Whether you are planning one large event or several small ones, or some combination of these, you are constantly juggling with your finances to track spending, balance expenses vs. budgets, monitor revenue inflows vs. forecasts, estimate profitability, and calculate ROI. Getting an accurate handle on your event’s financial situation is critical to business success. It simply does not make business sense to host a fabulous event if your event ends up losing you money!
Managing event finances is hard and painstaking work and it can often be very time- consuming. Here are some typical challenges event planners and their finance colleagues typically face in the course of planning and running their events:
- Easily get access to various data (budgets, expenses, revenue) when you need it
- Ensure data is accurate – and there aren’t multiple versions of the data lying around!
- Data is formatted properly in a way that you can use it and report on it
- Ease of consolidation of data to create different reports, forecasts, etc.
- Easily create and share reports and insights with others – managers, clients, stakeholders, etc.
Here are some important finance-related topics that apply to event management. Not everything may apply to all events (for e.g., if you are planning a tradeshow exhibition, you would not care for managing revenue, cash flow, etc.) Unless event managers are knowledgeable about these topics, it becomes hard to manage these effectively as it takes quite a bit of advance planning and process creation to set them up and manage them properly.
- Budget / Expense Management – This is a fundamental responsibility of all event planners. Every event costs money to host. You need to spend money on venues, hotels, food & bev, travel, speakers, booths, and a whole lot more. Spending money sounds easy to do. However, accounting for all spend and making sure you can stay within the fixed budget you are often given is not an easy task. You need to be in complete control of your expenses all the time. Here’s where it starts to get complicated:
- Managing budget allocations: With the fixed budget you have to work with, you need to carefully spend it on different event activities so that you don’t over-spend on one thing and run out of money to spend on something else that is also important. Depending on what is important to your guests, you need to apportion (or allocate) your budget to different activities and closely track expenses vs. these allocated budgets throughout the course of your event.
- Timing of Expenses: Some expenses will have to be paid immediately and some others you incur later as per your contract agreements. Knowing what is going to hit your accounting books now vs. later is important to manage cash flow (described in more detail below).
- Spending Constraints: Many events rely on revenue generation (from ticket sales, sponsorships, ad sales, etc.) to fund part or all of their expenses. Before you can authorize spend on some activities, you need to know what money is, or will be, available, and when, so that you can work within these constraints.
- Influence of other budget contributors: In larger organizations, funding for an event can come from multiple sources. These sources may place restrictions on what activities they would like you to spend their money on (e.g. spend only on sponsorships, or only for an evening award ceremony, etc.) In these situations, you need to track expenses vs. specific event activities to be able to report on them accurately.
- Multi-currency transactions: If you host events in other countries and transact in different currencies, you have the added burden of tracking expenses in multiple currencies, converting them at the correct exchange rate (plus any processing fees) to your local currency, and reporting everything accurately.
- Event Revenue Management – You generate revenue for your event through ticket sales, sponsorship / exhibitor sales, ad sales, promos, etc. For many events, generating revenue is a primary goal of running the event in the first place! For other events, generating revenue is critical to break even, or to fund part or the entire event. In all these situations, the following needs to be tracked and reported on a regular basis:
- Registration / Ticket sales: How much revenue is coming in as a result of sales of event tickets or registrations? Are specific promotions such as Early Bird promos, group discounts, etc., meeting targets? Understanding which promos are having impact will help you fine-tune what future promos to offer to ramp up registrations. Typically, the data for this resides in event registration software, and you need to understand how to acquire and interpret this data correctly.
- Sponsorship / Exhibitor sales: As sponsors and exhibitors sign up, they often pay a deposit up-front and the balance a few weeks or months before the start of the event. Further, in their contracts, sponsors and exhibitors are allowed 15 or 30 days (or more) to pay their invoices. So, it can take longer than what you would expect to actually receive money in your bank. If you have pending expense items that need to get paid, you have to track the receivables from sponsorship and exhibitor sales very closely. Typically, the data for this resides in accounting / finance systems and you need to understand how to acquire and interpret this data correctly.
- Other revenue: There can be a number of other revenue-generating activities like ad sales, product sales, co-branding, etc. The revenue flow from these could vary widely. If these represent significant percentage of your overall revenue sources, you need to track and report on these closely as well. This data can reside in various systems, and you need to understand how to acquire and interpret the data correctly.
- Event Cash Flow Management– Event cash flow management, esoteric as it sounds, is really about managing cash inflow (revenue) vs. available (or committed) budget vs. expenses (paid and future). The major objectives of event cash flow management are:
- Current cash flow status: You know what money you have, or will have, so that you can spend knowing there will be money available when you need it to pay for those expenses
- Cash flow forecast: You can provide accurate forecasts of income and expenses so that your accountants and finance managers can do their book keeping properly
- Profit / Loss monitoring: For organizations that have to project profit / loss from events, it is critical for them to have accurate up-to-date information on the event cash flow situation
- Financial Risk Management – When you produce an event, you take on a lot of risks. Several of these risks have financial implications, and if you are not on top of the details of what you are committing to, or aren’t closely monitoring how your event is tracking against these commitments, you can end up in quite a bit of trouble.
- For example, when you contractually commit to hotels room block bookings, food & beverage minimum spend, etc. months before your event, you are liable for any short falls. Being able to identify and track these liability items, and provide various reports, including commitment and liability forecasts, to help you and your stakeholders better manage these financial risks, is critical to the financial success of events.
- As another example, if you forget to take into consideration the various taxes, service charges, union fees, gratuities, resort fees, etc. that get tagged onto services that you procure, you could end up paying 30-40% more than what you had budgeted for!
- Aggregated Spend Analysis – Whether you do one large or several small/medium events a year, you spend money with many vendors (hundreds or even thousands of them.) Procurement and finance managers are very interested in optimizing spend by analyzing different spend items across all your events and negotiating favorable contracts with a few select vendors. This could save a lot of money and contracting headaches as well.
- However, if each event manager in the team does their own negotiations with different vendors and enter into vendor contracts independently of each other, and the information ends up getting stored in different formats, files and locations, it becomes hard to aggregate all vendor spend across all your events and get consolidated reports and analysis.
- You could end up leaving a lot of money on the table by not using the power of spend aggregation in your vendor negotiations!
- Real-Time Event Decision Making – Running events involves the management of a lot of risks. By having the right information available at the right time, managers can make the right decisions to mitigate risks. Of course, not all risks can be eliminated, but, many can be mitigated if the right action can be taken on a timely basis. Here is where having instant access to all critical information across your event can help.
- The information requirement is both current information, forecast information, as well as historic information. For example, if there is a health scare, or forecast of inclement weather, a political situation that may impact attendance, you could renegotiate some liabilities with your vendors and reduce your losses. But, to do this you will need instant access to facts because you often will have very limited time to take corrective action.
The above are some of the common financial management responsibilities for event managers and event teams. There are several other unique needs that are not addressed above, that could be specific to certain events (e.g. tracking taxable vs. non-taxable expenses, charity tax deductions, etc.) that would need special consideration.
All this makes the job of event managers even more challenging. But, by having the right tools and insights at their fingertips, event managers can not only use their creativity to run successful events, but also can run their events financially successfully as business managers.
Goombal, a modern and comprehensive event management solution, has been designed from the ground-up to plan, manage, aggregate, and track all event-related financial data in one place. It then brings the power of automation, analysis, and reporting to help event managers become better financial managers of their events – with way less effort vs. what would be required otherwise.