CHAPTER 11

COSTING,PROCUREMENT AND CASH FLOW

COSTING  

It is the estimating of event costs, establishing a baseline or budget, controlling those costs and documenting and reporting the process Cost must be classified in order to apply standards and make cost comparisons, such as well as to allocate the appropriate funding the element

COST CLASSIFICATION 
   

DIRECT OR INDIRECT COSTS UNIQUE OR STANDARDS COSTS FIXED OR VARIABLE COSTS ONETIME OR RECURRING COSTS LOST OPPORTUNITIES COSTS

DIRECT OR INDIRECT COSTS 
  



DC are those that specifically incurred by the project Such as hiring staff, catering, renting the venue and obtaining specific insurance for the event IC are the rest of the cost such as office expenses and general insurance IC also called overhead expenses DC can be calculated fairly easily as they often quotes from suppliers

UNIQUE OR STANDARDS COSTS 
   

SC are those that are normal within the industry They are easily computed and therefore generally have low risk As the event is meant to be special, the unique aspects of the event may incur unknown costs For example: the use of special lighting setup with laser and latest in digital control The uniqueness of the setup may hide additional unplanned cost

FIXED OR VARIABLE COSTS 
  

FC stay the same no matter what happens at the event VC will change, they rise and fall depending on known aspects of the event For example : the cost of the catering invitation or ticketed hospitality event will vary according to the number of people who attend VC have greatest opportunity for the event to go over budget, therefore event project managers who focus their business should expand their knowledge in this area

ONETIME OR RECURRING COSTS   

RC are those that repeat during the life cycle of the event and need to be scheduled into the cash flow OC are generally found at the beginning of organizing the event, For example : the administration cost such as general staff wages, photocopying and telephone will vary according to the size of the event and profile of the event

LOST OPPORTUNITIES COSTS  

Concentrating on one event may cause the independent event company to turn down many smaller event The event manager may compare the cost of losing the next-best opportunity to the cost of the one chosen

ESTIMATING METHODS 

To make the best possible estimate, the event manager needs to understand the different methods used: 
 

Top-down estimating Bottom-up estimating Parametric estimating

Top-down Estimating 
  

Also called analogous estimating Event manager base estimates on their experience in managing similar events For instance : how much a standard product launch cost? What is normally spent on the event is valuable starting point in cost estimation

Bottom-up Estimating  

The cost of the whole event is assumed to be the sum of the cost of its parts. Bottom-up estimating is a simple matter in theory but the process can become complex as the event nears, because many changes may occur as the event evolves into its final form

Parametric Estimating    

The overall cost of the event is assumed to be related to one element, a parameter, of the event For example : standard exhibition cost are related to floor space. Concert costs are related to the number of attendees The accuracy of this type of estimating will depend on the direct relationship between the event characteristics or parameter and the event as a whole

COST CONTROL 

The basis of cost control is to recognize possible deviation from the baseline and to response in an effective way

BOOKKEEPING-COST CONTROL CODES 

The description in the form of a report could be generated from software as simple as spreadsheet or as complex as a high-end project management system software

EVENT PROJECT LIFE CYCE (CASH FLOW)   

Scheduling the cash flow is significant part of the cost control procedures The cash flow schedule shows when and how much cash is coming in and going out over a period of time The timing for incoming cash may not coincide with the outgoing cash

PROBLEMS IN THE AREA OF COST 

Lack of product detail 

T he performance of the good or service contribute to the success of the event Normal delays in accounting procedure make event management misunderstand the current financial situation The amount of work needed to create the event can expand without the knowledge of the event management until it is too late to take action 

Account delay  

Score creep 

LEASE,MAKE OR BUY 

The decision to hire, rent, make or buy resources for event depend on: 
   

Return on investment Legal and other aspect considerations Schedules Quality assurance and change Future used and storage

END OF CHAPTER 9
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