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Wan's Column - Managing Finance

Note: This case study was submitted as part of the OCM Advance Sports Management Course in 2009

Foreword

I have to add this piece as I am a little different from the rest of the class since I do not hold any current position in my club. Therefore, I am unable to effectively execute my thoughts or ideas in the club after the completion of the course. I am a past president of the club, just retired from full time employment, attending this course for personal satisfaction and self development. It was agreed with our course directors that I could use my own experience in managing the club from 1998 to 2005 for the case study and add on whatever observation I may have about the progress of the club after I left the Committee.

It is hope that this practical cum academic exercise would benefit the current Committee since I have been endorsed by the club to attend this course. I would also share excerpts (in bite size) from my papers over the 6 chapters in the club's magazine the Footloose and my own website, www.runnersmalaysia.com.my as a reference point for better club management. As a new retiree, this course has given me the pleasure and commitment towards self development and also meeting a number of new friends.

History of Club
In early 1984, Kris Lee Siu Heng, a sales executive with Nike and Alex Moh Chean Seng, a keen distance runner mooted the idea of forming a distance running club, while preparing for the inaugural Kuala Lumpur International Marathon. Their dream gained momentum when they roped in Raymond Teoh, then general manager of the company promoting Nike products, Marina Chin our national sprint queen, Dr. Ronnie Yeo, a medical doctor with the National Sports Council and Dato' Professor Khairuddin Yusof . They had their first meeting on 23 January 1984 at Raymond's office and decided on the name of the club "Pacesetters" from a word in a runner magazine. The logo was adopted from running legend, Frank Shorter's product logo with some variation. The constitution was based on one from the Lights Athletic Club.

Kris Lee then approached Datuk Shahrir Abdul, the then Minister of Federal Territory Kuala Lumpur to be patron. Datuk Shahrir suggested that the club add the words Athletic Club to the name so that it can be affiliated with the Federal Territory Amateur Athletic Association (FTAAA), hence the name Pacesetters Athletic Club. He also consented to be the patron of the club.

The club was unofficially launched during the Kuala Lumpur Marathon with about 10 runners wearing the club's vest sponsored by Raymond's company, Roberston, Wilson, Jamil (M) Sdn Bhd. Later the Pro-tem Committee decided to organize a charity run on the launch date to create an impact. Dr Ronnie came out with the concept paper and the date of the run was fixed on 20 May 1984. The run would start at Lake Garden and end at Petaling Jaya Hilton car-park. The run attracted about 500 runners and the club was born.


Vision Statement : We aspire to be the role model running club in the country.

I recall when I was first elected president in March 2000, the Star Reporter, Stuart Michael asked me what I want the club to be. I did not say we want to be the biggest club but instead as a role model club for others to follow. At that time the local running clubs were in a weak position, the few famous clubs like SWIFT, LIGHT and JETS had sort of closed down due to problems of their own. The national association, Malaysian Amateur Athletic Union (MAAU) was having problems of their own and the local athletic fraternity got into the news for all the wrong reasons. I wanted PACM to be a breath of fresh air in the athletic arena.

Mission Statement

1. We promote running as a sustainable recreational activity among the grass root, catering for individuals of all ages and capability
2. Act as an internal and external event organizer to support the above.

I was very clear in my mind that our club is not going to be an elitists' club, (unlike MR 25 in Singapore), it will cater for individuals of all ages and capability. It is a very inclusive club, so long you are keen run, you are welcomed. You can be as young as 4 years old or as old as 75, this is the club for you. In supporting our Vision Mission Statement, we will organize events for our members, families and the public who are interested to run. In this regards I always remember the 3 generation relay team formed up by our former treasurer, Chen Kok Siong during the Fathers' Day Breakfast Run when his father, his son and him formed the 3 generation relay team.


MR 25 is an exclusive club for elite runners in Singapore. To join as a member, each individual must be able to run the McRitchie Reservoir route within 25 minutes. (4.8km for ladies) www.mr25.org.sg

The objectives of the club as stated in the constitution drafted in 1984 and revised once before I took over also clearly state what we are to achieve.

Objectives

  1. to promote, develop and encourage the sport of running in the country
  2. to foster mutual goodwill, understanding and friendship between its members
  3. to promote and / or participate in sports and social activities related to running both locally and internationally
  4. to develop and promote running programs for the benefit of the community
  5. to develop and promote other form of outdoor sports activities amongst its members.

