Although accountants and CFOs throw terms like "capital expenditures" around with ease, most of the general public has little or no grasp of what that means or why it is important. Because at least a working knowledge of the concept is important to effectively run a golf course operation, SBI started off with sessions on number-crunching.
Simply put, capital expenditures are "Investments that benefit the organization over a significant period of time," says Erwin McKone, superintendent at Briar Ridge Country Club in Schererville, Ind. The most obvious type is equipment, but golf course infrastructure such as cart paths and bridges are also included, as are major improvement projects.
McKone feels he had a basic understanding of the concept, but SBI made him more aware of some of the nuts and bolts of what goes into budgeting for capital expenditures. "As a professional managing a facilities assets, it is important to be able to make sound recommendations to decision-makers regarding large investments," McKone says. "Having knowledge about evaluation techniques will allow a manager to consider different options and to make the best recommendation." These decisions can include whether to lease or buy equipment, for example.
Coming out of the SBI course, McKone felt more comfortable talking about capital expenditure principles like concepts of cost, operating costs and benefits, residual/salvage value, tax considerations, payback, discounted cash flow, time value of money and lease vs. purchasing. For turf professionals, they sound like concepts the course’s accountant should be worried about – but they can make a huge difference for superintendents who are strapped to find the cash for new equipment, for instance.
"I look at lease options very differently," he says. "On paper, one option maybe glaringly obvious, but the reality is that there may be a better option which needs to be evaluated." Since SBI, McKone notes that he looks at lease options with a new eye.
Although the terms may sound intimidating, McKone says that the instructors at SBI made them clear and understandable. "We did some worksheets that made it easier to understand," he says.
As a result, McKone says that he feels more competent when he is interacting with other managers on the golf course staff, especially the accountants. "It gave me a jumping-off point so I can speak intelligently with our accountants and finance committee and be able to contribute to those discussions," he says.
McKone was no stranger to capital expenditures and accounting concepts, but now he has a leading edge. "I definitely feel even more confident,” he says. “It gave me the added knowledge to be able to ask questions and freely discuss the financial aspects of the business without being intimidated by it.”
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