Ch 7 Financial Management
Transcript of 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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