You can see that our objectives tie in nicely to our Vision Mission Statement. We also need to carry out a SWOT Analysis to determine what are the strength and weaknesses of the club in event management at a micro level and then also to examine the macro environment we are operating in and determine the opportunities / threats. Admittedly, this is something I did not do while I was the president and looking back now, it is an essential exercise that should be carried out each year by the Committee. This is my SWOT Analysis based on current financial management situation I can see from outside the Committee;


The SWOT Analysis on Finance Management

Strength

  1. Strong support by sponsors on club's activities
  2. Strong balance sheet with adequate cash resources due to prudent financial management
  3. Has a sizeable membership base of 1,800 with a steady membership fees income and a captive market
  4. Has developed alternative sources of income via sales of products / services to members and event management

Weakness

  1. Change in treasurer every two years as required by constitution
  2. Succession planning for treasurer in question

Opportunities

  1. Better awareness on the need to exercise to maintaining individuals' health; more potential members
  2. More new parks are built by the City Hall and Municipals; generate more runners
  3. More potential event owners coming to the club for help on run event management and/or as sponsors

Threats

  1. Higher cost of operation, both products and services due to inflation
  2. More competing events in the market place
  3. Economic crisis has adversely affect consumption behavior of runners and sponsors seeking value proposition

Good Financial Management

We believe; to build wealth, we have to earn, save and then invest. The club needs to be financially independent so that we can do what we set out to do for our members in a sustainable manner - we don't ask for handouts and we are proud of it. Financial mismanagement is usually a key reason for the demise of a club; examples are many. Given this belief, we place great emphasis to manage our finance strictly, starting with recruiting a reliable treasurer with good financial discipline.

The treasury function is significant in the organization chart as follows;

Existing Organisation Structure (2009)

The role of the treasurer is very distinct from the rest of the functions. In the early days when the constitution was first adopted, we have a rule that the treasurer position has to be changed every year. We later changed it to once 2 years. While the rationale of having a new treasurer every two years may be a good governance control, it too poses its own problem and it is difficult for find capable individuals with finance background willing to serve as honorary treasurer.

We have two positions in the treasury, one treasurer and one assistant treasurer. Their functions are as follows;

  • Keeping the cash books and draw up the income and expenditure accounts each month
  • Preparing the budget by October each year
  • Prepare event budget for specific event such as the Pacesetters 15km
  • Ensure all receipts are promptly banked in
  • Supervise income and expenditures, including acting as a signatory for all expenditures
  • Prepare event accounts within 2 months upon the completion of each event
  • Prepare annual financial statements, including the balance sheet, income and expenditure accounts and the receipts & payments accounts for the endorsement of the committee, the audit by the club's internal auditors before submission to members for approval at the club's Annual General Meeting.

Financial Planning
This is not a complex piece in the club as our main revenue is membership fees. Once we were able to increase our membership to 1,000, we have been comfortable with our level of income. Our main expenditure is printing and mailing costs, the club magazine takes up a large portion of the expenditure. The club has three categories of membership, ordinary members, youth and senior (introduced in 2009). In 2001, we have raised our membership to RM36 annum and it is comfortable based on 1,000 member base. We are conscious of the high attrition rate when members may not renew their membership upon expiry. We have two expiry dates for membership, June or December. One month before expiry, we send out notices to members notifying them of the renewal. Should a member does not renew his membership, the mailing of the newsletter will discontinue after 3 months. One final notice will be sent 5 months after expiry and if no renewal happens, the membership will be terminated based on the club's constitution (6 months upon expiry).

After 2000, we started developing our second and third source of income. The second source is retailing profit, profit from selling club merchandize such a T-shirts, Vests, bottle belts, energy bars and gel. We also generate some sundry income (via bulk discount) from the trips we organize to take part in events outside Kuala Lumpur even though the intention is that we do it as a service to our members. The third source that came in was from event management (chapter 6). It started in 2003 and has since been a steady source of income, growing from strength to strength.

The club also invested into some operating assets such as lap tops, A-Boards and a timing chips system to further enhance our event management capability.

The club also get some sponsorship in kinds; from rooms & F&B credit to malt drinks. These are usually used up in our events and we seldom cash them.

When we first developed our newsletter, Footloose and later our website, our intention was for communication with our members and the public. We are happy that now both our newsletter and website have generated steady advertisement income.


Budgeting
The club prepares two types of budget; the annual budget and the event budget. The annual budget focuses on the club's usual income and expenditure while the event budget is for specific event such as the Pacesetters 15km.

