a better sense of direction, so you can be on track to contribute to its short-term strategic objectives.
• Budgeting is . . . “a method of worrying before you spend, instead of afterwards.” Every organization or department has a set amount of available resources. And there is always going to be the need for mid-stream corrections. Whether you see it as budgeting or a “profit-planning” process, it’s not going to go exactly as planned-—so you need to build in contingencies and cushions that can help “finance” the unexpected expenses that are sure to arise, or put any windfalls to their best possible use. Without imbedding this kind of discipline into the process, you will almost always overspend or underinvest. And remember, while there are always good reasons to spend money, they don’t always produce equal returns (or in some cases, any at all).
• Budgeting is . . . “a system of going into debt systematically.” Budgets should be prepared with two types of targets in mind: profit targets and cash-flow targets. They’re vastly different, and require different levels of consideration to prevent unpleasant surprises.
• Good budgeting should . . . “produce a uniform distribution of dissatisfaction.” If some people in your department or operation are finding it hard to suppress smiles after an initial set of numbers has been worked out, while others look like they need an appendectomy, that’s probably a signal you need to get everyone back together to take another look at how you can more evenly parcel out the pain.
Once budgets have been set, it certainly doesn’t mean the numbers should be stuck in a drawer and forgotten until next year. It’s just as important, after your “profit plan” has been devised, to try to ensure that the actual figures come out as closely as possible to the plan.
Be it within a department or for the operation as a whole, these questions should be asked of team members on a regular basis:
• How are we doing compared to budget?
• What must we do to have a better result?
• What are we learning that will make the budgeting process better and even more precise the next time around?
When this kind of ongoing attention is lavished on the budgeting process, the results can be magical indeed.
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