It is a bad sign when you can’t get a plumber to fix a toilet at your club unless you pay in cash. Mike Alpert, the president and CEO of The Claremont Club in Claremont, California, had this happen to him when he first took control of the club. And it wasn’t a hurdle he had been expecting, simply because he had never asked to see the cash flow report.
“It’s really the most important report you need to see and understand in running your business because it tells you how cash is coming in and how it’s going out,” he said. “[It tells you] the cash you have to pay your bills and turn on your lights and pay your staff. Where’s the money coming from and where’s it going? It’s important to know.”
In summary, the cash flow report lets one know what money is coming in, what money is going out and what money you have to pay bills with. But, if you simply glance at your cash flow report without taking into consideration what it’s saying, it is just another piece of paper. Alpert explained how the cash flow report led him to implement checks and balances.
“You have to have good accounting policies and procedures. You have to have a good check writing and purchase order system. You have to have double checks on it,” he said. “So the first thing I did when I came to Claremont was create those daily reports. I wanted to see what was coming in daily, what was going out daily. Managers could not just order things. We put into place a purchase-order procedure. I made it a requirement that no one could sign a check by themselves. We required two signatures on checks. As the president and CEO, I can’t write a check for 50 cents with just my name on it.”
By tightening up his receivables and policies, putting into practice basic accounting and cash principles, and holding members accountable for paying their dues, Alpert brought Claremont back from the brink. “Today, for the last eight years, we haven’t had a penny of aged payables,” said Alpert. “We turn over our payables in 21 days. We turn over our receivables in 29 days. So that means our members are paying us within 30 days, which is great. And it means we’re paying our vendors and the people we owe money to in three weeks, which is pretty unheard of and especially through the five year recession.”
Your club’s cash flow report can tell you a lot as it did Alpert, or in his case, what it didn’t tell him. But in the end, Alpert made sure to note action must come based off of what the report is saying. “I think those are things you want to look at,” he said. “You want to be as lean as you can be. You don’t want a lot of debt. And you want to make sure you’re getting paid in a timely fashion from your members and that you’re paying your vendors timely so that you get great service when you need it.”
By Heather Hartmann
