Event Management - Unit 5

TOPIC 5
EVENT
MANAGEMENT
FINANCIAL ADMINISTRATION
PREPARED BY:
NORHASIMAH BINTI HAMIM

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TOPIC 5: FINANCIAL ADMINISTRATION
LEARNING OUTCOMES
At the end of this topic, the students would be able to:
 Understand the concept of budgeting relevant in event management.
 Outline the calculation of profit, expenses and break-even point in event.
 Describe the cash flow movement and management in event.

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TOPIC OUTLINES
Introduction
5.1 Budgeting
5.1.1 Three (3) categories of budgeting
5.1.2 Factors of event budgeting
5.1.3 Elements of budgeting
5.2 Producing profit
5.2.1 Categories of expenses
5.2.2 Net profit vs. gross profit
5.2.3 Break-even point
5.3 Managing event cash flow
5.3.1 Definition of cash flow
5.3.2 Measures to ensure positive cash flow
Summary

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INTRODUCTION
BUDGET?
Budget is part of the
initial planning.
Includes projected
revenue and expenditure.
Plans from accurate
quotes from all suppliers.
Provides guidelines to
remain on track and
approving expenditures.

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5.1 Budgeting
CATEGORIES OF BUDGETING
Categories
of
Budgeting
Profit-oriented
Events
Break-even
Events
Loss Leaders or
Hosted Events
Revenue ˃ Expenses Revenue = Expenses Revenue ˂ Expenses

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5.1 Budgeting
Revenue exceeds expenses
The events that is produced by corporation for the purpose to generating more
sales.
Examples : Entrepreneurship events such as Matta Fair, Wedding Expo, Halfest.
PROFIT-ORIENTED EVENTS

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5.1 Budgeting
Revenue equal expense
In this case, event professionals should budget the event, keeping the break even
assumption in mind.
Admission fees should be calculated at the rate that will cover all expenses and
break even.
Examples:
Association Conference.
BREAK-EVEN EVENTS

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5.1 Budgeting
Revenue < Expenses
These events are designed from the very beginning to lose money.
These events are usually organized for the purpose of promoting a cause or agenda
and not designed to break even or generate a profit.
Examples:
University Graduation, and
govermental celebration.
LOSS LEADERS/HOSTED EVENTS

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5.1 Budgeting
FACTORS OF EVENT BUDGETING
The general history of previous
identical or similar events
The general economy and your
forecast for the future
The nett profit or excess
(return on investment)
Using the right type of financing
Marketing projection and estimates
FACTORSOFEVENTBUDGETING

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5.1 Budgeting
ELEMENTS OF BUDGETING
4.
Sustanable
Funding
5.
Typical
Income
Category
3.
Reasonable
Projected
Income 6.
Expenses 8.
Finding and
Supervising an
Accountant
ELEMENTS
OF
BUDGETING
1.
Financial
History
2.
General
Economy
7.
Structuring
Account
Codes
9.
Accounting
Software

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5.1 Budgeting
 The event planner must rely on estimates or on what is known at the time the
budget is prepared.
 The event planner will have to rely on events of similar size and scope to
develop the budget.
 Not only it is important to base your budget on history, it is equally important
that you develop controls to begin collecting financial data on the event
budget you are currently preparing.
FINANCIAL HISTORY1

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5.1 Budgeting
 Event planners must use general economics data to assist you with the
development of your budget.
 Indicators of strong economic health usually include low unemployment, a
steady rate of inflation, and healthy retail sales.
GENERAL ECONOMY2

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5.1 Budgeting
 Is a budget based on certain logical assumptions of projections of income is one
that is within reason.
 It is also for logically project revenue based on the resources available, you must
consider market research as well as a general knowledge of the economy.
 This making reasonable assumptions about projected revenue is one of the most
important decisions that you must handle as you begin the budgeting process.
 After gathering all the fact, seek objective opinions and counsel, and then
conservatively project the revenue you hope to achieve.
REASONABLE PROJECTED INCOME3

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5.1 Budgeting
 A mixture of income streams so that if one disappears, or is limited, it doesn’t
threaten your organization’s overall viability.
 Sustainable funding for your event should come from variety of streams
including the public purse, corporate sponsorship, earned income from
ticket sales, merchandise, food and beverage and other sources.
SUSTAINABLE FUNDING4

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5.1 Budgeting
TYPICAL INCOME CATEGORY5
Advertising Revenues Donations
Sponsorship Fees Registration Fees
Special Events Ticket
Sales

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5.1 Budgeting
 These expenses often come from comparing your event to others of similar size
and scope
 The actual amount budgeted for each expense line item is what you and your
advisor believe to be reasonable based on the information known at the time
the budget is prepared.
 The general expenses for most events are:
 Advertising
 Audiovisual equipment rental
 Décor
 Entertainment
 Lighting labor
EXPENSES6

