You have a pulse on your club’s health because you’re in the facility every day. You see the flow of members in and out of your club, and you interact with your staff by exchanging stories. And while these interactions do a great job of keeping you privy to the success of the club, nothing will provide you with concrete insights like your club’s finances.
Financial statements are essential, because they provide information about your club’s revenue, expenses, profitability, and debt. This ultimately grants you visibility into the performance of your programs, operations, staff, and more. Since your club begins and ends with your financial health, it’s worth evaluating.
Whether your club is just getting started or has been around for decades, this blog will help you develop financial best practices – yes, even for a global pandemic.
BUDGETS AND BOOKKEEPING
Your budget is a segmented list of all your club’s expenses, and it is crucial to keep track of every expense to ensure your facility remains open and operates efficiently. Once you’ve listed what it takes to run your club, your income target will have presented itself. And if you see that you have a deficit between your expenses and income, you can strategize to cut costs, bring in more money or seek funding.
The most common budget categories are:
- Rent or mortgage for your facility
- Utilities
- Insurance
- Phone and/or internet
- Employee or contractor compensation
- Equipment finance payments
- Bank charges or interest
- Office supplies
- Club management software
- Licenses or permit fees
- Recurring supplies, (ex: bathroom and cleaning supplies)
- Periodic equipment replacement and upgrades
Even with all of this information, though, you can’t rely on your club’s checking account to indicate your financial health. Truthfully, a checking account balance tells an incomplete story about how much profit a business has made or how much money is available. For a better picture of the financial health of your club, you need cash flow statements.
REPORTS AND PROJECTIONS
Are you looking at your cash flow – the money that goes in and out of your club? Across the board, financial experts say that not looking at cash flow is the most common way business owners get into trouble. Especially when you first open your club, money is slow to come in, but expenses are constant.
Understanding your cash flow situation at all times helps ensure you’ll be able to cover all your expenses. It will also help you set goals and make plans for the future.
When your club is doing well, cash flow management maximizes profitability. When times are hard, cash flow management is the key to keeping your business afloat.
HOW TO MANAGE CASH FLOW
Start the process of cash flow management by:
- Creating a statement of cash flow — a report of your actual cash inflows and outflows.
- Writing a statement of projected cash flows, or your best estimate of what you expect will come in and out each month.
- Checking your cash flow statement each month and make sure it’s in line with your projections.
If after creating those two reports and finding your cashflow statement out of line with projections, dive into the numbers and figure out what’s off. Make sure to start the process fresh each year with a new cash flow projection, and use it throughout the year to stay on track with your actual cash flow.
HOW TO PIVOT DURING THE PANDEMIC
Creating systems for your club’s financial health is a science, but learning how to adapt to market conditions that challenge your business’ success is an art. Nothing has done a better job of proving this to our seemingly recession-proof industry than the COVID-19 pandemic.
The only way you can be prepared to adapt to anything that life throws at you is by creating flexible systems, and in this case, flexible budget templates. Stone Creek Club and Spa President and General Manager Larry Conner did just that, and he spoke about it at this year’s IHRSA Innovation Summit during his talk, “Build Budgets for Every Scenario.”
PARTNER WITH A TEAM OF EXPERTS
Of course, the ultimate goal is to stick to your budget to be sure your business is profitable, which health club management software and member billing software can help you do. Beyond that, though, you need solid processes for managing member billing and missed payments, and for that, Club Automation’s full-service billing is the answer.
