There seems to be a blind spot in the industry when it comes to financial focus. While a great deal of a typical club board’s time and attention goes into dissecting income statements and budgets, I see very few boards that recognize the importance of the balance sheet and its critical role as an indicator of the club’s long-term financial health or harbinger of underlying problems.
The income statement is effective as a periodic report of progress or results, but it is important to remember that it reflects only small increments of time. The balance sheet, sometimes called the Statement of Financial Position in nonprofit accounting, shows the cumulative effect of all the club’s financial activity over the years. This document reports the club’s financial history up to the present point in time, so it is an excellent resource if you are looking for a comprehensive picture of the financial situation.
One balance sheet item, unrestricted net assets (UNA), is particularly revealing when plotted over time. UNA equates to net worth and like any business or individual, the club’s net worth is a measure you hope to see increasing over time. With assistance from your club’s controller, locate the UNA from audited financials going back at least 10 years. Plug the numbers into an Excel spreadsheet and chart the results to see if your club’s net worth is on the rise, stagnant or declining.
Boards that are serious about the long-term health of their club would benefit from directing more attention to the balance sheet and, in particular, the club’s net worth. To learn more about new research on net worth in private clubs, visit clubbenchmarking.com/club-net-worth.
Ray Cronin co-founded Club Benchmarking in 2009 with his business partner Russ Conde, and has presented the concept of strategic benchmarking and the “Financial Insight Model” to club boards and committees across the country. He is currently serving his third term as president of Thorny Lea Golf Club in Brockton, Mass. He can be reached at [email protected].