Event Planning and Management: Budgeting and Procurement (PDF)

09 == Finance, budgeting and procurement in events -------------------------------------------- -- -- - decision making to provide in-house or outsourced events management elements; - budgeting and forecasting event finances, cash flow and break-even; - managing event finances; -...

09 == Finance, budgeting and procurement in events -------------------------------------------- -- -- - decision making to provide in-house or outsourced events management elements; - budgeting and forecasting event finances, cash flow and break-even; - managing event finances; - purchasing and procurement of suppliers; - a range of financial issues that need to be considered in events. #### Outsourcing ##### Outsourcing key suppliers - understanding the organizational procurement and finance processes and policies (including deposits and advance payments, where required), and agreeing processes for confirming variations between the purchase order amount and the final invoice; - timescales for processing of purchase orders and payment of invoices; - authority to sign off budgets; - identifying all the different support services needed to deliver the event, and decid- ing which can be provided in-house and those that must be outsourced. #### Budgeting -- -- -- -- -- -- £15,664.34 £14,660.82 £14,736.13 -- ------------ ------------ ------------ -- £16,435.50 £8,689.94 £8,429.89 £0.00 £2,031.25 £1,721.31 £31,978.70 £32,035.20 £30,675.70 £4,318.50 £3,377.80 £4,340.69 £0.00 £555.45 £555.44 £5,871.80 £4,240.30 £4,163.85 £0.00 £0.00 £1,014.20 £0.00 £0.00 £1,275.79 £0.00 £1,337.40 £1,596.90 -- -- -- -- -- -- -- -- -- -- -- ------------ ----- ----------- £2,978.72 1 £2,978.72 £4,680.81 1 £4,680.81 £1,276.59 1 £1,276.59 £221.27 130 £59.57 50 £2,978.50 £34.04 50 £1,702.00 £3.20 200 £640.00 £3.20 40 £128.00 £10,376.00 1 £5,769.14 -- ------------ ----- ----------- ##### Budgeting considerations for event cancellation decisions #### Responsible finances ##### Managing event finances PROJECTED ACTUAL ----------- ----------- ----- ----------- -------- ----------- ----- ----------- Unit cost Qty Unit cost £3,084.38 1 £3,084.38 £3,084.38 1 £3,084.38 £8.25 300 £2,475.00 £8.25 300 £2,475.00 £2,839.00 1 £2,839.00 £2,839.00 0 £0.00 £2.25 300 £675.00 £2.25 150 £337.50 £118.00 5 £590.00 £118.00 0 £0.00 £9,663.38 £5,896.88 ##### Income sources - make an Application for Road Closure (£850 at 2009 prices); - prepare a Road Closure Management Plan (estimated £4,000--6,000); - arrange for crowd barriers (£400--600); - engage stewards and a Steward Supervisor (£200--£600); - hold Public Liability Insurance (in 2009 the King's Army had £5 million of cover, which is now £10 m); - provide a legal indemnity to Westminster Council -- this was problematic as the King's Army is an unincorporated association. ##### Cash ffow and break-even #### Purchasing and procurement ##### Purchasing and procurement terms - Larger organizations will have specialist functions (even separate departments) to manage the process for outsourcing resources. These may be known as 'purchas- ing' or 'procurement' teams. - Purchasing involves the outright acquisition of services, equipment or other goods for monetary payment. - Procurement includes the acquisition of goods or services in any way, which could include leasing, temporary hire, borrowing or contra-deals (swap). 1. Three quotes: the events manager issues a request for quotes for services, equipment or other goods, to three companies, who will respond with a price and possibly other relevant information, for example delivery date, availability, previous experience. In the public sector, three quotes would be limited to expenditure of up to and around 2. Tendering process: this is a formal process where the ITT (or invitation to provide a quote) is advertised more formally. In the case of public sector organizations, expenditure above set limits (over £100,000 for event-related purchases, but these 3. Preferred supplier: once a tender process has been undertaken, an organization may decide to appoint one or more preferred suppliers, with whom they develop an ongoing relationship for supplying specific goods, equipment and services. In smaller companies the process for appointing a preferred supplier may lack the rigour required by public sector and larger organizations, such as using a supplier because your brother-in-law owns it. - Phase 1: Pre-tender - Set up core team; agree the roles required (e.g. events team, finance, legal); agree the levels of responsibility and areas of expertise required by team members; establish specific objectives for the procurement project. - Formulate plan: agree actions, dates, complexity of the tender, the value of the tender. - Develop a specification for the required goods, services or equipment and criteria for evaluation, outlining the purpose of the purchase and the shared values required of any potential supplier company. - Develop tender documentation: develop and use templates for a common structure; include roles, objectives, instructions to tenderers (examples follow in sections below). - Phase 2: The tender - Invitation to tender: examples of documentation are given in the section below. - PQQ -- for larger procurement processes, there may be an initial stage that involves a pre-qualification questionnaire (PQQ) which enables finance/legal departments to filter out any unsuitable potential suppliers. - Initial visit and briefing: this depends on what is being procured. For a venue selection, a site visit is always recommended (see Chapter 5 on location). Particularly for locally based suppliers, the process of managing the ongoing relationship might begin with an initial meeting prior to the selection decision. For larger purchases, there may be the opportunity for potential suppliers to meet and ask questions for clarification about the purchase. - Submission of tenders: for legal reasons, in the public sector (and for best practice elsewhere), responses to tenders are kept securely in a locked (or if electronic, password-protected) place, to ensure equal treatment for all