On Budget

Simply put, a budget is a list of operating expenditures and their costs, offset by any income, for a fixed period of time. In practice, however, a well-designed budget is the most critical tool in a meeting planner’s arsenal. Not only does it help track and manage the meeting’s revenues and expenses, it creates accountability, provides financial control, encourages delegation, enforces timelines and ultimately results in accurate historical data, which is critical for planning the next event.

“Most people think a budget is a long list of things that need to be done. That’s a checklist,” says Carroll Reuben, CMP, CMM, owner of Rolling Hills Estates, Calif.-based Meeting Excellence and an industry speaker on the topic. “A budget is a fluid, working document that is indispensable to a well-managed meeting.”

Getting started

If the event is an annual one, the meeting planner will have some sense of income and spend, provided that there is previous data to go on. For the first-time event, however, the budget can begin to be assembled only after a number of key items have been nailed down and a timeline for the event has been established. To begin:

Know the objective. This ultimately determines where the dollars will be spent. For example, if networking with clients is the meeting’s ultimate goal, then the venue, along with food and beverage, will be the major expenditures. On the other hand, if it is a training meeting, rental of meeting rooms and an audiovisual presentation possibly will be the largest expenses.

The meeting’s objective also establishes whether the event will generate any income. An association’s annual conference usually is a major revenue generator, and managing that income becomes an important factor, because it will influence the budget’s final profit-and-loss statement. Most corporate meetings, however, are mandated by management and deemed a necessary operational expense. As such, there will be no income section to the budget, and therefore no profit-and-loss statement will be required.

Know the attendees. “The biggest mistake most planners make when it comes to budgeting is they immediately start assigning pricing,” says Bonnie Wallsh, CMP, CMM, owner of Charlotte, N.C.-based Bonnie Wallsh Associates and a regular speaker on the topic of budgets for several meetings industry associations. “Budgeting comes only after you’ve figured out where attendees are coming from and who they are. If everyone is a chief executive officer or chief financial officer, then you know you need to have better quality housing and F&B than, say, a training session for employees. Likewise, if you are hired to plan a meeting and you see everyone is flying in from the Midwest, then hold the meeting there instead of having heavy transportation costs eat up the budget.”

Analyze the data. By its very nature, an event’s historical data provides benchmarks for future planning. Of course, “If there are things that didn’t go well at the past event, any changes made to correct them, say hiring a better band, might affect pricing and the whole budget,” notes Jill Moran, CSEP, founder of JSMoran & Associates, a Boston area independent meeting consultant and author of How to Start a Home-Based Event Planning Business (Globe Pequot Press, 2004). “The final budget you come up with should fit the expectancy of the meeting.”

Among the questions a planner should keep in mind when reviewing a meeting’s data: What were the final numbers for F&B functions, room block pickup and no-shows?

Pay special attention to data on the final night banquet, which actually can be a revenue generator. The banquet usually is included in the registration fee, so for every person who elects not to go, that money can be applied elsewhere. By such accounting, “One association generated $50,000 in one year alone,” says Wallsh.

Cost and revenue centers

Once the meeting’s objective has been established and any past data reviewed, the next step is to set up two core categories -- income and expenses. This is where a tool such as a Microsoft Excel spreadsheet becomes indispensable.

Track revenue. Every anticipated revenue source should be tracked as a separate line item, with its own worksheet. These should include advertising, registration, sponsorships and exhibitor fees. Each source worksheet should be broken out into as much detail as possible, which is essential to managing cash flow. “And never round up; work to the penny,” advises Reuben.

The registration worksheet is a prime example of where detail becomes critical. Just because 1,000 people have signed on in the first week of registration for an event with a fee of $300 per person doesn’t mean that event automatically generated $300,000 in that period. Registration dollars need to be tracked in all the varying categories offered, such as partial registration; student, early bird and on-site registration; and complimentary registration for media.

“You need to constantly revisit income, particularly registration, and adjust the numbers as they come in,” says Wallsh. “This is the only way to capture actual figures for the next year.”

Establish expenses. Costs need to be grouped in two categories: Fixed and variable. Fixed costs are those that remain the same, no matter how many people actually show up, such as the venue rental and printed materials for marketing the event. Variable costs are expenses that will change based on attendance, such as F&B and on-site printed materials. It’s important to know these two costs while budgeting, as they will determine the meeting’s break-even point.

Next, every expense should be given a separate line with its own worksheet and its own budget. If all the line items are linked together correctly, they will feed into a profit-and-loss sheet, which will allow the planner to view the budget’s bottom line at any period in the planning stage and allow for adjustments.

