Financial Operations and Financial Reporting
One of the most complete examples of best practices for financial management is available online from the Australian Sports Commission 2000 and is referred to as Club/Association Management Program – Financial Management.
For another comprehensive guide see: Financial Management for Nonprofit Organizations: Policies and Practices by John Zeitlow, Jo Ann Hankin and Alan G. Seidner.
The basic principles of ski and snowboard club financial and accounting practices are summarized below.
Financial Oversight - Checks and Balances and Transparency
The individual who takes on the position of club treasurer will need to know what they are required to do and how their performance will be evaluated. Aside from keeping track of the details of all financial transactions the treasurer also provides advice to the executive committee, including the executive director, about major financial decisions such as investing or borrowing funds, or the financial implications of strategic decisions. The treasurer’s role alternates between reporting what has happened to a club’s funds (accounting or financial operations) in such a way that all can understand (leadership, membership, constituents), and looking for the most effective ways to use available funds (financial planning and management). Both financial accounting/operations and financial planning/management should be transparent to the club community as a whole, as this can often be the most black and white statement of organizational priorities, health and sustainability.
Most ski and snowboard clubs will dedicate a staff person (club administrator) to work hand in hand with the treasurer to manage the routine accounting tasks necessary to keep a club financially viable and in compliance with state and federal law. A majority of the tasks involve the day-to-day management of the club’s financial resources. In this role, the treasurer, with support of the club administrator, puts into place the procedures necessary to collect and record details of all financial transactions affecting the financial position and performance of a ski or snowboard club. The outputs of these procedures are regular financial reports that are presented at the executive committee or board meetings.
Smaller and medium-sized clubs may also find it beneficial and economical to hire a local accounting firm to run their books rather than having this on the shoulders of a executive director/head coach that is already spread thin and may not have significant financial expertise. In this case it is still imperative that the staff leadership and treasurer have good oversight, checks and balances in place.
Operating and Capital Budgets
Usually it is the treasurer’s responsibility to coordinate the budgeting process in consultation with the executive director and board president/executive committee. Budgeting is a key role in financial planning and management for ski and snowboard clubs. It follows on from a review of the club’s development or strategic plan and may well lead to a review of the club’s future plans. There is usually a separation between operating and capital budgets. Operating budgets are usually projected for one year at a time.
Capital budgets involve less frequent but mostly substantial items and might be projected over a five-year period and subject to annual review. The budget is a statement of the likely sources of income and anticipated expenses for operations and capital development.
Though not elaborated on in this section, in larger clubs operating budgets may be further subdivided into a number of cost-center budgets such as for marketing, administration, programs, facility operations, training and development, merchandising and so on.
Cash Flow Budgeting
If a ski and snowboard club is to continue to operate, it must have enough cash to pay its bills when they become due. Many sport and recreation clubs are vulnerable to cash flow problems because they operate on small cash reserves and fail to see the implications of cash flow problems until it’s too late. The timing and size of cash receipts and payments are the two most important factors in cash flow budgeting. After projecting annual operating and capital budgets, the treasurer and the executive committee should try to project on a month-to-month basis its cash position to plan for months where the organization is likely to have a shortage or a surplus of cash on hand.
Perceptive treasurers are able to anticipate the months in which cash flow problems are likely to occur and plan accordingly. Bringing forward income and putting back large items of expenditure (capital projects) are the two most widely used strategies for dealing with cash flow problems. Borrowing money is another strategy that is often used to overcome cash flow problems. However, the risks and costs associated with borrowing funds and finding access to such funds makes it a less appealing strategy for most nonprofit clubs. In months where a cash surplus is expected to occur, the treasurer can suggest strategies for investing the surplus funds for short periods of time to generate additional income for the club.
As well as managing the day-to-day financial operations and coordinating the budget process, the treasurer is responsible for financial reporting and management. The role is to regularly report the financial situation of the club (actual performance) to the executive committee, as well as comparing actual performance with budgeted performance. Where actual performance varies unexpectedly from budgeted performance the treasurer might be called on to advise the executive director and executive committee about managing unexpected financial results.
End of year financial reports
Most clubs publish a statement of income and expenditure and balance sheet as the principal financial reports for presentation to and adoption by its members at the annual general meeting. These statements summarize and report the financial performance (statement of income and expenditure) and financial position or net worth (balance sheet) of the club. Unlike budgets, which are estimates, or projections where the figures are rounded, financial reports account for every dollar. The most important financial reports that should be reviewed regularly (monthly or quarterly) by all club leadership and annually by other constituents are:
· Annual Budget (operating – not necessarily capital)
· Profit and Loss Report (Year-to-Date and YTD Budget-to-Actual)
· Balance Sheet
Financial Management Summary
The application of financial resources has a significant bearing on the success of ski and snowboard clubs. Clubs need to be able to account for their financial resources, but also need to look at ways to effectively use their financial resources. The treasurer, in consultation with the executive director, has a key role to play in the effective management of financial resources, but it is the executive committee or board that has ultimate accountability for how funds are used by clubs and how this is reported to constituents.