submissions. - Phase 3: Evaluating the responses - Evaluation of the tender: decide which roles and individuals are required to undertake evaluation (e.g. permanent staff as opposed to contractors). During this process, ensure that professional relationships are maintained, and any bias or prior relationship is acknowledged. - Shortlisting: Set up a shortlisting meeting, decide which roles are required to attend. - Meeting/interview: if the decision is made to interview potential suppliers, ensure that there are no undue influences on the process. - References: feel free to request formal or informal references from organizations with prior experience of working with the supplier. This can range from a set tick-box pro forma to a telephone call. - Visit existing sites/customers: if needed you may choose to arrange visits to the supplier's existing customers, but be sure to have a clear purpose for the visit and a means of gathering and giving feedback. - Phase 4: Appoint the successful supplier/s - Appoint the preferred supplier: having marked each supplier against specific criteria, add up the scores to compare the ratings. The company that is appointed must be the highest scorer. - Negotiate and sign contracts: again, agree the relevant roles with authority to appoint, negotiate and sign contracts. - Commence service: this may be the first project of many, or a one-off arrangement, but either way, there needs to be a formal recognition of the start of the relationship. - Monitor and evaluate: this may be undertaken by the use of key performance indicators (KPIs), measurable targets, two-way feedback, regular meetings and identified process improvements. - Debrief unsuccessful tenderers: this task may be given to the procurement team to ensure a robust process. - Ultimately the events management company still maintains overall responsibility for the quality and success of the event and so needs to carefully manage the selection of suppliers and partner organizations. Key to this is having appropriate financial and procurement processes and supporting documentation. ##### Documentation templates - Capture high-level budget estimates per spend category. - Input or import granular budget line items (rooms, audio-visual, food & beverage, production agency and space, speaker costs, etc) per cost category. - Track negotiated rates and actual paid against the initial quote to show their return on objectives (Budget vs Actual). - Design customized budget templates to shortcut the budget creation process and ensure consistency. - Standardize categories, subcategories, taxes and General Ledger codes to accurately track and report spend across meetings and ensure data integrity. - Track budget line items in local currencies and establish exchange rates to convert items to a base currency for better reporting. - Analyse key spend metrics through a robust reporting engine (i.e. aggregate spend by: category, subcategory, event format, vendor, corporate division, geographic location, etc). - Integrate or transfer your data between event management systems like Cvent and other systems like Concur's Expense module or QuickBooks. - What kind of registration types should you offer? - How much should you charge? - Should you tailor price points for different audiences? - Can you still make money on free events? - How can you prove ROI? ##### The procurement process -- invitation to tender -- -- -- -- -- ------------ -- -- -- Start time 09:00 10:00 11:10 11:30 12:50 13:30 15:30 -- ------------ -- -- -- +-----------------------------------+-----------------------------------+ | | - Numbers of days' work | | | anticipated for this piece of | | | work: four | | | | | | - Please note that in order to | | | obtain the information | | | required for the vox pops, | | | extensive travel around the | | | country will be necessary | | | | | | - The vox pops will also need | | | to be produced in the | | | following formats: | | | | | | | | | | | | - - | +-----------------------------------+-----------------------------------+ | | | +-----------------------------------+-----------------------------------+ +-----------------------------------------------------------------------+ | [ specific venue requirements ] | +=======================================================================+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ - Specification by function: created within the event planning process, this tells the supplier the purpose of the service -- what the service is supposed to do -- including resources the supplier should provide for the client, appointing the right person for the right role and completing the project. - Technical specification: a detailed breakdown of resources, including staff and tech- nical equipment by type, quantity and days needed. It may request additional docu- mentation from the supplier, such as risk assessments, method statements, legal requirements, site maps/floor plans, to assist the tenderer in making the decision. - Specification by performance: it should include relevant health and safety, ethical, quality and sustainability issues, and address delivery of service, with attention to detail to meet the event's quality standards. Could be stated in terms of perfor- mance results and criteria for verifying compliance, such as KPIs. Could identify shared corporate values. ##### Evaluating tender responses - quality - meeting the specifications - cost vs budget - availability - past experience -- ------------ -- -- -- Supplier A DECLINED -- ------------ -- -- -- -- -- -- -- -- -- ------------- Total Price DECLINED -- -- ------------- -- -- ---------- DECLINED -- -- ---------- -- -- -- -- -- -- -- -- -- -- ----------- ---------- ----------- £6979.00 DECLINED £5512.50 £2130.00 £2650.00 £11852.00 £10425.10 £2289.40 £5576.28 £18671.60 £18587.60 -- -- ----------- ---------- ----------- Evaluated by: --------------- -- -- -- -- Name Name ##### Fundraising 1. Beg, borrow or charity shop. (Don't steal!) When you've got your list of requirements to deliver your event, find cheaper ways to obtain what you need. Charity shops are a great place to buy all sorts of things -- from tablecloths to glassware and crockery (vintage is very on-trend). Try asking your friends, find out what you can borrow, and turn to local online recycling websites ([www.freecycle.org/](http://www.freecycle.org/)) as well as social media. 