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Our Crazy World

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From John Dickson’s desk

In the last two years we’ve had COVID, an acute labour shortage, a war in Ukraine creating global power issues and rapidly increasing cost of goods and services (lettuces at $10 and a glut of bananas).  House prices skyrocketed and there is no rental accommodation available.   China is still shutting down due to COVID which is increasing supply pressures.  We lost the second round of the State of Origin, Southern Queensland is having the coldest temperatures in its history, and if that wasn’t enough… the reserve bank increased interest rates last week by 50 points as expected, with a clear indication of more rises to come.

Still with me? Great! Let’s talk about Clubland.  

I’ve been travelling around the industry over the last three months and asking managers, committees, and boards what strategies they have in place to deal with these ongoing issues.  The significant ones like shortage of labour, increase costs, reduced disposable income (gaming impact) through inflation, all of which are going to be with us for the next 12 months maybe more; and to be honest, I’m surprised to find that few clubs seemed to have grabbed the bull by the horns, even though we have had plenty of notice that these issues were coming our way.

The harsh reality is, we simply cannot continue to do business today as we did two years ago.  Staff availabilities aren’t going to increase, but their expected remuneration and working conditions will continue to do so. Supplies will only get worse, and inflation will rise for at least the next six months if not longer.  We know that we are an industry that survives on disposable income and it is the disposable income spending that the reserve bank wants to slow down dramatically.  It would be naïve to suggest that a reduction in disposable income will not impact on our business let alone cost and supply issues.

Whilst the loss of profit in your Club will not impact on the share market, it will impact on our social contract to operate a Club largely free of tax and operate EGM’s at significantly reduced tax levels in exchange for a social contract to provide services to members, sporting organisations, and charities.  So, in spite of our crazy world, Club management will still need to produce an EBITDARD in the range of 20+ percent in order to deliver their social contract.

This will not be possible in this crazy world without scrutinising the way we do business to minimise costs and maximise revenues.  In order to achieve this, Club Committees and Boards should be forming a Finance Sub-Committee (if they don’t already have one).  This should include the Club’s Chairman, Secretary, Treasurer, the General Manager and the Club’s Financial Controller.  This Sub-Committee should meet regularly in between Board meetings and analysing a range of financial information probably much more in depth and with more insight into the future then they have done in the past. The objectives of this Sub-Committee should be to make recommendations to the Club Committee/Board to ensure that they constantly retain an EBITARD of no less than 20%.  The Finance Sub-Committee agenda should include at least the following:

  1. Review projected cash flow budget for the next 12 months
  2. Analyse budget variance report
  3. Report on the EBITDARD and analyse issues if below 20%
  4. Review departmental cost of goods and labour against the Club budget
  5. Review all of the Club’s costs against the industry benchmark the industry benchmark report
  6. Charge Club Management with recommendations to ensure maintenance against budget EBITARD and industry benchmarks
  7. Finance Sub-Committee should provide a written report for the next Committee/Board meeting with Sub-Committee’s and Management recommendations
  8. If the Finance Sub-Committee needs additional knowledge to at least meet these agenda items then they should seek advice from Clubs Queensland, their auditor or external consultants – ignorance is not an excuse

Maintaining viability in our crazy world is the absolute responsibility of the Club’s Committee/Board.  To do otherwise would be a significant breach of corporate governance and a failure of their fiduciary obligation to their members and their community.

Further reference can be found in the Institute of Company Directors recent email newsletter article titledThe 2022 cost crunch how boards can adopt to rising inflation

P.S. For further information and explanation of EBITDARD and industry benchmarks, visit the DWS website – https://dws.net.au/members-dashboard/industry-benchmark-reports/

Related article:  The Genie Is Out Of The Bottle

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