ACC Program Area: Management & Finance - Program

Program

Management and finances is not only a huge area for a collecting club; it may be the most important area. Although management and finances are entirely different from one another, they are intricately entwined in the club's operations and are therefore being dealt with together.

Overall decision-making for both management decisions and financial decisions is basically a part of the leadership model which is dealt with in another ACC program area in this section. However the many specific decisions the club leadership must address in daily operations are covered here. There are many--some common to most club situations--others perhaps unique to a single club. We will address these, adding to them on a regular basis as clubs' needs come to our attention.

Club Dues versus Member Services

One of the most important management/financial tasks of club leadership is the continual monitoring of club dues in relation to what services are being provided to the members. In other words, are members getting their monies' worth? Are they getting too much for their money?

This can be one of the functions of an annual club audit. The audit team should do more than simply `check the books' to determine if the figures are correct or not. They should, in their report to the club leadership, make recommendations on whether or not a dues increase should be considered, and answer the question, "Are membership dues in sync with member services?"

Obviously, like everything else, the costs of doing business continue to rise. They seldom come down. Printing, postage, office supplies, telephone service, all kinds of costs a club routinely has, must be carefully monitored. This escalation by itself, does not however automatically dictate a dues increase. Is dues revenue constant, i.e. is membership increasing, decreasing or on a level plateau? Due to management decisions, are some expenses going down? For example, have printing and postage costs actually decreased because the newsletter or a membership roster has been placed in a `members only' section on the club website?

If a club finds itself in a financial problem due to general operations, a dues increase sounds like an obvious `quick fix' solution. But is it? First, what will the attrition rate be? Some members will not re-new because of the increase--result, less dues revenue. Have you built a case with the membership for justification for an increase? If no new member services have been added, and the justification is simply on increase in operating expenses, it might be a hard sell. Have you analyzed options for doing things differently? For example, is the annual revenue process and the officer election process computerized, thus saving postage and paper? Even if only a portion of the membership can be reached via e-mail (and we're finding in most clubs this "portion" is now over 50%) it can be a significant savings. Perhaps reducing your publication by one issue a year (if you currently issue four or more annually) would be enough to offset a dues increase. On the other hand, if member services have increased, and you have left the dues structure unchanged, this may be short-sighted in looking at the future because you are providing too much for too little. Seize the opportunity to build up some equity!

Another option some clubs are offering is to simply base dues on an optional approach to services provided. For example, if members choose to receive their newsletter or club publication by first class mail, their dues is higher than if it is sent out via bulk mail rate. If they do not have Internet access for the member directory which is in a `members only' section on the club website, and they must have a printed version (or even if they do have Internet access and still want a printed version) their dues cost is reflected accordingly. These types of `cafeteria' options make the secretary/treasurer's job more complicated, but may still be a viable option or consideration for your club.

So, how do you know if your club's membership dues is in sync with member services? Other than the audit suggestion mentioned earlier, probably the best gauge is if dues is the primary revenue source for the club, and problems with club financing are a central part of the agenda at every board meeting, you have a problem.

Another thought. Some clubs deliberately offer more member services than their dues structure would normally permit. This keeps members happy...and, renewing remains high and recruiting new members becomes easier. How do they do this? Their dues revenue is not the backbone of their budget revenue sources. They have a diversified income base consisting of advertising revenue in their publication, benefit auctions, convention income, sale of price guides and a member supply service, to name a few.

Year-End Audits

It is amazing the number of collecting clubs, even some larger clubs, which do not routinely conduct a year-end audit--at least a formal one. Audits are important and should not be overlooked. If your club has income revenue you should also have an annual audit. For those clubs leaders who feel it is demeaning to the secretary and treasurer to have an audit, put simply, they need to get over it! Audits do not have to be expensive. They certainly do not have to be conducted by an `outside' auditing firm.

Use an independent auditing committee made up from the membership. Our preference is three members, on a rotational basis, one being a "hold over" from the previous year's audit committee. This person would serve as chair. Audit committee members should have an interest in this area, and some business or financial experience is preferable. The club president should lay out the expectations for the committee and give them a deadline for submitting their report. (This may already be covered in a club's bylaws.) Although it is preferable for the audit committee to meet in person, the committee can do its job without physically meeting, particularly if all three have e-mail or fax capabilities. It is expected that the audit committee chair be given complete financial records, along with any written explanations that seem either necessary or appropriate.

