Does a zero-based approach fit the times?

Jim Nedrow has been budgeting for The Club at Indian Creek (Nebraska) for nearly 13 years. In over a decade, the director of agronomy has adopted a “zero-based budget” strategy for the 27-hole course.

“You know, when I first started out, I was not really understanding ‘How do you take this year’s or last year’s budget and build on it?’ and ‘How do you project what’s going to happen?’” Nedrow says. “I think getting into the zero-based budget has helped me kind of fine tune plans.”

The technical definition of this strategy is “a method of budgeting in which all expenses must be justified for each new period.”

So, rather than just turning in the same numbers from last year because you came in under or right on budget, you start from scratch and look at the numbers month by month. The process involves a lot of research and forecasting, but can ultimately save you from unnecessary spending and headaches.

“Budgeting every month, not just bulk numbers, really breaking it down, has allowed me to visualize each month of the year so we enter that that month with a plan,” Nedrow says.

Being proactive comes in handy when there are factors out of your control. The labor market, fuel and fertilizer costs, as well as the supply chain market are all things that could change frequently throughout the year.

“We forecast ahead, we do a lot of our purchasing early,” explains Nedrow, whose course hosts the Korn Ferry Tour’s Pinnacle Bank Championship. “We may do 80 percent of our chemical fertilizer and control product purchasing in October and then that makes budgeting easy because I know those costs. I know 80 percent of what we’re going to spend on those programs before I even submit my budget so that if fertilizer prices jump 15 to 30 percent in July, I don’t get hit by those ebbs and flows or price spikes in the middle of the year.”

There may be certain areas where money can be saved, but Nedrow refuses to cut corners on payroll and the quality of products used in the spray program.

“We want to find a number that is fair and appropriate and attracts the right type of people,” he says. “We want to be out ahead of it. We want to be the ones that set the market, not the ones that react to the market.”

Some of the ways Nedrow does that is by speaking with other industries that are actively recruiting like the restaurant and retail industry. “We’re basing our pay scales on that and obviously of what we expect here and what we demand from our staff, but then also what the market demands.”

There are other areas where costs can be saved, though. Attempting to invest in consistent repairs to prevent large repairs that can be costly and timely is one way. Also, recognizing when the miscellaneous costs are adding up can have long-term savings. Losing tools or making random trips to the hardware store are all still coming out of the budget, whether you planned for them or not.

“It’s like going to Starbucks a couple times a week and you don’t think about it, but all of a sudden you sit back and those little things add up to large amounts of money, so watching those little things is really important,” Nedrow says.

“Let’s spend a little bit more time and money on changing oil, greasing the equipment and making sure all changes are up to speed, tire pressures are managed well – all that stuff,” he adds. “Then, we won’t have major, major repairs because of lack of attention to the maintenance schedules.”

As Nedrow begins to formulate the 2023 budget, he focuses more on the process than the end number.

“You create and visualize your operation and your operating plan for the coming year,” he says. “It’s not just a number. It is a blueprint and a roadmap for how you’re going to get through the coming year.”

Cassidy Gladieux is a Kent State University senior and frequent Golf Course Industry contributor.