Even if golf budgets are finally bouncing back, an understanding of accounting basics will go a long way in getting the most out of an unforgiving financial plan. Mel Williams, CFO of West Coast Turf in Palm Desert, Calif., talks about why getting down to numbers can make a big difference.
What is the difference between accounting and bookkeeping?
Accounting is about monitoring the financial performance of your organization, whereas bookkeeping is more about keeping track of the transactions that occur. The accountant will often interpret the financial performance of your organization through the transactions (for example sales, costs) that are handled by someone who is involved with the bookkeeping aspects. They often work hand-in-hand and can be the same person in the organization depending on the size of the organization.
What are some key principles that golf course superintendents should be aware of?
1. Understanding financial statements. The three key financial statements are the income statement, the balance sheet and the cash flow statement, and although a superintendent does not need to understand each statement in-depth, it is useful to understand each at a high enough level to interpret the financial performance of his or her golf course. Many would argue the cash flow statement is the most important to understand, as it looks as the cash inflows and outflows of the organization over a given period of time.
2. Relevant costing. Costing is an important concept to understand as it helps dictate the appropriate level of costs within an organization and can factor into how items, green fees, lessons should be priced. It looks at the costs involved for example the organization's cost for a shirt, some amount to cover overhead (i.e. administrative costs) and a desired profit level.
3. Capital expenditure evaluation. Capital expenditures are necessary to understand, as these can often be “big-ticket items.” Examples are machinery, improvements to buildings, etc. These don’t show up in an income statement immediately, but are typically recorded as an asset and then depreciated over a given period of time. These obviously have an impact on your cash flow. An organization can appear profitable from an income statement perspective, but need to invest in assets that can impact a golf courses cash flow.
What should a superintendent be aware of for day to day operations?
From a day-to-day perspective, it is important to understand the seasonality of the golf course business, as there can be certain times in the year when cash flow from a golf course can be stressed due to limited inflows of cash.
One area where is important to have a good solid understanding is the fixed costs of the golf course. This could be a mix of labor, food, electricity, etc. that generally will be there if there is one foursome or 40 foursomes playing on a given day. This is particularly important during the offseason, as there needs to be enough cash to cover those cover those fixed costs during slower times.
How about long-term accounting?
When looking at the longer term, a golf course superintendent needs to understand how it will finance some of your bigger investments, for example course remodeling, investments in equipment, investments in clubhouse and how those will be paid for. It is important to understand if those will be financed through debt (i.e. loan) or in the case of a club, an assessment, or if a club can pay for these larger expenditures through its regular cash flows. Each of those have those own costs or challenges, which need to be determined.
What is the easiest and most efficient way to track expenses?
Fortunately, there are some useful programs like Quick Books or Great Plains, which are useful software packages which can help track expenses, but it will still require someone who is familiar and comfortable to read and understand the output.
