Lesson 4: Financial Management Flashcards
Domain D
- The document used to entice sponsorships for your event and contains information regarding the overview of the event, the potential return on investment, terms and conditions, and demographic information would be called the:
Page 81
A. Stakeholder management plan
B. Financial Sponsor Plan
C. Sponsorship Prospectus
D. Donation plan
C. Sponsorship Prospectus
- Selling a sponsorship to an entity that will underwrite the majority of the event and will have its brand name associated with the event is called a:
Page 82
A. Title Sponsor
B. In-Kind Sponsor
C. Managing Partner Sponsor
D. Donation Sponsor
A. Title Sponsor
- Budgeting based on having no prior history and the budget is created using estimates of revenue and expenses is called:
Page 93
A. Indirect budget
B. Zero-based budget
C. Incremental budget
D. Zero-line budget
B. Zero-based budget
- These expenses are used to cover staff salaries, overhead, and any organizational expenses not directly related to the event:
Page 92
A. Variable Costs
B. Fixed Costs
C. Incremental Costs
D. Indirect Costs
D. Indirect Costs
- This tool helps monitor cash flow and illustrates the budget lifecycle from inception to final billing. It’s called:
Page 104
A. Billing Timetable
B. Chart of Accounts
C. Balance Sheet
D. Income Statement
A. Billing Timetable
- Which one of these represents the Contribution Margin?
Page 98
A. Attendees- Registration Fee
B. Total Fixed Costs + Total Variable Costs
C. Registration Fee – Variable Costs
D. Total Fixed Costs – Breakeven Units
C. Registration Fee – Variable Costs
- If you wanted to make sure you had a guaranteed currency rate of exchange for your future meeting you would:
Page 95
A. Have the rate float within certain limits
B. Buy Forward the currency rate of exchange
C. Use a guaranteed VAT to fix the currency
D. Ask to have your exchange rate tied to the Euro
B. Buy Forward the currency rate of exchange
- Which type of accounting system counts income and expenses as they are actually received and paid?
Page 103
A. Cash Accounting
B. Income Accounting
C. Accrual Accounting
D. Variable Accounting
A. Cash Accounting
- In General who is able to reclaim any VAT paid?
Page 96
A. Every attendee who is not from the country where the VAT is collected
B. The meeting organizer
C. The company hosting the meeting
D. Any individual in attendance
C. The company hosting the meeting
- The document provided to the hotel which specifies what can be billed to the master account, limits of financial liability and who is authorized to charge to the master account is called the:
Page 104
A. Billing timetable
B. Direct Bill application
C. Balance sheet
D. Master Account Authorization Form
D. Master Account Authorization Form
- Net Income is:
A. Expenses + Income
B. Gross Profit- Loss
C. Revenue – Expenses
D. Gross Profit + Revenue
C. Revenue – Expenses
- A Variance in the budget is defined as:
A. An item in the budget not expected
B. The difference between the budgeted line item and the actual line item
C. Charges to the budget that cannot be categorized
D. The difference between net income and net expenses
B. The difference between the budgeted line item and the actual line item
- When calculating your registration fee, which of the following costs would be considered “variable costs”?
A. Meals, T-shirts, guest rooms
B. Salaries, overhead, insurance
C. Guest Speaker fees, meeting room rental, transportation costs
D. Meeting room rental, guest rooms, food and beverage
A. Meals, T-shirts, guest rooms
Cash Accounting
Counts income and expenses as they are received and paid
Accrual Accounting
Counts expenses and income when they are earned or incurred
Chart of Accounts
List of line items that make up the revenue and expense categories
Paid Out
the advance of cash a hotel may give you then charge to your master account- to use as cash tips for example
Registration Fee Formula
Registration Fee = Total Fixed Costs + Total Variable Costs
———————————————————
# Attendees
Total Variable Costs
Are the Variable costs X number of ppl
Breakeven Units Formula
Breakeven Units = Total Fixed Costs
—————————————————-
Registration Fee- Variable Costs
Contribution Margin Formula
Registration Fee- Variable Costs
ROI Formula
ROI = Meeting Benefits - Meeting Costs
———————————————– x 100
Meeting Costs
Net Income Formula
Net Income = Revenue – Expenses
Percent of Variance Formula
Percent of Variance = Actual Line Item – Budget Line Item
—————————————————-
Budget Line Item
fixed cost
total amount of profit
Registration Fee is $25; Your costs are $1000 for meeting room rental, $100 for AV, and $500 for a speaker (Total Fixed costs $1600)
Food and beverage is $10 per person and $5 for a T-shirt ( variable costs $15 per person)
- How many attendees do you need to break even?
- $1600 (Fixed costs)
——————————————– = 160 attendees to break even
$25-$15 (Registration-Variable Costs)
Registration Fee is $25; Your costs are $1000 for meeting room rental, $100 for AV, and $500 for a speaker (Total Fixed costs $1600)
Food and beverage is $10 per person and $5 for a T-shirt ( variable costs $15 per person)
- How many attendees do you need to turn a profit of $1500?
- $1600 (FC) + $1500 (profit) = $3100
————————————– ———- = 310 attendees
$25 - $15 (Reg – VC) $10
Registration Fee is $25; Your costs are $1000 for meeting room rental, $100 for AV, and $500 for a speaker (Total Fixed costs $1600)
Food and beverage is $10 per person and $5 for a T-shirt ( variable costs $15 per person)
- The meeting room only holds 200 people. If you still want a profit of $1500, what should you raise the registration fee to?