Annual Budget
In October each year, we draft our budget for the next calendar year, write to the sponsors on our next year's activities. Mostly sponsors can only confirm their sponsorship by December or January, their own calendar budgeting. Accounts are audited by February and the Annual General Meeting is usually set on the third Saturday of March each year with adequate notice given to the members. The budget prepared is provisional and the budget allocation (like how much we allocate to the racing team or the youth team) is approved by the new committee during the April meeting.

Event Budgeting
This budget is prepared before we embark on an event like the Pacesetters 15km. The budget gave us a basis to negotiate with the sponsors on the amount of sponsorship to seek with a view that we at least breakeven in each of our events. The budget is approved by the committee at least 6 months before the event.

We have been frugal with our expenditure and when we first started our internal track meet, we even recycled our bibs. The club keeps a small office within the office of an office bearer of the club at a nominal rental. Due to our prudential financial management and sponsorship over the few years, the club has accumulated adequate cash resources that we are prepared to use as working capital for our events pending written confirmation of sponsorship - a critical strength of the club; able to commit with service providers in advance to meet timeline. Some sponsors even pay us well after the event but we are able to honor all our commitments to our service providers as and when they fall due - in commercial terms, they call it working capital.


Accounting for Finance
Our main accounting revolves around the cash book, kept in an electronic spreadsheet. We handle a tremendous amount of receipts in cash and cheques, more than RM500,000 in 2008. It takes tremendous discipline to ensure all the receipts are accounted for, its completeness and banked in promptly. We use pre-numbered receipt books for general receipts for membership which the treasurer is the sole custodian. Another set of special receipts are used for event registration. The two treasurers need to be very diligent when dealing with individuals that hold receipt books (Group Leaders and certain members of the committee) At the end of each month, the treasurer has to ensure that all collections are accounted for by individuals receiving money. Each month copies of the cashbook is tabled at the monthly Committee meeting.

Our payment system is based on a simple open file system, whereby all the unpaid bills are filed into an arch level file and paid during the monthly Committee meeting via cheques; ie all committee members are fully aware of the cheque payments made each month. This practise promotes transparency at the highest level.

In December each year, we have to accrue for any unpaid expenses to enable the club to close the accounts the week after 31 December each year. This is one deadline we meet to allow the club to hold its Annual General Meeting by the third week of March each year. We understand very few clubs can hold their AGM at such an early date.

Evaluation & Reporting
Since we have the discipline of presenting monthly accounts, our year end accounts usually do not pose any surprises. The draft year end accounts are presented to the auditors for audit in January and by the February Committee meeting, the Committee is able to adopt / endorse the audited accounts before we circulate to the members for the AGM in March.

We like to stress here that such financial discipline is very key to the longevity of the club. We have seen the demise of several running clubs over the years, usually due to financial mismanagement. We need to have the same discipline in financial management as training for a marathon!

Proposed Action Plan

Policy / Objectives Strategic Measures Time Frame Implementer Expected Outcome
Institutionalize Event Sponsorship methodology Draft a policy guide on event sponsorship for club events, on franchises we have developed over the years. April 2010 President and individuals appointed by him
A formal policy guide to facilitate negotiation with potential sponsors
Develop advertising revenue as a sustainable source of income Review current advertising rates vis-à-vis competing rate in the market and propose revised rates Dec 2009 Vice President in charge of communication
A proposed revised rates for the approval our the Exco
Succession planning for Treasurer Mining the club database for members with financial discipline to join Exco Feb 2010 Treasurer A few names for the Exco to consider

Conclusion
The club has achieved it vision of being a financially independent running, able to fund it own events for the members and the public. Considering that the club merely charge RM36 membership fees per annum, it is a club that everyone wishing to run can afford to join. Lately, the club even introduce a senior membership for those above 60, paying just RM18 per annum. The low membership fees did not stop us from building up a strong coffer, what we term as our war chest. This sum of money will allow the club to operate effectively on projects / events prior to the final confirmation by sponsors.

The club has successfully developed additional sources of income such as event income, sale of merchandize and advertisement income through our website and newsletter. We have prudently invested into enhancing our event management capability with tools such as chip timing system.

The club's challenge forward is to be able to continue recruiting capable treasurer to manage our finance prudently, enforce those controls we have set up. As we are very much a people business, we have to strive to build our human resources pool in good financial management as well as other key positions, those with good leadership. This itself is a continuous challenge.


Wan Yew Leong
5 November 2009
wanyewleong@gmail.com

 
 

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