Accounting Methods Accrual method Records revenue and expenses

Accounting Methods • Accrual method § Records revenue and expenses at the time they are committed, but money doesn’t actually get exchanged. • Cash method § Records revenue and expenses at the time they are committed. Money is exchanged at that moment (via cash, check or credit card) Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Definitions • Assets—Anything of value owned by or due to the organization • Liabilities—Anything that the organization owes • Accounts payable—Amounts an organization owes for purchased goods or services from a supplier or vendor Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Definitions • Accounts receivable—Amounts an organization can collect for sales of goods or services on credit to a customer • Break-even analysis—Process where revenue and expense items are adjusted until a break-even point is reached (revenue = expenses) Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Definitions • Fixed costs—Overhead type expenses that are constant and do not change as the level of output changes • Variable costs—Not constant, change with the level of output, and are frequently stated on a per unit basis (Food & Beverage one of the biggest example) • Indirect costs—A portion of wages and other expenses, included in fixed costs Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Definitions • Chart of accounts—Uniform system by the organization to define specific groups of items for both monies received (revenue) and spent (expense) • Double-entry bookkeeping system— Method by which every transaction is either a credit or a debit Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Definitions • Contribution margin—Difference between total sales revenue and total variable costs • Balance sheet (or statement of financial position in non-profits)—A picture of the organization at a given point in time and reflects the assets owned, liabilities owed, and residual net assets Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Determine Budget Philosophy • Make a profit, meaning revenue received exceeds expenses paid out • Break-even, meaning that revenue minus expenses equals zero • Lose money, meaning expenses paid out are in excess of revenues received *We might have the goal to lose money on a first time event or charitable event. Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Determine Potential Sources of Revenue Ticket Sales Registration fees Exhibitor fees Advertising – sometimes advertising can help us bring in money via ticket sales or a sponsor handles it, freeing up that expense for us. • Sponsorships (including in-kind contributions and grants) • • Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Allocate Expenses for Event • Identify all possible expenses. • Organize expenses into categories and as fixed or variable expenses. • Identifying expenses first is a more accurate way to budget than by trying to forecast revenue. Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Typical Event Expenses • • • Accommodation (hotels) expenses Event technology Exhibition expenses Facility and other fees Food and beverage fees Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Typical Event Expenses • • • General or administrative expenses Marketing and promotion expenses Programming expenses Registration costs Transportation expenses Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Developing the Budget • Define categories for revenue and expense items that are consistent with the Chart of Accounts. Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Study Factors Affecting Budgets • Internal factors § Higher organizational factors, inadequate collections, inferior accounts receivable practices • External factors § Economic downturn, market conditions, change in taxation rates, etc. Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Projecting Revenue • Set registration and exhibit fees § Single day registration fee for multi-day events § Early, advanced, and on-site registration rates § Discount fees for multiple registrations from same company § Extent of complimentary registrations? Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Calculating Attendee Registration Fee • Steps to take when number of attendees are known or forecast, but the fee is not known 1. Identify expenses as fixed, variable, or indirect 2. Calculate fixed costs 3. Calculate variable costs Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Calculating Attendee Registration Fee • Steps to take when number of attendees are known or forecast, but the fee is not known 4. Add fixed costs and variable costs 5. Divide the total costs by the number of attendees Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Calculating Attendee Registration Fee • Steps to take when registration fee is known but the number of attendees is not 1. Calculate registration break-even point as per last slide 2. Subtract the person variable costs from the registration fee to arrive at the contribution margin Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Calculating Attendee Registration Fee • Steps to take when registration fee is known but the number of attendees is not 3. Divide total fixed costs by the contribution margin to arrive at the number of attendees Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Establishing Sponsorship, Advertising, and Promotional Fees • Multiply cost of delivering sponsor benefits plus the cost of sale plus any cost for servicing by a factor of 3, 2, or 1. 5. • Be consistent; use same factor for various sponsor options. • For advertising and promotional fees, use same factors and research as sponsorship fees. Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Types of Budgets • Zero-based § Emphasizes what will happen in the future and aligns with goals and objectives. When we have no history or sample to use. • Incremental § Uses a previous period's budget or actual performance as a basis and makes incremental changes for the new budget period Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Types of Budgets • Line Item § Can be zero-based or incremental. Each category of activity aligns with an item in the chart of accounts. • Performance/Function § Focuses primarily on what functions are performed and is useful in developing unit costs. Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved

Evaluation • ROI (Return On Investment) § Net profit divided by net worth • ROO (Return On Objectives) § How well participating in the event met overall non-financial objectives • ROE (Return On Equity) § Measures efficiency at generating profits from units of shareholder equity (net assets) Planning and Management of Meetings, Expositions, Events, and Conventions George. G. Fenich Copyright © 2015 by Pearson Education, Inc. All Rights Reserved