- $1600 + $1500 + 200($15) = $3100 + $3000 = $6100
———————————— ——————– ——— = $30.50
200 attendees 200 attendees 200
$30.50 Registration Fee
In this example, you need to add up all of your costs, fixed costs, variable costs, and profit, and divide by the number of attendees. Since the maximum attendees is 200 then your maximum variable costs will be the variable costs per person multiplied by the number of people the room can hold.
- Your meeting budget outlines a registration fee of $595 per participant and you are planning for 200 attendees. Variable costs total $375 per person. Fixed costs total $45,000. What is the contribution margin?
a. 220b. 225c. 375d. 395
- $595 (Registration Fee)- $375 (Variable Costs)= $220
The fixed costs value and the number of people are extra information that is not needed to answer the question.
- Your meeting has a registration fee of $200, fixed costs of $30,000, and a variable cost of $55 per person. How many attendees do you need to break even?
a. 118
b. 150
c. 207
d. 546
- $30,000 (Fixed costs) = $30,000
——————————- ———— = $206.8
$200 (Reg Fee)- $55(Var Cost) $145
- You need to determine the registration fee for an upcoming conference. Your management wants to make a profit of $5000 on the event. You have $3500 room rental fee, $2500 on- site staff cost, $200 website creation, $100 per person food and beverage, $25 t-shirt cost per person, & $800 printing fee. You expect 400 attendees. Your registration fee should be?a. $160
b. $61
c. $185
d. $155
- Total Fixed costs:
$5000+ $3500+$2500+$200+$800 = $12,000
Variable Costs per Person: $100 + $25 = $125
RF = $12,000 + ($125 pp x400ppl)
—————————————— = $155
400 ppl
Sponsors come from a variety of sources
- Previous sponsors
- Current suppliers or exhibitors
- Your stakeholders
- Research
- Referrals
Sponsor Prospectus
A sponsor benefit package that contains information to assist the prospective sponsor in making a decision
Title or Main Sponsor
Sponsor will underwrite the majority of the event and its name will be associated with the name of the event
Tiered Model of Sponsorship
Example: Bronze-Silver-Gold (levels)
Sponsorship of specific areas of the event, such as breakfast sponsor or sustainability sponsor
Credit Model of Sponsorship
A situation where a larger, established entity (the “Sponsor”) provides credit support or guarantees to a smaller business or project, essentially acting as a guarantor to enhance the smaller entity’s ability to secure loans or financing, often leveraging the sponsor’s strong credit rating to gain better terms for the sponsored entity
In-Kind Sponsors
Sponsor provides goods or services at no cost to the event
When developing the Registration Process
- Create a registration form
- Identify all of the information you need from the attendees to track them and ensure their needs are met at the event
- Collect specific data for different types of registrants, such as exhibitor, a speaker, or an attendee
- Scheduling information that alerts registrants to conflicts with their selections
- The system can be edited after the site is live to close full options or to make other needed changes
- integrated with secure payment transactions
- one-stop shopping can be managed by combining registration, housing, and travel in one system
- Have an automatic confirmation generated and communicate with registered attendees
NOTE: (ASP) Application Service Providers- System to enable the event by sending a message to a specific attendee in a session - integrated with the event website and mobile applications so updates automatically feed into different components
What is a CRM
Customer relationship management
Exhibit Sales Process
Can be set up in the form of booth sales, sponsorships, advertising, and registration fees, educational opportunities (Allowing attendees to learn about products, services, and technology that are relevant to their field
Setting the Price on Exhibit Booths
- Prices of past and comparable
-types of available booths (Standard, Corner, Island)
-how to price (by size of unit, area, etc)
-market response
-event cost
-what do you plan to include in the booth
Exhibitor Prospectus
Outline that includes full benefits and information about the show for exhibitors
Developing the budget involves the following steps
- identify the categories of revenues and expenses for your event
- estimate the quantities for each budget item
- research costs for each budget item
- set prices to meet financial goals
Fixed Cost
Regardless of the number of attendees of the event, the number will be the same. Example- Meeting Room rental, Marketing, signage
Variable Cost
The cost is according to the number of attendees. Example- food & beverage, printed material
Indirect costs
Expenses that are not related to the event. For example staff salaries and wages, equipment repair
incremental budgeting
is a budgeting method that involves making slight adjustments to an existing budget to create a new one. It’s considered one of the most conservative budgeting methods
Zero Based budgeting
is a budgeting method that involves starting from zero and justifying all expenses for each new period, instead of starting with the previous budget and adjusting it
Avoid seven common mistakes in budget planning
- allow contingencies for the unexpected
- including tax and service charges
- include labor costs
- communicate clear policies to speakers and staff
- review the master account daily
- rely on history for meal guarantees
- know the value of your business
Buying Forward
A contract to exchange a certain amount of money on a specified date at a specified exchange rate
Taxes
USA: local sales tax
Europe: value added tax (VAT)
Two Accounting methods that are most widely used in the events industry and elsewhere
- Cash Accounting (income and expenses that are actually received and paid)
- Accrual Accounting (Income and expenses that are earned or incurred)
Three accounting tools that can help an event professional with budgeting and forecasting
- income statements: a statement of revenue and expenses over a period of time
- balance sheets: a statement that indicates overall financial status by subtracting expenses from income
- cash flow statements: Distinct from income statement and balance sheet because it does not include the amount of future incoming and outgoing cash that has been recorded on credit
Chart of accounts
Detailed list of individual line item that makes up the revenue and expense categories in a budget
