A zero-based operating budget might be the key to successful fiscal planning.
Many of us became sports field managers because we prefer working outdoors to staring at a spreadsheet. Let’s face it; fiscal planning takes time and isn’t much fun. However, budgets become part of the job once we become managers. If we work in the private sector, writing a good budget is the first step towards profitability. If we work in the public side, such as government or in education, everything we do is an overhead expense. And, when the economy goes bad, overhead is a likely target.
In order to survive, we have to justify our existence. Grounds managers who know their costs and can communicate the consequences of budget cuts to the administration have an advantage. Let’s demystify the process so you can use your budget as a management tool.
An operating budget is nothing more than a reflection of your day-to-day management program expressed in financial terms. If you have to be involved with it or fund it, it needs to be in your plan and budget.
Many people create an incremental budget by taking last year’s numbers and increasing or decreasing it by a percentage or a dollar amount. The problem with this type of plan is that it is easy to overspend or underfund your means. There is no incentive to find more efficient ways of working your program. Lastly, it can promote waste, particularly in a spend it or lose it culture.
A zero-based budget means the budget starts at zero and the costs add up line item by line item. Using an inventory of all of the tasks and activities that you perform or fund (as part of your management program), you determine the unit costs for each, and then multiply the unit costs by the number of times each occurs. It is the same process a contractor would use when preparing an estimate for you. You end up with a well thought out, rational budget that is right sized and defendable. If it sounds like a lot of work, it is! But don’t worry, it only hurts the first time.
The advantage to you is that once you go through the process and record all of the data initially, then you will have created a template that you can reuse for years to come. It becomes a living document, more refined and easier to use each year. All you have to do is review and update your information annually. Here is the process in five steps:
1. Collect your data. First, gather all of the pertinent records. Current and past years’ ledgers, receipts, time sheets and growing records can provide you with valuable information, especially if it is well organized. It will help to find costs, detect trends and validate assumptions. Keep these handy, as they are essential for planning purposes.
2. Agree on the standards. Your mission is to provide a quality result that meets the owner’s expectations. Assume nothing. You and the owner will need a clear-cut vision that can be agreed upon and shared. Communicate tactfully, because your management plan and budget depend on it.
3. Develop your management program. For each area that you oversee, develop a program that will deliver the results. It is common to have different priority or service levels at a site. The action thresholds that you set become the parameters of your management program. It will include your cultural practices, your nutrient management plan, the conditions under which you treat for pests and how, or if, to renovate your playing fields at the end of a playing season. Be sure to document these different action thresholds; they become your specifications and policy. You will be able to quantify and measure the results. If your budget must be modified or reduced, you can credibly predict the anticipated consequences and your service adjustments to the owners.
4. Do a complete inventory of the tasks and assets necessary to get the job done and learn the costs. A comprehensive operations audit of all the tasks your department performs encompasses everything from the routine to the category known as “and other work as directed.”
When you list all of the tasks and expenses your department is responsible for, indicate the dates or periods when these activities will occur. I like to use last year’s calendar to jog my memory. For your convenience, make notes about these events, especially where special care or consideration must be taken. For example, is overtime required, or must special arrangements be made for rental equipment or additional supplies?
5. The other part is the site inventory. I like to break this down into three important areas: people, places and things. This information will help you find the costs of time and materials.
Do you know your people or labor costs? Individually your people may receive different pay rates. Depending upon your employer’s policies, you may or may not have access to your crew’s payroll information. For simplicity and for budgetary purposes, you will need to know what the average shop cost per man-hour is for your team. Man-hour costs include all productive and nonproductive labor normally associated with performing a task.
Labor cost is not just the salaries and wages that are paid to your people, but also includes the benefits and taxes that an employer pays on their payroll. Your CFO can probably supply you with the average man-hour cost for your department. Even if labor costs are not part of your budget, having the average shop cost per man-hour is good for comparison, especially if you ever consider outsourcing or contracting certain tasks.
Next, let’s consider your places. You will need measurements for all the areas you oversee. The costs of mowing, aeration and snow removal are often broken out by square footage. Mulched areas can be categorized by flower beds and tree rings. How many linear feet of field marking do you paint before a game? Take it further and examine everything that you manage. Soil testing will help you determine what kind and how much fertilizer to buy. And don’t forget to survey and inventory all of the plant material you care for. Every plant is subject to pest and environmental problems. This information will guide plant health care decisions and help you put a price tag next to it. For easy reference, be sure to keep all of these areas marked out on a map.
Finally, there are the things. Things include the equipment and products you use. How much does it cost to run that mower per hour? Equipment costs factor in acquisition, interest, tax, depreciation, insurance, repair and fuel costs over the useful life of the machine and can be broken out into a cost per hour (see example). You can then project how many hours you will use each piece weekly or monthly during the fiscal period. Your management program should specify how much of each commodity (such as fertilizers, seed, pesticides, sod, green goods and mulch) you project to use per given area.
By now you have all the information you need to put the budget together in a form that your CFO requires. Neatness and accuracy count. Is your budget clear, understandable, and do the numbers add up? Be sure to submit your information on time. My personal experience is that budgeting is not an exact science. The budget that you are creating is for a fiscal year that might be as much as 18 months out. If you have your program well planned and documented, it will be defendable, and it will be harder for someone to micromanage you.
Don Savard, CSFM, CGM, is grounds manager at Salesianum School in Wilmington, Del.