2. Use what's included in the venue hire. Try living with the colour of chairs in the room, rather than splashing out on colour-themed chair covers. Use the tablecloths provided. 3. DIY: make your own. Be creative. For a cheap and cheerful wedding reception, buy a bolt of material in the bride's preferred colour (purple), and drape it over the brown curtains of the local village hall. Use the venue's own tablecloths (which had seen better days) and sew your own table covers, which sit on top of the tablecloths, to match the chosen colour scheme. Pre-cook all the food at home and bring in a team of friends to manage the on-site kitchen and wait on tables. 4. Include volunteers in your event staff. We're not by any means recommending that events managers forgo the professionals, but for events on a budget, there are plenty of events management students eager to add volunteering hours to increase their on-site events experience. Contact your local university or college to find out if you can provide some work experience for their events, graphic design, marketing or photography students. And get the professionals in to run the professional events! 5. Avoid peak times. Choose a day or time of year or location that's less popular -- you'll find that it's cheaper, too. 6. Go for simpler food options. A brown bag lunch can be healthier (and less sleep- inducing after lunch) than a three-course sit-down meal. 7. Find local sponsors. It's back to 'who do you know?' Visit your friends and the shops on your local high street to ask for donations in kind, or for raffle prizes. 8. Make a budget. Sounds obvious, but make a budget -- and stick to it! Don't spend money on things you don't need, double-check numbers are accurate, and control who spends what by making sure different members of the team aren't making spending decisions on their own that mean instead of raising money you end up making a loss. 9. Get quotes. Get more than three quotes (minimum). And haggle. (The professionals call this 'negotiating'!) 10. Use social media to help market your event -- but don't rely on it, because it depends who your target audience is. 11. Ask yourself before you buy, 'Do we really need this for our event?' 12. Downsize or rearrange your event rather than cancel. Some venues will be flexible to help keep your booking (but check the terms and conditions of the contract first), so speak to the venue sales team. #### Factors to consider in effective procurement and good financial management for events ##### Factors to consider - **Direct revenue** -- Ticket sales, sponsorships, advertising, merchandise sales, exhibitors, government grants - **Attributed revenue** -- Revenue after the event that was influenced by product demos or interaction with sales staff during the event - **Attributed sales pipeline** -- Leads and opportunities generated at the event that eventually become sales - **Brand equity** -- Attendees' positive experience and impression of the brand as it relates to the event - **Knowledge exchange** -- Information and insight shared between customers, prospects, and the organization - Control supplier expenditure by agreed per diem expenses -- or cover them yourself (e.g. booking overnight accommodation for on-site staff, including external suppliers). - Availability and responsibility of staff to sign off against the budget -- including from the client side. Make sure you have sign-off from the client for any expendi- ture you incur, as it may not be possible to claim back unauthorized expenses. Make sure that the staff who are signing off expenditure are authorized to do so. - Make sure you have the relevant insurances to cover your event, guests, and staff, both on- and off-site. - Put in place a variation to services agreement as part of the procurement process -- to agree changes to the original commission, and costs. - Agree an advance payments and deposits schedule and check all terms and condi- tions thoroughly before you sign the contract. - Agree feedback processes as part of the contract, from your organization to the supplier, and from the supplier to you. Feed back relevant improvements to the client. - Beware of hidden charges made on the day for last-minute items such as photo- copying or internet access. - Without a full appreciation of the potential costs of an event, organizers risk not only the failure of the event, but also of the company, whether in terms of finances or reputation. - Decide whether you have that capacity and capability to deliver the event using in-house resources, or whether you need to outsource. - Ensure you have a signed-off budget from the client, and that any expenditure is accurately estimated in advance. The complexity of the event will have a direct bearing on the finances of the event. - Ensure that you abide by financial regulations and company guidelines, as well as planning what you might do in the case of an emergency -- always have a plan B and contingency funds in case things don't go to plan. - Make sure you keep a record of financial aspects, from cash flow to ensuring you are allowed to spend budgets. If you don't manage the cash flow, you could be out of business, no matter how popular the event! - There are detailed processes to enable you to identify and procure suppliers. We have provided a range of templates and examples that can be adapted and implemented, as well as online resources. - Valuable models and in-depth discussion of the financial evaluation of events can be found in *Return on Investment in Meetings and Events*, by Jack J Phillips, M Theresa Breining and Patricia Pulliam Phillips. 1. What are the sources of potential income for an event? 2. Where can you find information about the regulations that affect charities for their events activities? 3. Why would some organizations choose to outsource some of their event support services and supplies?