FINANCIAL MANAGEMENT AND

BUDGET

Presented By-Naresh Nogiya

MIAMI INTERNATIONAL FILM FESTIVAL

Good Financial management by the event company will ensure that quote given to the client at the beginning will at least cover the expenses incurred in staging the party and

hopefully make a profit for the company !

Ticket revenue and other sales are expected to exceed the expenses, thus delivering a profit to the organizers or investors.

Some necessary Questions under financial management

1. Is the Aim to make a profit ?

• Range of Objectives, that do not include making a profit.• Often, goods and services are provided by businesses and

individuals to assist in the running of an event, • Still essential that all other expenses are properly approved

and documented.• May be the objective of an event is raising money for

charity, but a target needs to be set and again , both the expenses and the funds raised need to be accounted for correctly.

2. How much will the Event Cost?

• In a fund raising event described before, as indeed for any non profit event, it is important to estimate how much the event will cost as well as to keep track of the actual expenses incurred.

• With every event , money changing hands must be properly documented and in most cases, the financial records should be audited.

• Expenses or costs, include fees, equipment and venue rental costs, advertising, insurance and so on.

3.What are the Revenue Sources?

• Generally, revenue is raised by selling tickets or charging admission fees.

• Merchandise sales also contribute to revenue. Merchandising items, such as T- Shirts and Caps, may be sold by the event organizer or under arrangement with the retailer whereby the event organizer earns a percentage of any sales.

• The same arrangement may occur with food and beverage sales.

4. How many Tickets must be sold to Break Even ?

• Critical Question• It relates to whether you decide on a large venue, large

audience and low price OR on a small venue, small audience and high price.

5. What is the Cash Flow Situation?6. What Control Systems are needed to avoid Fraud

THE BUDGET• Preparing a budget is part of the initial planning stage.• A budget includes - projected revenue and expenditureFrom which an estimate of the net profit ( or sometimes net loss) from the proposed event.• Plan based on accurate quotes from all contractors and

suppliers.• Provides guidelines for approving expenditure• The budget is part of the event proposal or the basis of

the quote by the event management company to the client.

Budget Items for Themed Dinner Fixed costs Band Dancers Stage Crew Costumes Theme- Decoration Entrance Graphics-animation logo Artwork and printing Lighting Sound

Vision Rear Projection 4.2*3 m screen Data projection Freight and Travel Labor Setup Management Fee Total fixed costs Variable costs Table decoration Food Beverage

Budget Items for Music EventFixed CostsVenue Rental ArtistsProduction TeamCostumesSoundsLightsVisual effectsStagingPrinting

Catering Gifts for special guests Photography Video Recording Setup Freight Airfares Ground TransportationFor guests Accomodation & meal Total Fixed Costs Variable costs

Management Fees

• Prior to contracts being signed, the event organizer should work out the tasks involved in the event, allocate staff to the various roles, and determine their pay rates in order to come up with a more accurate estimate of management costs and the management fee to be charged.

• If a management fee is charged, the client is usually responsible for all pre-event payments to venues and subcontractors.

Break-Even Point• To work out the break even point, the event organizer

has to estimate the number of tickets that need to be sold in order to meet expenses.

• These expenses include both fixed costs and variable costs.

• Variable costs increase as the size of the audiences increases.

• When the total revenue is the same as the total expenditure (fixed and variable), then break even point has been reached. Beyond it , the event is profitable.

Cash Flow Analysis

• Monthly expenses and projected revenue need to be entered into a spreadsheet to establish how cash flow can best be managed.

• A funding crisis, just days before an event, is not uncommon in this industry.

Profit and Loss Statement

• A list of an organization’s revenue, expenditure and net profit ( or net loss) for a specific period .

• Generally, the profit and loss statement (Income statement) is prepared after the event.

• In the event industry , the budget is generally prepared before the event and the profit and loss statement afterward.

• In most on going business operations, budgets and profits and loss statements are done regularly and routinely.

Balance Sheet

• The Balance sheet gives you an idea of what a business is worth at a certain point of time

• The balance sheet shows what the result would be if all bills were paid and everything were sold (the assets minus the liabilities).

• This result is the owner’s equity in the business.• The problem for many event management companies

is that their assets , such as reputation are intangible!

Financial Control Systems In any case, the system should have checks and balances to make sure that• Purchases or other expenses are approved• Goods and services meet specifications• Payment is approved• Accounts are paid• Incoming revenue is checked and banked• Revenue totals are recorded correctly • Debts are met • All transactions are recorded and balanced• Taxation requirements are met

• Financial matters are correctly reported to stakeholders.

CONCLUSION

Long term financial results are an important consideration in event management. The Aim of financial management is for all expenses to be recouped at the time of the event. There is need to be remembered that, Not all events are profit oriented.

References

• “Event Management for Tourism, Cultural, Business and Sporting Events”

by Lynn Van Der Wagen & Brenda R. Carlos