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5.1 Budgeting
 Each income or expense item must have a corresponding account code.
 Account are those general budget categories where items of similar type and
impact on the overall budget are grouped together for more efficient analysis.
 Example; Administration -
 Decor
 Insurance
 Site telephone expenses
 Example; Staff/Volunteers -
 Staff accommodation
 Volunteer accommodation
 Volunteer appreciation activities and gifts
STRUCTURING ACCOUNT CODES7

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5.1 Budgeting
1. Seek the counsel of the accountant
After have prepared a draft budget. Seek the counsel of the accountant to review
your budget and help you with various line items and account codes.
2. Retain the accountant to handle specific operations
You may retain the accountant to handle specific or to coordinate all of your
financial procedures.
3. Using accounting software
Using accounting software may help you reduce your costs and provide you with
better or faster information.
FINDING AND SUPERVISING AN ACCOUNTANT8

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5.1 Budgeting
 Before, small-business owners use Quicken to record their journal entries
quickly, accurately, and cost-effectively.
 But now, we use Microsoft Excel for budgeting and creating financial projection.
 But using this Microsoft Excel may needs basic skill to familiarizing yourself
with this Microsoft.
ACCOUNTING SOFTWARE9

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“The Term of Profit”
 Profit means the earnings over and above all expenses.
 Revenue is income that a company receives from its normal business
activities, usually from the sale of goods and services to customers.
 Expenses is an outflow of money to another person or group to pay for an
item or service, or for a category of costs.
5.2 Producing Profit
PROFIT
Profit Revenue Expenses

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CATEGORIES OF EXPENSES
 Those predictable item such as rent, salary, insurance, telephone, and
other standard operating expenses required to support the Event Leadership
Business.
 The better you are able to achieve the lower cost of sale, the greater net
profit you will achieve.
 To lower your cost of operations, you must try to reduce your fixed overhead
expenses.
 Fixed expenses of an individual event do not depend on the number of
participants.
FIXED OVERHEAD EXPENSES

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CATEGORIES OF EXPENSES
 These are those expenses which change with the change of units of products but
remain fixed relative to units of product.
 For example: Food & Beverages, audio visual rentals, registration materials,
proceedings design and printing and other items with total cost.
VARIABLE EXPENSES

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NET PROFIT VS. GROSS PROFIT
NET PROFIT
Subtracting total expenses from total revenue, thus showing what has earned (or
lost) in a given period of time.
GROSS PROFIT
Sales minus all costs directly related to those sales.
DIFFERENCES = the percentage of fixed overhead expenses that was dedicated to
producing a specific event.

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Break-even point = Total fixed costs
Contribution margin
Contribution Margin : is the marginal profit per unit sale. It is a useful quantity in
carrying out various calculations.
BREAK-EVEN POINT

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BREAK-EVEN POINT_SAMPLE
 Joe is a voluntary club administrator and he has the responsibility to organise a
sporting event.
 This event requires the expenditure of the following amounts:
 Venue Hire $400.00
 Advertising and Promotion Costs $300.00
 Trophies $200.00
 Telephone, Postage and Stationery $100.00
 Total Fixed Costs $1,000.00
 These amounts will be spent no matter how many people turn up to the event,
and therefore they are Fixed.

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 At event, however, there will be other costs which will be dependant upon the
number of people who turn up and participate. These costs are as follows:
 Each competitor will receive
 Food and drink $10.00
 Hat $5.00
 Variable Costs per Competitor $15.00
 These costs are referred to as variable costs because the amount of cost will
vary with the number of competitors.
 Joe is worried about how many competitors he needs to break-even if he
charges a competition entry price of $20.00 per participant.
 The term break-even means that all event costs will just be covered by the
income he receives from the competitors.

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 In solving this type of problem it is necessary to distinguish between fixed and
variable costs (as above). This is how Joe calculates the solution:
Competition Entry Fee $20.00
less
Variable Costs per Competitor $15.00
Contribution of each Competitor towards Fixed Costs $5.00
Total Fixed Costs $1,000.00
divided by Contribution $5.00
 No of competitors required is 1000/5 = 200

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5.3 Managing Event Cash Flow
DEFINITION OF CASH FLOW
 Cash flow is the liquidity that allows you to pay your bills, including salaries, in a
timely manner.
 To ensure a positive event cash flow, two (2) measures are necessary:
 Prearrange with your vendors payment terms and condition
 Collect those funds that are due

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5.3 Managing Event Cash Flow
MEASURES TO ENSURE POSITIVE CASH FLOW
Prearrange with your vendors payment terms and
conditions
You must prearrange with your vendors, payment terms
and conditions that will allow you to collect the revenue
adequate to this obligation.
Collect those funds that are due
You must diligently collect those funds that are due and
payable in timely manner in order to mee your obligations
to your vendors.

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SUMMARY
“Productivity is never an accident. It is always the result
of a commitment to excellence, intelligent planning, and
focused effort.”
Paul J. Meyer

Event Management - Unit 5

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