Download - 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