Monthly Manager Moments

Monthly Manager Moments - Article #27 

Fifth in the Series on Leadership and Management

Management Nuts and Bolts – Budgeting

Introduction – One thing is certain: every program has to operate on a budget.  You might be in complete control of it, or have very little say in what your budget is.  Here, I’m assuming that you have some degree of control, or at least input that is seriously considered.  What nearly all of us have control of is how much we spend on staffing our programs.  We are the ones who schedule the staff, and that translates into the money expended.  So, even though we may have the total handed to us at the beginning of the fiscal year, it’s our responsibility to manage that total and stay within it.  Here are some of the budgeting nuts and bolts that I’ve learned over the years.  These principles should keep you out of trouble with your boss, and actually make him/her smile at year end!

Basic principles of budgeting – Look carefully at the last couple of years’ actual expenses and revenues.  Virtually no budget will be exactly as you planned it, because things happen that you cannot control – stuff breaks, people come and go at different pay-rates, severe weather events or catastrophic incidents may close your pool unexpectedly.  Still here’s a list of good advice from the old timer –

• Revenues are first, not after expenses. Before doing any “wish listing” establish your achievable revenue projection, based on the last two years of actual revenues. Revenue projections cannot be based on hope, or whatever it takes to balance expenses. That’s a recipe for the dog house with the boss! Instead look at what’s been done and what can realistically be done next year. Expenses need to match this, not the other way around.
• Look at your repair and replacement plan next – what major items must be purchased the next fiscal year to prevent the catastrophic equipment failure that you should have foreseen? Make sure that these items are included in your expense side, with accurate prices quoted from trusted vendors. Include ONLY items that must be purchased this year.
• Now lay out your pool schedule for all four seasons. List how many hours and how much the expected average hourly wage will be for the next fiscal year. Do NOT exaggerate. This will only result in distrust by your boss and more work by you to explain the numbers.
• Think about the peripheral activities that can add up to thousands of dollars – In-service training, new hire training, cashiering, water aerobics instructors, guards during rentals, swimming lessons instructors and guards during lessons, marketing/public relations time, maintenance, and cleaning. All of these things are needed, and cost money.  Following your pool schedule will help. You have times scheduled for cleaning, maintenance, In-service, new hire training, etc. By transposing that schedule to your spreadsheet, you should minimize oversights.
• Check your work!! Have another manager go over your spreadsheet with a fine-toothed comb. Simple typos can cost thousands of dollars, when a spreadsheet is set up to auto-calculate!

Revenue specifics – As mentioned above, do this section first.  Start by referring to last year’s projection and actual revenue received.   Print out your entire fiscal year’s pool schedule, with every program listed.  Use this as a reference to build your revenue spreadsheet.  The schedule is to make sure that your projection for revenue is actually what you’re doing next year.  When prices are being raised, it’s often prudent to anticipate a nearly zero increase in revenue as a result, unless your demand is so intense that the prices have no effect on attendance; but they often do – so don’t project based on hope.  The more specificity you use, the better; especially to your boss.  For example if your income for 10-visit passes was $22,375 last year and $21,800 the year before, I’d list that line item at $22,000 for the next year.  That is a safe number, but not a “pad.”  Projecting far less than you know you’ll make is really kind of pointless.  I’ve seen managers use this as a ploy for making themselves look good by being way over projection.  It’s really just inaccurate at best and dishonest at worst.  Plus, it doesn’t take a rocket scientist to see that you’re purposefully projecting too low…

Expense specifics – Just like excessively low revenue projections, never pad your expenses.  It’s just lame budgeting and your boss will have reason to doubt your honesty.  If you don’t have to have the money, don’t ask for it.

Some expenses are fixed and cannot be avoided. Those are pretty easy to get approved, because your boss knows that they must be incurred.  Pool chemicals, for example, are a cost that must be absorbed in order to be open.  Our job is to try to get the best price we can, and not waste any chemicals by doing stupid things as the operator!  Here, paying attention to price increases is important, because pool chemicals are always into the thousands of dollars, and may exceed $50K in larger pools.  For example, last year here at EWU I used an average of 375 pounds of CO₂ per week.   I had negotiated a price of $.35/pound two years ago for the next year.  As soon as that period ended, the price went to $.48/pound; a difference of $.13/pound.  Not significant, right?  Wrong.  That adds up ($2535 more over the year).  I also get charged for tank rental of $75/month (another $900 per year).  Moral of this story – that’s $3435 in expenses that would have bit me if not watching the details.  This price increase was changed without notice and implemented in January; which is mid-year for our fiscal year. Thus, it missed the budget cycle.  My chemicals account went into the negative to cover the increase in carbon dioxide.  However, due to savings in other expenses that I could get by without, my expense budget was still under projection at year end.

Again, look carefully at the usage for the last two years and project next year’s usage based on what happened the last two years. Don’t forget to adjust for any changes in your schedule/program.  Another example:  what if you’re switching from gas chlorine to cal-hypo?  Find out how many pounds of gas you used last year and multiply that by 1.5 to get how many pounds of cal-hypo you expect to use.  Then multiply that by the price per pound.  That formula should get you into the ballpark.  Here, we use about 900 pounds of gas each year.  Gas costs about $1.35/pound or $1215.  Cal-hypo tablets cost about $3/pound.  900 X 1.5 = 1350 lbs. X $3/pound = $4050.  If you weren’t careful, a $2825 increase would be a bit of sticker shock!

“Plan ahead, panic is expensive” – a familiar phrase that is all too true when budgeting expenses.

Summary – Honest, accurate, transparent.  That’s what I recommend.  Let your staff know what your budget is, and what you can afford to do for them.  One last thing about budgeting the staff – if you have extensive lesson programs, supervisors, specialists, etc. that are paid at higher rates than the guards, you MUST list them separately on your spreadsheet detailing how many hours are paid at the higher rates.  Again, honest, accurate and transparent.  Easy to defend, because it’s the truth!

Greg Schmidt,

EWU Aquatic Center Manager

Got a question or comment? email me - leos@ewu.edu.