This is an excerpt from Health Fitness Management 2nd Edition by Mike Bates.
Learning to control the expenses of a facility should be the goal of every manager. To date, there is no comprehensive method for completely controlling the expenses of any business. However, there are industry standards and management procedures that provide a gauge for expense management. A financial profile comparing the most profitable commercial health and fitness centers with less successful operations indicates that the most successful clubs control expenses better than others. Twelve tools of expense management are listed in Checklist to Assist in Expense Management below.
Checklist to Assist in Expense Management: Twelve Tools
The following list will provide club operators with a checklist of items to carefully monitor as they look to more effectively manage their expenses.
1. Accounting controls and security
• Use purchase orders that include an estimated cost for the purchase and management approval.
• Control access to cash by limiting access and using a drop safe, three-part receipt forms, and control-sheet verifications.
• Provide physical facility security by using alarm systems, entry gates, and security cameras.
• Provide computer security by including password protection, limited access, and room security.
• Install management controls by preparing procedure manuals, providing a manager on duty at all times, and obtaining management’s approval on large purchases.
2. Value analysis
• Have a cost-benefit mentality. Weigh results versus costs; consider the return on investment and what the payback includes.
• Ask key questions: Why are we purchasing this? Is this the best value for the money? What did we purchase that we didn’t need?
• Review the method of funding, such as leasing versus buying and paying cash versus borrowing from the bank.
• Bid everything-signs, insurance, office supplies, garbage removal, carpeting, construction, and so on.
• Obtain at least three comparison bids.
• Buy in bulk.
• Do comparison shopping every 3 to 6 months for selected goods and services.
• Vendors expect negotiations.
• You can negotiate total price, payment terms, delivery date, service (e.g., guarantee, contract), guarantees, options or extra features, and training.
5. Doing it yourself
• Use internal resources.
• Use an in-house maintenance team for carpentry, basic heating and air conditioning, electrical and plumbing, carpet cleaning, and court floors.
• Consider communication needs-printing, photography, and desktop publishing (e.g., newsletters, in-house flyers, forms).
• Investigate using full-time employees for part-time work, and regularly analyze staff schedules.
• Shift from mass media advertising to other marketing vehicles.
• Eliminate unnecessary office supplies and unused services.
• Eliminate unnecessary cost centers.
7. Buying used
• Used items that you might purchase include restaurant equipment, computers, and maintenance equipment.
• Consider name brands, appraisals, and guarantees when purchasing used equipment.
• Locate used equipment by attending auctions and reading trade periodicals and local newspapers.
8. Contracting out
• Reasons for contracting services include lack of expertise, internal tasks that are unprofitable, and outside resources that could improve business performance.
• Examples of areas to contract out include restaurants, pro shops, lawn care, and heating and air-conditioning service.
• Advantages include predictable return, reclaimed use of staff, less risk, and greater knowledge of a particular service.
9. Trading or bartering
• Determine the value of the trade by comparing a full membership fee (initiation fees and dues) with the normal charge for the service.
• Examples of trades include photography, printing, supplies, advertising and promotion, and architectural and legal services.
• Use lower wattage lightbulbs.
• Use generic replacement parts.
• Use an accountant’s review statement instead of a full audit.
• Use smaller brand name labels versus big-name labels.
• Offer a free (limited) membership to charitable organizations requesting donations.
• Offer free fitness evaluations or an invitation to a club party.
• Avoid giving cash.
12. Using space more efficiently
• Convert cost centers into profit centers, contract out restaurants after internal failure of running them, or convert offices to a pro shop.
• Convert underused space to a usable (i.e., revenue-generating) function; for example, convert a lounge to a sales office or storage space to a massage room.