Our recommendations for the "charge" given to the audit committee are perhaps somewhat unorthodox compared to a regular business audit. Granted, the committee has a base responsibility for reviewing the financial records and confirming their accuracy, questioning any perceived problem areas, and making suggestions for changes in financial recording/documentation. In addition, we like to see audit committees make recommendations to the club leadership on any other areas they perhaps see as impending `red flags' i.e. the possible need for a dues increase, dues structure vs. member services, other suggested sources for revenue or how to cut down expenses, and the committee's general opinions on the club finances. Remember, this portion of the audit committee's report is simply their observations and recommendations. But they do provide an important perspective for the president and/or the board to consider in making future club plans.

Plan of Work and Budget

Every collecting club should have an annual plan of work compiled by the club officers, and if there is a board, submitted and approved by the board. The plan of work should be tied to the club's annual budget.

How extensive the plan of work is remains totally optional. Many portions of the plan are ongoing and more or less routine, so after a club has completed their first plan of work, future annual plans should be much easier.

For smaller clubs, normally the president can do the plan of work for the club. If there are segments of club operations which utilize a portion of the budget, these persons should be required to submit their portion of the plan of work along with budget requests to the president. This may include the secretary, the membership chairman, treasurer, convention chairman, editor of the club publication, club webmaster and perhaps others.

Note: While the secretary does the plan of work for some clubs, our preference is that this responsibility should rest with the president. The exception to this is for larger clubs which have an executive director responsible for operations. This person may be assigned the plan of work responsibilities.

Offering Life-Time Memberships

Some collecting clubs offer their members the opportunity to purchase life-time memberships, an idea taken from the pages of university alumni associations, fraternities and sororities. For clubs, normally there is not a large number of members who decide to go this route, but even with relatively small numbers, a club has to be very careful. You have to calculate the potential cost of dues increases and the average number of years, i.e. life-expectancy, of the members signing up.

Two major points here. First, make sure through your calculations that you are financially covered. For example, if you figure a 40-year-old member can very likely live another 30 years and your current member dues are $25.00, this multiplies out at $750.00. However, let's say in 30 years the annual dues has escalated to $75.00 to cover operating costs. Obviously $750.00 isn't enough; $1,250.00 may not be enough. Yet, a member looking at an annual dues currently at $25.00 is going to thing that even $750.00 is pretty steep. Hence, the lack of strong participation.

The second point--money from life-time memberships should be placed in escrow accounts, portioned out on an annual formula basis. If not, on down the road the club will be in financial trouble.

This may well be the worst case scenario. Obviously, some life-members may die prematurely, or tire of the hobby and simply forego member services. Also, the money in escrow, if invested properly, will potentially bring in very good dividends.

We will be adding to this area as we get more information and advise on life-time memberships.

Gifts and Endowments

It is great when a club hears that a loyal member of the club is providing a gift to the club. If this is a financial gift, made through an endowment, trust or will, no matter if the club works with the benefactor establishing the gift or gives the gift to the club without ever checking with the club leadership, it is wise for the club to seek legal advise to review the papers.

Exactly what is being given? How much is it worth? Are there any `strings' attached? What are the expectations of the club? Read the fine print! We have heard of cases where a club has turned down financial gifts based on the advise of their legal representative. This is particularly true if the money is restricted for use in a certain way that may not be a high priority for the club, or may be very high maintenance. Check the reporting requirements, if there any. And, whether or not the donor or if deceased, the donor's spouse or descendants, retain any "approval" procedures or authority over the operations, expenditures or other decision-making procedures involving the gift.

By working with the benefactor from the beginning, a club can usually avoid or side-step any potential problems. This will usually result in a very worthwhile experience for both the club and its membership, as well as for the donor and his or her heirs.

A different kind of gift could bring on an entirely different situation--that of a person giving the club his or her collection, or perhaps their entire estate! In most cases this means a major liquidation process for the club. Does the club get the proceeds? ...does a portion revert back to the family or the heirs? Are the proceeds designated for certain specific uses? Be careful of this type of situation. Or, worse yet, if a club member leaves a club his or her collection with instructions it is not to be sold, but retained intact as a museum! Sometimes its better to politely say "no, thank you."

More later here, as well.

Going After Grants

Few clubs venture into the grants arena. Undoubtedly there is grant money available to clubs for worthwhile projects. But, there is a need for some serious expertise to consider applying for a grant.

Very small grants may be relatively easy. Larger grants carry some heavy expectations, but for good reason. The party making the grant wants to know if the club can "deliver" on what they say they can.

The purpose for the grant must be clearly documented. Usually there must be anticipated results documented in terms which are reasonable. How the project will be conducted, what the grant funds will be used for, the qualifications of those responsible for the grant project, the step-by-step time frame and reporting procedures for both project results and for expenditures must all be clearly articulated in the proposal.

If the club is incorporated and/or a non-profit 501(c)3 organization, this will make a difference. The potential donor will want to see the clubs bylaws and any other documents, and probably an annual report and the auditor's report. They will want a listing of all officers and board and will carefully scrutinize the decision-making process of the club.

