costing, procurement & cash flow

8/7/2019 Costing, Procurement & Cash Flow

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CHAPTER 11

COSTING,PROCUREMENT

AND CASH FLOW


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COSTING

It is the estimating of event costs,

establishing a baseline or budget, controlling

those costs and documenting and reportingthe process

Cost must be classified in order to apply

standards and make cost comparisons, such

as well as to allocate the appropriate fundingthe element


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COST CLASSIFICATION

DIRECT OR INDIRECT COSTS

UNIQUE OR STANDARDS COSTS

FIXED OR VARIABLE COSTS ONETIME OR RECURRING COSTS

LOST OPPORTUNITIES COSTS


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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 oftenquotes from suppliers


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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


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FIXED OR VARIABLE COSTS

FC stay the same no matter what happens at theevent

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 thenumber of people who attend

VC have greatest opportunity for the event to goover budget, therefore event project managers whofocus their business should expand their knowledgein this area


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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


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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


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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


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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


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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 intheory but the process can become complex

as the event nears, because many changes

may occur as the event evolves into its final

form


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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


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COST CONTROL

The basis of cost control is to recognize

possible deviation from the baseline and to

response in an effective way


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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-endproject management system software


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EVENT PROJECT LIFE CYCE

(CASH FLOW) Scheduling the cash flow is significant part of

the cost control procedures

The cash flow schedule shows when andhow 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


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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

Account delay Normal delays in accounting procedure make event

management misunderstand the current financial situation

Score creep

The amount of work needed to create the event canexpand without the knowledge of the event management

until it is too late to take action


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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


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END OF CHAPTER 9

THANK YOU

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