The golden rule in creating line items in a budget, says Carroll Reuben, is never to mix text and data in a single cell (the term for an entry on an Excel worksheet), because it will make computing impossible. For example, put the word tax in one cell and the number percentage in another. Should the tax on any line item change by the time the event rolls around, one keystroke will give the new computation.

“Most novice budgeters mix text and numbers together and then get frustrated when the budget doesn’t adjust throughout to reflect changes,” Reuben notes. “Don’t bother asking why. Just don’t do it.”

Be detailed. The more detail, the greater flexibility one has to manipulate the budget. Three line items with the greatest potential for loss -- and savings -- are food and beverage, audiovisual and housing. The more detailed a breakdown planners can put into the worksheets for these three areas, the more potential there is to control spending.

Break down the food. Organize the F&B worksheet by creating a column for each meal category: breakfast, lunch, dinner, meeting break, reception and final night banquet. Within each of those, include a separate line for cost of the meal, tax and service charge. For example, breakfast might read: meal, $8; tax, $1.20; service charge, $1; total, $10.20.

Each meal category also should include columns that allow the planner to calculate the total cost per meal based on number of attendees, the actual cost per attendee, as well as the total F&B spend for each day. It should also include a “no show” line for each meal, which should be filled in right after each function.

The more detail, the greater the ability to control the F&B budget by increasing or decreasing anticipated attendance or adjusting menu pricing. “Food and beverage is one of those line items that can take a huge swing in either direction,” says Moran. “The more attention planners pay to attendance, the better their final guarantee numbers to the kitchen. And the better chance they have of staying on track and not wasting money.”

Track housing. “The negotiated rate might be $100 a night, but not everyone attending the event is going to be paying that rate,” says Wallsh, who suggests listing all negotiated room types as separate categories. That includes lines to track complimentary rooms, room upgrades, staff sleeping rooms at discount and any rooms purchased at a different rate for speakers, VIPs, etc. -- as well as all hotel bill add-ons, such as city, state and occupancy taxes, and resort fees.

Be clear on A/V. Because audiovisual companies typically charge by the day, with the first day being the costliest because it includes setup fees, A/V charges should be broken down by day. As such, the first day’s list will include all required items, the number of each needed and the cost per item. Then, next to each item, calculate how many successive days that equipment is needed. Broken down this way, the planner easily can ascertain how the A/V budget was spent and where the possibility for savings lies by adjusting the meeting’s itinerary. To figure out how to deconstruct A/V costs, ask the supplier for a breakdown by day, and structure the budget accordingly.

Add some padding. There is no set formula to gauge how much buffer to add to a budget to compensate for unforeseen or last-minute changes. But most experts agree, somewhere between 2 and 10 percent makes for a comfortable safety net. Typical items left off the budget that affect revenue projections and expenses include registration refunds, unexpected changes in tax percentages, cancellation charges and late fees. This built-in contingency fund should be designated as “miscellaneous,” from which any expense shortfalls should be charged.

Manage the timeline

Every item on the budget should be assigned a timeline, indicating by what date payment is due or revenues are expected. It also should delineate who on staff is responsible for coordinating each item and who has responsibility for approving expenses.

“The timeline is crucial because it puts the whole budget and event in perspective,” says Gene Siciliano, founder of Los Angeles-based Western Management Associates. “It helps you to visualize how each event in the planning process relates to the next and gets the whole meeting planning team on one page so they can troubleshoot problems as they come up.”

The timeline also is essential for the expense side of the budget, because it allows the planner to track when monies are due suppliers when it comes to deposits or payment of a service. “With a formal timeline and a budget projection, it is much easier to get accounts payable to see why you need X dollars per week paid out,” says Reuben.

Similarly, don’t be alarmed if the budget shows monies being paid out before any revenue is generated. This is typical of association meetings, where the due dates for supplier deposits arrive before registration and exhibitor monies begin rolling in.

Final wrap-up

The budget should be finalized once the hotel bill has been reconciled. Ideally, it would be a plus to plug in all the actual numbers and run the completed budget the day after the event wrap-up; in reality, it can take as long as 30 days for the hotel bill to be reconciled. Still, it is critical to finalize the budget and generate a profit-and-loss statement, particularly if there is any income involved and definitely if the event is supposed to be a moneymaker. Profit and losses should always be expressed as a percentage of the budget, never a dollar amount.

Expressing profit as a percentage of what you spent is a far more valuable reporting tool, according to Reuben. “It’s the same as telling a hotel that you represent 50,000 room nights a year in business, rather than you put on five events a year,” she notes.