ch 7 financial management

8/6/2019 Ch 7 Financial Management

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FINANCIAL MANAGEMENT


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Importance

y To develop an event budget, including income andexpenditure.

y Identify the Break even point in order to make

pricing decisions.y To review and manage cash flow.

y To produce profit and loss account.

y

To Develop control systems for managing financeswithin budget.


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y Not all the events are profit oriented.

y Initial focus on covering costs.


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Considerations

y Is the aim to make profit?

y How much will the event cost?

y What are the revenue sources?

y How many tickets must be sold to break even?

y What is the cash flow situation?

y What control systems are needed to avoid fraud?

y How will legal and tax obligations be met?


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The Budget

y Initial planning stage.

y Projected revenues and expenditure.

y To estimate profits.

y No expenses should be overlooked.

y Components involved?


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The Budget

y Exhibition

y Venue rents.

y Signage

y Lighting

y Welcome display

y Insurance

y Printing


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The Budget

y Fixed and variable costs.

y Management fees.

y Contingencies.


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Break even point

y Fixed costs + Variable costs= Total costs

y Total revenue

y TC= TR

y Start earning profits.


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Cash flow analysis

y Usually planning phase is long with continuousongoing and unavoidable expenditures, and periodof capturing revenue is short

y Ideally an arrangement of Upfront payment fromclient should be negotiated to avoid cash flow problems

y A funding crisis, just days before an event, is not

uncommony Cash surplus or Deficit.


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Profit and Loss Account

y Sources of revenue.

y Ideally Budget should match P & L statement

y Gross revenue: All the revenues before deduction of

costs.

y Gross profit= GR-COGS

y Net profit after deductions of all taxes and operatingexpenses.

y Balance Sheet


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Financial Control Systems

y These are must to avoid any kind of Fraud

y It usually occur if Employees been given the

authority to make purchase, pay the bills, etc.

y So , all financial transactions must be approved andshould be conducted through a requisition form.


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Financial Control Systems

y Following could be the Checkpoints:

y Purchase and other expenses are approved

y Goods and services must meet specifications

y Payments are approvedy Accounts are Paid

y Incoming revenue is checked and banked

y Revenue totals are recorded correctly

y Debts are Met

y All transactions are recorded and balanced

y Taxation requirements are Met

y Stakeholders must be informed regarding Finances


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Panic Payments

y A usual situation attached with Event Management

y Despite careful Planning , some crisis may occur,

especially when the event is about to happen

y To cover this crisis, often high price paid thannormal

y To avoid this, need ofCareful Planning and Detailedcontracts negotiated well in advance, is must.


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ch 7 financial management

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