Proposals for grants usually must follow a very strict, rigid format, but the foundation, government agency or other potential grantor will have a proposal guideline to assist with preparation and may also assign a staff person to give guidance.

ACC would like to see more clubs consider grants, particularly for special projects, and will be seeking out additional assistance in this area.

How to be More Financially Creative

Many collecting clubs are steeped in tradition. This can be both good and bad. There is a certain comfort level with tradition. But a club which remains `the same' for year after year, normally doesn't indicate great growth potential. We realize that getting bigger doesn't always mean better (We even know of clubs with an informal quota system -- "We can't handle any more members than we are currently serving."). However, if a club does want to grow, to better serve their membership and recruit new collectors, they not only need to continually update their program offerings, but they should also become more financially creative.

What does this mean? In simple terms, three things. First, utilize your current financial base more effectively. Second, analyze your current financial base to determine how it might be expanded. And, third, explore new financial resources to add to your existing sources of revenue.

Analyzing your current finances for more effective use should be an ongoing procedure (At the very least, make sure your revenue is maintained in a savings account, short term CD, money market or whatever.).

Analyze your current financial base. For an example, let's say your financial base is primarily dues. Is your dues structure appropriate for what you are offering the membership? Are you offering spouse or partner dues? ...family dues? youth or student memberships? ...library or museum memberships? multi-year dues payments? ...lifetime memberships? If you are offering any of these options, how well do you know whether or not they're working? Are they increasing membership? Are they paying their way?

Does your club publication and website accept advertising? If so, are the rates realistic? Do you offer member rates? Is anyone aggressively seeking advertising...or is it just `there' if someone asks? Is advertising sales the responsibility of the editor or webmaster, or is someone with some advertising sales expertise responsible for securing advertisers? If you do not accept advertising, should you be considering it?

Bottom line, does your club annual convention make a profit? If it doesn't, this needs to be changed. If it does, is there an expectation for how much should be a realistic goal? (One model we like here is the host chapter and the national organization share the convention profit, the national's share going into a contingency reserve fund which would be used in case there was an unanticipated loss some year. In addition, the host chapter is provided a small loan up front one year before the convention for operating costs. This comes from the contingency fund with payback coming from the convention bottom line revenue.)

Explore new financial resources to add to your existing sources of revenue. We hope to be bringing you a number of suggestions in this area as we get the input from clubs. Some are listed here, but in the meantime, why not ask your own membership. You may be surprised at what they suggest.

Sources of Revenue for Clubs

Dues: Dues are the major source of income for a majority of collecting clubs.
Conventions & shows: Although not a sure money-maker, there is no reason that club-sponsored conventions and shows should not be revenue producers.
Limited edition collector items: Annual editions of a members' only limited edition item, offered to members as a sales item, is a revenue source more and more clubs are adopting.
Auctions: Club-sponsored auctions at annual conventions have traditionally been successful sources of funding. Some clubs are just beginning to explore a specialty auction segment on their club websites.
Advertising: Club publications and club websites are both potential vehicles for carrying advertising, however it needs strong commitment and sales expertise.
Appraisal services: Clubs should certainly qualify for being capable of generating the expertise for appraising from among the membership. Whether this potential can be appropriately `harnessed' to provide appraisals in the collecting area the club supports remains a question. If a club does not want to physically set up such a service through their website or in other ways, perhaps a safer route to go would be to offer the service to one of the internet appraisal services already existing.
Supply service: Selling items to members through a club-operated supply service--everything from past issues of the club publication to display cases--can be a good revenue source.
References: Club-sponsored resource books, references and price guides in the collecting area the club supports is an excellent revenue source for some clubs. Some clubs also offer educational programs on audiotapes, videotapes, CD's, computer discs and in other formats.
Book club: Similar to a club-operated supply service, a book club offers reference books and price guides, authored by authorities in the club's collecting field but not necessarily club sponsored. In this case, the club gets a small portion of the sales for selling the books.
Speakers bureau: If your club has members who like to speak to groups about collecting, and are good at it, a speakers bureau might be considered with the club sharing the fee or honorarium with the speaker. Note, the honorariums are usually not large and offering such an operation may be more trouble than it's worth. (We need to hear some success stories here!)
Repair service: For certain types of collectibles, a repair or restoration service might be explored as a club revenue source. Like the appraisal service, this area has not been fully studied as a viable financial resource for clubs.
Development fund: Offering members an option to contribute above and beyond their membership renewal dues fee, by giving to a separate fund for projects and educational needs, can assist a club greatly by not having to pay for these areas out of the general financial operating account.